<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 23, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
VITAS HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 8050 59-2318357
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
<TABLE>
<S> <C>
HUGH A. WESTBROOK
VITAS HEALTHCARE CORPORATION
100 SOUTH BISCAYNE BOULEVARD 100 SOUTH BISCAYNE BOULEVARD
MIAMI, FLORIDA 33131 MIAMI, FLORIDA 33131
(305) 374-4143 (305) 374-4143
(Address, including zip code, and (Name and address including zip code,
telephone number, including area code of and telephone number, including area
registrant's principal executive code, of agent for service)
offices)
</TABLE>
------------------------
COPIES TO:
<TABLE>
<S> <C>
ROBERT J. WALDMAN, ESQ. WILLIAM J. GRANT, ESQ.
HOGAN & HARTSON L.L.P. WILLKIE FARR & GALLAGHER
555 THIRTEENTH STREET, N.W. 153 EAST 53RD STREET
WASHINGTON, D.C. 20004 NEW YORK, NEW YORK 10022
(202) 637-5600 (212) 821-8000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If any of the securities being registered on the Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 per share 4,370,000 $16.00 $69,920,000 $21,188
</TABLE>
(1) Includes 570,000 shares that the Underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 23, 1997
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.
<PAGE>
PROSPECTUS
3,800,000 SHARES
[LOGO]
VITAS HEALTHCARE CORPORATION
COMMON STOCK
All of the 3,800,000 shares of Common Stock offered hereby are being sold by
Vitas Healthcare Corporation ("Vitas" or the "Company").
Prior to this offering (the "Offering"), there has been no public market for
the Common Stock of the Company. It is currently estimated that the initial
public offering price will be between $14.00 and $16.00 per share. See
"Underwriting" for information relating to factors considered in determining the
initial public offering price. Application is being made to have the Common
Stock approved for listing on The Nasdaq National Market under the symbol
"VTAS".
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS IN THE COMMON STOCK.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share................................. $ $ $
Total (3)................................. $ $ $
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
at $ .
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 570,000 shares of Common Stock on the same terms and
conditions as set forth above solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------------------------
The shares of Common Stock are offered by the several Underwriters named
herein, when, as and if delivered to and accepted by them, and subject to
various prior conditions, including the right to reject orders in whole or in
part. It is expected that delivery of certificates representing the shares will
be made against payment therefor at the offices of Furman Selz LLC, in New York,
New York on or about , 1997.
FURMAN SELZ
---------------
The date of this Prospectus is , 1997
<PAGE>
[SERVICE AREA MAP ARTWORK]
[A map of the continental United States representing the Company's hospice
locations within the states of Florida, Texas, California, Illinois, Ohio,
Pennsylvania and Wisconsin is included on the inside front cover. Hospice
locations within each applicable state are represented by solid dots with a
number inside the dot. A numbered legend appears below the map indicating each
hospice location corresponding to each number appearing on the map.]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING OVER-ALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING
SYNDICATE COVERING TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THE OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED. SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY, AND THE NOTES
THERETO, INCLUDED ELSEWHERE IN THIS PROSPECTUS. REFERENCES IN THIS PROSPECTUS TO
A FISCAL YEAR REFER TO THE 12-MONTH PERIOD ENDED SEPTEMBER 30 OF THAT YEAR.
EXCEPT AS OTHERWISE INDICATED HEREIN, ALL INFORMATION IN THIS PROSPECTUS ASSUMES
NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND HAS BEEN ADJUSTED TO
GIVE EFFECT TO A 1-FOR-2.7273 REVERSE STOCK SPLIT TO BE EFFECTIVE UPON
CONSUMMATION OF THIS OFFERING.
THE COMPANY
GENERAL
Vitas is the largest provider of hospice services in the United States.
Hospice services emphasize palliative medical care and related services that
focus primarily on improving the quality of life of terminally ill patients and
their families, as opposed to attempting to "cure" the underlying or end-stage
disease. Vitas provided hospice care to more than 31,000 patients in fiscal
1996, which the Company believes is more than four times the number of patients
served by the next largest U.S. hospice provider. Such care is provided in the
patient's home, which could be a residence or a long-term care or assisted
living facility, or in an inpatient facility, and is generally reimbursed by
third-party payors on a fixed "per diem" basis. The Company's hospice
operations, which were among the first in the U.S., were co-founded by the
Company's current Chairman of the Board and Chief Executive Officer, who has
been instrumental in the development of the legislative and clinical framework
for hospice care in the U.S.
The Company provides a comprehensive range of palliative services through 21
programs in 27 locations and believes it is the largest or second largest
provider of hospice services in substantially all of its service areas within
Florida, Texas, California, Illinois, Ohio, Pennsylvania and Wisconsin. For the
nine months ended June 30, 1997, the Company served an average daily census of
approximately 4,500 patients with an average length of stay of approximately 66
days. The Company expects to grow through a combination of: (i) acquisitions
which will allow it to benefit from the opportunities for consolidation
available in the fragmented hospice industry and (ii) greater demand for hospice
services to the extent that such services become increasingly accepted as a
means of caring for terminally ill patients and based on an increasingly aging
population in the U.S. Since fiscal 1992, the Company's net revenue has
increased from approximately $102 million to approximately $214 million in
fiscal 1996.
THE HOSPICE INDUSTRY
The hospice movement in the U.S. began in the mid-1970s to provide
terminally ill patients and their families with an alternative to
hospital-based, cure-oriented care. Hospice services focus on improving the
quality of life for patients and their families, such as the reduction of pain,
uncomfortable symptoms, the physical and psychological stress of the terminal
disease and bereavement care for the families. Care is coordinated through a
team of nurses, physicians, home health aides, clergy, social workers,
counselors and community volunteers, which assesses and coordinates the clinical
and psychological needs of the patient and family. By providing an
interdisciplinary approach to managing a terminal illness, a hospice patient
avoids having to receive independent medical services from a number of
providers, which may have little or no effective coordination among them. This
often results in a lack of clear accountability for clinical outcomes and the
cost of services provided. Various studies have indicated that hospice care is
cost-effective when compared to end-of-life curative options, largely because it
reduces the number of patient days in an acute care setting. According to the
National Hospice Organization ("NHO"), approximately 450,000 patients in the
U.S. received hospice care in 1996, compared to approximately 210,000 patients
in 1990.
3
<PAGE>
Reimbursement for hospice care was added as a Medicare benefit in 1982. As
approximately 72% of all deaths in the U.S. are among people older than 65 years
of age, Medicare is the payor of the vast majority of end-of-life health care,
including hospice care. Hospice care became an optional state Medicaid benefit
in 1986 and is currently covered by Medicaid in at least 41 states, including
all of the states in which Vitas operates, and by most private insurance plans.
Reimbursement by Medicare and Medicaid collectively represented approximately
94% of the Company's net revenue in fiscal 1996. According to statistics
developed by the Congressional Budget Office (the "CBO"), Medicare reimbursement
for hospice services grew from approximately $318 million in 1990 to
approximately $1.9 billion in 1995, and is expected to grow to approximately
$4.7 billion by 2000.
BUSINESS STRATEGY
The Company's business strategy is based on leveraging its operating model,
which is designed to provide quality hospice care at the local program level
supported by centralized corporate services, including financial management,
clinical operations and information and telecommunications systems. Key elements
of the Company's business strategy include: (i) acquisitions of hospice
operations in the Company's existing markets and in new service areas; (ii)
growth in utilization in the Company's existing service areas through the
continued education of healthcare providers and patients designed to increase
the awareness and acceptance of hospice services; and (iii) development of
business arrangements with managed care organizations and other healthcare
providers which desire to provide a full continuum of care for their patients.
The hospice industry in the U.S. is highly fragmented, and Vitas believes
that significant opportunities exist for future consolidation. Based on industry
data, the Company estimates there are approximately 3,000 hospice programs in
the U.S., more than 70% of which are not-for-profit or government sponsored, and
which have, on average, a daily census of between 40 and 45 patients. In light
of the capital requirements and competitive pressures facing many hospice
providers in the current healthcare environment, the Company believes that many
providers of hospice care will find it attractive to combine their operations
with other providers that have greater access to capital to better fulfill their
mission to provide optimal end-of-life care in their communities. The Company
believes that its history of having completed such transactions and its
operating model, which is designed to take advantage of the economies of scale
from such acquisitions, should enable it to realize opportunities for
acquisitions that may be presented in the future. Since February 1995, the
Company has completed three acquisitions (two involving not-for-profit
operations) which have expanded its operations into new markets in California
and Central Florida and expanded its presence in Ohio.
The Company believes that it has significant competitive advantages relative
to other independent hospice providers and integrated healthcare service
providers with hospice operations, including its:
- size and position of market leadership;
- unique focus and experience in providing hospice services;
- centralized operating model designed to realize efficiencies from local
and national economies of scale;
- proprietary, enterprise-wide information and telecommunications systems,
which provide integrated and comprehensive information on a real-time
basis, including significant patient care, billing, payroll and other
financial information; and
- team of professionals dedicated to educating and communicating with
healthcare professionals and patients about choices in end-of-life care
and creating awareness of Vitas services.
4
<PAGE>
OTHER DEVELOPMENTS
Over the past several years, the Company's operations have undergone
significant changes which have negatively affected its financial performance but
which, management believes, have resulted in an improved business model and
positioned the Company for future growth and profitability. Prior to fiscal
1995, the Company had attempted to diversify its operations to include
non-hospice services, such as chronic disease management, through the
development of large multi-functional service teams at the local program level
with regional support capabilities. Developing this infrastructure to support
diversification significantly increased the Company's operating expenses and
affected the results of its acquired operations in California and certain DE
NOVO hospice programs which were not fully incorporated into the Company's
existing support operations. Beginning in fiscal 1995, the Company initiated a
series of restructuring efforts (collectively, the "Restructuring") designed to
return its emphasis to expanding its hospice operations and to create a more
efficient operating model that emphasized a uniform structure in each of the
Company's local hospice programs supported by centralized corporate functions.
The Restructuring involved three key initiatives, which have been adopted
and implemented in various stages since fiscal 1995 and have included: (i) the
reorganization of senior management and other personnel; (ii) the reduction of
the size of the local programs' patient care teams within a new structure
designed to provide exclusively hospice care; and (iii) the elimination of
various corporate, regional and local personnel positions no longer deemed
necessary to manage the Company's operations. The Company's current operating
model emphasizes the delivery of hospice services through a standardized hospice
program structure supported by centralized services provided from the Company's
corporate office located in Miami, Florida. The Company believes that this
operating model provides significant opportunities for the Company to expand
through acquisitions and to recognize operating and cost improvements in these
acquired operations.
In June 1996, the Company entered into a merger agreement with Apria
Healthcare Group Inc. "Apria", which was terminated in November 1996 (the
"Proposed Merger Transaction"). During this period, the Company experienced
significant disruptions as a result of the anticipated combination of the
operations of Vitas and Apria, particularly with respect to changes in the
Company's admissions and education activities. In addition, the Proposed Merger
Transaction caused a delay in the implementation of certain of the Company's
Restructuring efforts. Although certain aspects of the Restructuring have not
yet been fully implemented, the Company believes it has adequate reserves for
all anticipated restructuring activities. The Restructuring and the Proposed
Merger Transaction contributed significantly to the Company's losses in fiscal
1995 and fiscal 1996 and the nine months ended June 30, 1997. However, the
Company has been profitable in the two most recent quarters of fiscal 1997.
5
<PAGE>
THE OFFERING
In connection with the Offering, the following events are expected to occur:
(i) the redemption of 270,000 shares of the 9.0% Cumulative Nonconvertible
Preferred Stock of the Company (the "9% Preferred Stock") held by a subsidiary
of Chemed Corporation (such subsidiary, together with Chemed Corporation,
"Chemed"), including the payment of all accrued but unpaid dividends and an
early redemption premium, using a portion of the net proceeds of the Offering;
(ii) the conversion of 262,500 shares of Series B Convertible Preferred Stock of
the Company (the "Series B Preferred Stock"), held by an investor group
including Warburg, Pincus Investors, L.P. and Galen Partners II, L.P. and
certain of its affiliates, into 2,026,293 shares of Common Stock upon completion
of the Offering; (iii) the issuance of 246,634 shares of Common Stock pursuant
to a warrant held by Chemed for an aggregate exercise price of $3.0 million, or
$12.16 per share, and the expiration of the remaining portion of such warrant
upon the closing of this Offering; (iv) the repurchase in full of a second
warrant originally issued to Chemed to purchase 522,289 shares at a per share
purchase price equal to the excess of the public offering price over $12.19, or
an aggregate of $1.5 million based on an assumed public offering price of $15.00
per share, using a portion of the net proceeds of the Offering; and (v) the
issuance of 107,036 shares of Common Stock pursuant to a warrant originally
issued to NationsBank, N.A. (the "Bank") on July 18, 1997 (the "First Bank
Warrant") at an exercise price of $0.03 per share.
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 3,800,000 shares
Common Stock to be outstanding after the
Offering................................... 7,832,769 shares (1)
Use of Proceeds.............................. To redeem certain outstanding Preferred
Stock; to repurchase a warrant to purchase
Common Stock; to repay certain indebtedness;
and for general corporate purposes, including
possible acquisitions. See "Use of Proceeds."
Proposed Nasdaq National Market Symbol....... VTAS
</TABLE>
- ------------------------
(1) Does not include (i) 1,817,098 shares of Common Stock issuable upon the
exercise of stock options (with an average exercise price of $10.62 per
share) granted under the Company's Management Equity Incentive Plans as well
as pursuant to certain non-plan stock option grants, of which 1,695,755 are
now or will become exercisable within 60 days after the date of this
Prospectus, (ii) 148,032 shares of Common Stock eligible for future grant
under the Company's Management Equity Incentive Plans, (iii) up to an
additional 35,679 shares of Common Stock at an exercise price of $0.03 per
share that may be issued pursuant to the First Bank Warrant if this Offering
is not completed by November 29, 1997, and (iv) up to 570,000 shares of
Common Stock that may be sold by the Company pursuant to the Underwriters'
over-allotment option. See "Management--Management Equity Incentive Plans"
and "--Non-Plan Stock Option Grants," "Capitalization," "Description of
Capital Stock--Common Stock Purchase Warrant" and "Shares Eligible for
Future Sale."
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth summary financial and other data of the
Company. The Summary Consolidated Financial Data set forth below for the fiscal
years 1992 through 1996 are derived from Consolidated Financial Statements of
the Company, including related notes thereto, certain of which are contained
elsewhere in this Prospectus. The summary financial data as of June 30, 1997 and
for the nine month periods ended June 30, 1996 and 1997 are derived from
unaudited financial statements. The unaudited financial statements include, in
the opinion of management, all adjustments, consisting of normal recurring
adjustments and accruals, necessary for a fair presentation of the financial
position and results of operations for these periods. Operating results for the
nine months ended June 30, 1997 are not necessarily indicative of the results
that may be expected for the entire year. The information presented below is
qualified in its entirety by, and should be read in conjunction with "Selected
Consolidated Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
of the Company, and notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED JUNE 30,
----------------------------------------------------- --------------------
1992(1) 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING DATA:
Net revenue..................................... $ 101,737 $ 128,405 $ 148,535 $ 193,275 $ 213,856 $ 161,657 $ 150,323
Operating expenses:
Hospice program expenses...................... 80,135 93,833 110,251 155,570 175,495 131,319 121,604
Central support services...................... 15,507 22,304 22,036 25,241 23,790 17,290 16,120
Provision for bad debts....................... 1,316 3,283 3,973 6,828 7,958 4,035 3,283
Depreciation.................................. 1,018 1,794 2,931 4,197 5,438 3,993 4,308
Amortization of goodwill...................... 952 717 654 1,089 1,527 1,123 1,248
Nonrecurring charges (2)...................... -- 6,708 798 -- -- -- --
Restructuring costs (3)....................... -- -- -- 2,020 2,345 -- 3,480
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses........................ 98,928 128,639 140,643 194,945 216,553 157,760 150,043
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations................... 2,809 (234) 7,892 (1,670) (2,697) 3,897 280
Gain on terminated merger (4)................... -- -- -- -- -- -- 1,600
Gain on sale of assets.......................... -- -- -- -- -- -- 484
Interest and other income....................... 90 97 715 329 279 222 364
Interest expense................................ -- -- (316) (3,092) (4,674) (3,391) (3,652)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes and other
items......................................... 2,899 (137) 8,291 (4,433) (7,092) 728 (924)
Provision (benefit) for income taxes............ 992 46 3,150 (1,588) -- 248 --
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before other items................ 1,907 (183) 5,141 (2,845) (7,092) 480 (924)
Cumulative effect of change in accounting
principle for income taxes.................... -- 259 -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)............................... $ 1,907 $ 76 $ 5,141 ($ 2,845) ($ 7,092) $ 480 ($ 924)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Pro forma net income (loss) (5)................. $ 1,662 $ 76 $ 5,141 ($ 2,845) ($ 7,092) $ 480 ($ 924)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) attributable to common
stockholders.................................. $ 544 ($ 3,038) $ 543 ($ 7,443) ($ 11,690) ($ 2,968) ($ 4,372)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Supplemental net loss attributable to common
stockholders (6).............................. ($ 9,590) ($ 1,393) ($ 2,797)
--------- --------- ---------
--------- --------- ---------
Supplemental net loss per common share (7)...... ($ 2.56) ($ 0.37) ($ 0.74)
--------- --------- ---------
--------- --------- ---------
OTHER DATA:
Admissions (8).................................. 13,780 15,808 17,727 23,512 26,256 19,888 19,487
Average length of stay (9)...................... 56.7 58.8 64.9 64.9 72.5 73.1 66.4
Average daily census (10)....................... 2,402 2,967 3,499 4,488 4,902 4,925 4,507
Adjusted EBITDA (11)............................ $ 4,779 $ 8,985 $ 12,275 $ 5,636 $ 6,613 $ 9,013 $ 9,318
Adjusted EBITDA as a % of net revenue........... 4.7% 7.0% 8.3% 2.9% 3.1% 5.6% 6.2%
</TABLE>
(CONTINUED ON NEXT PAGE)
7
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------
ACTUAL AS ADJUSTED(12)
--------- ---------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Cash, cash equivalents and investments.................................................. $ 9,225 $ 15,025
Working capital (deficit)............................................................... (15,653) (1,265)
Total assets............................................................................ 85,859 91,659
Total long-term debt.................................................................... 31,227 22,105
Total redeemable preferred stock........................................................ 62,117 --
Stockholders' equity (deficit).......................................................... (50,244) 35,383
</TABLE>
- ------------------------
(1) Selected consolidated financial information for the fiscal year ended
September 30, 1992 has been adjusted to combine the operations of Vitas
Healthcare Corporation of Florida, a wholly owned subsidiary of the Company
("Vitas-Florida"), with those of the Company for the period through December
16, 1991. The Company's purchase of the outstanding stock of Vitas-Florida
on December 17, 1991 was accounted for as if a pooling of interests had
occurred since the Company was affiliated with Vitas-Florida through common
ownership.
(2) In fiscal 1993, nonrecurring charges of $6.7 million related to the
acceleration of performance bonus arrangements and vesting of non-qualified
stock options. In fiscal 1994, nonrecurring charges of $0.8 million related
to expenses incurred in connection with a proposed public offering of the
Company's Common Stock that was not pursued due to market conditions.
(3) Represents restructuring costs principally to establish severance reserves.
(4) Includes a $4.0 million settlement relating to the Proposed Merger
Transaction, less $2.4 million of terminated merger costs.
(5) Through December 16, 1991, Vitas-Florida was an S Corporation under the
Internal Revenue Code of 1986, as amended (the "Code"). Pro forma net income
for the fiscal year ended September 30, 1992 represents net income after
deducting the income tax expense that would have been recorded had
Vitas-Florida not been exempt from taxation under the S Corporation
election.
(6) Gives effect to the elimination of the dividends which would have been
payable under the mandatory redemption features of the Series B Preferred
Stock.
(7) Computed assuming the Series B Preferred Stock is converted into 2,026,293
shares of Common Stock and, pursuant to the Securities and Commission's (the
"Commission's") Staff Accounting Bulletins ("SABs"), includes all Common
Stock and Common Stock equivalents issued within the 12 months immediately
preceding the Offering as if they were outstanding for all periods
presented.
(8) Admissions is defined as the number of patients admitted into the Company's
programs during the period.
(9) Average length of stay represents the sum of days of care of patients who
have been discharged during the period divided by the total number of
patients discharged in such period. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(10) Average daily census is defined as the sum of the days of care of patients
who have been under the Company's care during the period divided by the
number of days in such period.
(11) Adjusted EBITDA is defined as income before interest and other income,
interest expense, taxes, depreciation and amortization, and excludes the
$6.7 million and $0.8 million of nonrecurring charges in fiscal 1993 and
fiscal 1994; the $2.0 million, $2.3 million and the $3.5 million in
restructuring costs in fiscal 1995, fiscal 1996 and the nine months ended
June 30, 1997; and the $1.6 million gain on terminated merger and the $0.5
million gain on the sale of assets in the nine months ended June 30, 1997.
(12) The as adjusted data give effect to net proceeds of $52.0 million from the
issuance and the sale of Common Stock in this Offering, the receipt of $3.0
million from the issuance and sale of 246,634 shares of Common Stock upon
exercise of a warrant and the application of the net proceeds therefrom;
also gives effect to the exercise of the First Bank Warrant and the
conversion of the Series B Preferred Stock into Common Stock upon
consummation of the Offering.
8
<PAGE>
SUMMARY QUARTERLY CONSOLIDATED FINANCIAL DATA
The following table presents the consolidated operating results and other
operating data of the Company for each of the seven quarters in the period ended
June 30, 1997. The information presented is unaudited. In the opinion of the
Company's management, all adjustments, consisting of normal recurring
adjustments and accruals, necessary for a fair presentation of the results of
operations for the interim periods presented have been reflected herein. For
further information, refer to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
of the Company, and notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995 1996 1996 1996 1996 1997 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
OPERATING DATA:
Net revenue........................... $ 54,516 $ 54,564 $ 52,577 $ 52,199 $ 51,492 $ 48,838 $ 49,993
Operating expenses:
Hospice program expenses............ 44,017 44,111 43,191 44,176 42,473 39,960 39,171
Central support services............ 5,913 5,812 5,565 6,500 5,504 5,051 5,565
Provision for bad debts............. 1,453 1,250 1,332 3,923 1,360 1,004 919
Depreciation........................ 1,243 1,355 1,395 1,445 1,462 1,415 1,431
Amortization of goodwill............ 368 377 378 404 425 412 411
Restructuring costs (1)............. -- -- -- 2,345 3,480 -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses.............. 52,994 52,905 51,861 58,793 54,704 47,842 47,497
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from operations......... 1,522 1,659 716 (6,594) (3,212) 996 2,496
Gain on terminated merger (2)......... -- -- -- -- 1,600 -- --
Gain on sale of assets................ -- -- -- -- 484 -- --
Interest and other income............. 94 73 48 64 89 107 168
Interest expense...................... (1,181) (1,142) (1,061) (1,290) (1,089) (1,074) (1,489)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes..... 435 590 (297) (7,820) (2,128) 29 1,175
Provision (benefit) for income taxes.. 148 201 (101) (248) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)..................... $ 287 $ 389 ($ 196) ($ 7,572) ($ 2,128) $ 29 $ 1,175
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
OTHER DATA:
Admissions (3)........................ 6,392 7,012 6,484 6,368 6,448 6,740 6,299
Average length of stay (4)............ 76.3 67.7 75.4 70.6 73.4 62.0 63.3
Average daily census (5).............. 4,982 4,938 4,854 4,837 4,685 4,384 4,448
Adjusted EBITDA (6)................... $ 3,133 $ 3,391 $ 2,489 ($ 2,400) $ 2,155 $ 2,823 $ 4,338
Adjusted EBITDA as a % of net
revenue............................. 5.7% 6.2% 4.7% (4.6%) 4.2% 5.8% 8.7%
</TABLE>
- ------------------------
(1) Represents restructuring costs principally to establish severance reserves.
(2) Includes a $4.0 million settlement relating to the Proposed Merger
Transaction, less $2.4 million of terminated merger costs.
(3) Admissions is defined as the number of patients admitted into the Company's
programs during the period.
(4) Average length of stay represents the sum of days of care of patients who
have been discharged during the period divided by the total number of
patients discharged in such period. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(5) Average daily census is defined as the sum of the days of care of patients
who have been under the Company's care during the period divided by the
number of days in such period.
(6) Adjusted EBITDA is defined as income before interest and other income,
interest expense, taxes, depreciation and amortization, and excludes the
$2.3 million and the $3.5 million of restructuring costs in the three months
ended September 30, 1996 and December 31, 1996, respectively, and the $1.6
million gain on the terminated merger and $0.5 million gain on the sale of
assets in the three months ended December 31, 1996.
9
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE SPECIFIC FACTORS SET
FORTH BELOW, AS WELL AS THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS BEFORE
DECIDING TO PURCHASE THE COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS CONTAINS
CERTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO THE COMPANY THAT
ARE BASED ON THE BELIEFS OF MANAGEMENT AS WELL AS ASSUMPTIONS MADE BY AND
INFORMATION CURRENTLY AVAILABLE TO MANAGEMENT. SUCH FORWARD-LOOKING STATEMENTS
ARE PRINCIPALLY CONTAINED IN THE SECTIONS "PROSPECTUS SUMMARY," "SUMMARY
CONSOLIDATED FINANCIAL DATA," "SUMMARY QUARTERLY CONSOLIDATED FINANCIAL DATA,"
"RISK FACTORS," "SELECTED CONSOLIDATED FINANCIAL DATA" AND "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND
INCLUDE, WITHOUT LIMITATION, THE COMPANY'S EXPECTATION AND ESTIMATES AS TO THE
COMPANY'S BUSINESS OPERATIONS FOLLOWING THE OFFERING, INCLUDING FUTURE FINANCIAL
PERFORMANCE AND THE COMPANY'S GROWTH STRATEGY. IN ADDITION, IN THOSE AND OTHER
PORTIONS OF THIS PROSPECTUS, THE WORDS "ANTICIPATES," "BELIEVES," "BUDGETED,"
"ESTIMATES," "EXPECTS," "PLANS," "INTENDS," "SHOULD" AND SIMILAR EXPRESSIONS, AS
THEY RELATE TO THE COMPANY AND ITS SUBSIDIARIES OR ITS MANAGEMENT, ARE INTENDED
TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS REFLECT THE CURRENT
VIEWS OF THE COMPANY WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO CERTAIN
RISKS, UNCERTAINTIES AND ASSUMPTIONS, INCLUDING THE RISK FACTORS DESCRIBED
BELOW.
IN ADDITION TO FACTORS THAT MAY BE DESCRIBED BELOW AND ELSEWHERE IN THIS
PROSPECTUS GENERALLY, THE FOLLOWING FACTORS, AMONG OTHERS, COULD CAUSE THE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING
STATEMENTS MADE BY THE COMPANY. SHOULD ONE OR MORE OF THESE RISKS OR
UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT,
ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED HEREIN AS ANTICIPATED,
BELIEVED, ESTIMATED OR EXPECTED. THE COMPANY DOES NOT INTEND TO UPDATE THESE
FORWARD-LOOKING STATEMENTS.
UNCERTAINTY ASSOCIATED WITH LEGISLATIVE INITIATIVES
Healthcare is an area of extensive and dynamic legislative and regulatory
change. Changes in the law, new interpretations of existing laws, or changes in
payment methodology, may have a dramatic effect on the definition of permissible
or impermissible activities, the relative costs associated with doing business
and the amount of reimbursement by both government and other third-party payors.
In addition to specific legislative and regulatory influences, efforts to reduce
the growth of the federal budget and the Medicare and Medicaid programs have
resulted in enactment of the Balanced Budget Act of 1997 (the "Balanced Budget
Act"). This law contains several provisions affecting Medicare payment for and
coverage of hospice services which, together with Medicaid payments, accounted
for 94% of the Company's net revenue in fiscal 1996. See "Business--Legislative
Considerations." Certain of these provisions are expected to have an adverse
effect on the Company. In addition, state legislatures periodically consider
various healthcare reform proposals. Congress and state legislatures can be
expected to continue to review and assess alternative healthcare delivery
systems and payment methodologies, and public debate of these issues can be
expected to continue in the future. The ultimate timing or effect of such
additional legislative efforts cannot be predicted and may impact Vitas in
different ways. No assurance can be given that any such efforts will not have a
material adverse effect on the Company.
EXTENSIVE GOVERNMENT REGULATION; IMPACT OF OPERATION RESTORE TRUST AND CLAIMS
REVIEWS
ON THE COMPANY
REIMBURSEMENT. A substantial portion of the Company's revenues is
attributable to payments received from third-party payors, including the
Medicare and Medicaid programs and private insurers. In fiscal 1996,
approximately 94% of Vitas' net revenue was attributable to Medicare and
Medicaid payments which are made on a "per diem" basis. Under the per diem
reimbursement methodology, the Company is essentially at risk for the cost of
eligible services provided to hospice patients. Profitability is therefore
largely dependent upon the Company's ability to manage the costs of providing
hospice services to patients. Increases in operating costs that are subject to
inflation, such as labor and supply costs, without a compensating increase in
Medicare and Medicaid rates could have a material adverse effect on the
10
<PAGE>
Company in the future. See "Business--Payment for Services." Many payors are
increasing pressure to control healthcare costs. In addition, both public and
private payors are increasing pressure to decrease or limit increases in
reimbursement rates for healthcare services. The levels of revenues and
profitability of the Company, similar to those of other healthcare companies,
will be subject to the effect of possible reductions in coverage or payment
rates by third-party payors. For example, under the Balanced Budget Act, annual
payment rate increases for hospice reimbursement from Medicare, which
historically have been based on the "market basket" inflation rate as calculated
by the Health Care Financing Administration ("HCFA"), will be reduced by one
percentage point in each of fiscal years 1998 through 2002. Thus, the annual
inflationary adjustment in Medicare rates as of October 1, 1997 of 2.7% will be
reduced to 1.7%. In addition, under a final rule recently published by HCFA, a
new wage index methodology (to be phased in over three years) was established
which the Company estimates will reduce reimbursement from Medicare by
approximately 0.5% in fiscal 1998, approximately 1.0% in fiscal 1999 and
approximately 1.5% in fiscal 2000, subject to possible change due to, among
other things, changes in the Company's utilization rates and the geographic
distribution of the Company's utilization. Further, effective for cost reporting
periods beginning on or after October 1, 1997, hospices are required to submit
claims on the basis of the location where a service is actually furnished. The
Company understands that HCFA may seek to implement this change immediately on a
basis yet to be established. These and other changes could have a material
adverse effect on the Company. See "Business--Legislative Considerations" for a
discussion of recent legislation.
Each state which maintains a Medicaid program has the option to provide
reimbursement for hospice services at reimbursement rates generally required to
be at least as much as Medicare rates. All states in which the Company operates
cover Medicaid hospice services; however, there can be no assurance that the
states in which the Company is presently operating or states into which it could
expand operations will continue to cover Medicaid hospice services. In addition,
the Medicare and Medicaid programs are subject to statutory and regulatory
changes, retroactive and prospective rate and payment adjustments,
administrative rulings, freezes and funding reductions, all of which may
adversely affect the level of program payments and could have a material adverse
effect on the Company.
FRAUD AND ABUSE LAWS. As a provider of services under the Medicare and
Medicaid programs, the Company is subject to federal and state healthcare
program fraud and abuse laws. These laws include the Medicare and Medicaid
anti-kickback statute, which prohibits, among other things, the offer, payment,
solicitation or receipt of any remuneration in return for the referral of
patients for items or services, or arranging for the furnishing of items or
services, for which payment may be made under the Medicare, Medicaid or other
federal healthcare programs. Violations of these provisions may result in civil
and criminal penalties and exclusion from participation in Medicare and state
health programs such as Medicaid. The Health Insurance Portability and
Accountability Act of 1996 includes an expansion of certain fraud and abuse
provisions, such as extending the application of Medicare and Medicaid fraud
penalties to certain other federal healthcare programs. The Balanced Budget Act
further strengthens numerous fraud and abuse provisions through expanded
exclusion authority and new civil money penalties for violating the
anti-kickback statute, among other provisions. See "Business--Regulatory
Environment-- Fraud and Abuse Laws." In addition, several healthcare reform
proposals have included an expansion of the anti-kickback laws to include
referrals of any patients regardless of payor source. The broad language of the
anti-kickback statute has been interpreted by the courts and governmental
enforcement agencies in a manner which could impose liability on healthcare
providers for engaging in a wide variety of business transactions. In addition,
a number of states in which the Company operates have laws, which vary from
state to state, prohibiting certain direct or indirect remuneration or
fee-splitting arrangements between healthcare providers, regardless of payor
source, for the referral of patients to a particular provider.
Further, under separate statutes, submission of claims for items or services
that are "not provided as claimed" may lead to civil money penalties, criminal
fines and imprisonment and/or exclusion from participation in Medicare, Medicaid
and other federally funded state healthcare programs. These false
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<PAGE>
claims statutes include the Federal False Claims Act, which allows any person to
bring a suit, known as a QUI TAM action, alleging false or fraudulent Medicare
or Medicaid claims or other violations of the statute and to share in any
amounts paid by the entity to the government in fines or settlement. Finally,
Congress enacted in 1993 the so-called "Stark Law," which prohibits referrals by
physicians to certain entities with which they have a financial relationship
unless an exception applies. Several states in which the Company operates have
similar laws. Possible sanctions for violation of these laws include denial of
payment, loss of licensure and civil and criminal penalties.
The Company maintains an internal regulatory compliance review program and
from time to time retains regulatory counsel for guidance on applicable laws and
regulations. However, no assurance can be given that the practices of the
Company, if reviewed, would be found to be in compliance with applicable health
regulatory laws, as such laws ultimately may be interpreted, or that any
non-compliance with such laws would not have a material adverse effect on the
Company.
OTHER FEDERAL AND STATE REGULATIONS. The federal government and all states
regulate various aspects of the hospice industry. In particular, the Company's
operations are subject to federal and state health regulatory laws, including
those covering professional services, the dispensing of drugs, and certain types
of hospice activities. Certain of the Company's employees are subject to state
laws and regulations governing professional practice. The Company's operations
are subject to periodic survey by governmental and private accrediting entities
to assure compliance with applicable state licensing, and Medicare and Medicaid
certification and accreditation standards, as the case may be. From time to time
in the ordinary course of business, the Company, like other healthcare
companies, receives survey reports containing deficiencies for alleged failure
to comply with applicable requirements. The Company reviews such reports and
takes appropriate corrective action. The failure to effect such action or to
obtain, renew or maintain any of the required regulatory approvals,
certifications or licenses could materially adversely affect the Company's
business, and could prevent the programs involved from offering products and
services to patients. In addition, laws and regulations often are adopted to
regulate new products, services and industries. There can be no assurance that
either the states or the federal government will not impose additional
regulations upon the activities of the Company which might materially adversely
affect the Company. See "Business--Regulatory Environment--Other Federal and
State Regulations."
OPERATION RESTORE TRUST. In recent years, federal and state enforcement
agencies and private insurers have increased efforts to enforce the fraud and
abuse laws. Operation Restore Trust ("ORT") is a federal/ state effort which
includes audits, investigations and aggressive surveys of home health agencies,
nursing homes, and certain durable medical equipment suppliers located initially
in California, Florida, Illinois, Texas and New York, the five states in which
Medicare spending is the highest. In June 1995, federal officials announced the
expansion of ORT to include hospices in these five states. Since August 1996,
the Office of Inspector General ("OIG") of the Department of Health and Human
Services ("HHS") has published audit reports on its reviews of five hospice
programs unrelated to the Company. These OIG audit reports focused on the
hospice eligibility of long-stay patients (those who are in a hospice program
for longer than 210 days). In the reports, the OIG recommended that the Medicare
fiscal intermediaries recoup substantial payments previously made for allegedly
ineligible, long-stay beneficiaries. The OIG also identified certain payments
relating to patients for whom it could not determine eligibility, and
recommended that the intermediaries conduct their own reviews. In response to
several reports, one intermediary expressed reluctance and another raised
concerns about the recovery of these payments, although a senior HHS official
has stated subsequently that the agency still intends to seek recoveries under
certain circumstances.
As a part of the OIG's review of hospices under ORT, beginning in July 1995,
the OIG conducted on-site medical and operational reviews at six of the
Company's hospice programs and at its corporate office. No reports have been
issued by the OIG on the Company's hospice programs. Although no exit
conferences have been held, in response to the Company's request for
information, in September 1995 OIG auditors indicated they would discuss their
preliminary views regarding their initial on-site visits to
12
<PAGE>
the three hospice programs that had been visited prior to that time, which
included a review of approximately 530 records of long-stay patients (those who
are in a hospice program for longer than 210 days). Based on such discussions,
the Company understands that the auditors had formed a preliminary view that a
vast majority of the records in the limited sample did not support the
beneficiaries' eligibility for hospice services. The Company understands that
the OIG has reviewed medical records on a total of approximately 1,150 of Vitas'
long-stay patients.
The Company understands that the activities of the OIG Office of Audit
Services and the OIG Office of Investigations involving the Company are ongoing.
The scope and ultimate disposition of the ORT and OIG activities, and the
possible impact on the Company of such activities, cannot currently be
predicted. If the OIG releases an adverse report or takes some other adverse
action, the Company expects to vigorously defend its position. However, there
can be no assurance that these matters, including any costs of defense, will not
have a material adverse effect on the Company. The Company believes that its
admissions, average length of stay and average daily census have been negatively
impacted in fiscal 1996 and fiscal 1997 by several items, including
implementation of new guidelines developed by NHO, in consultation with HCFA,
which established more specific criteria for analyzing terminal prognoses for
certain non-cancer diagnoses, and publicity resulting from, and reactions to,
the ORT initiatives and other claims review activities. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Operation Restore Trust and Claims Reviews." In addition, the
publication of any adverse report, or any adverse publicity regarding these
matters, regardless of their merit or eventual outcome, could have a material
adverse effect on the Company's business and reputation for at least some period
of time. See "Business--Operation Restore Trust and Claims Reviews."
In September 1997, the OIG issued a report which recommends, among other
things, that HCFA seek legislation to modify Medicare or Medicaid payments for
hospice patients living in nursing homes. These modifications may include
lowering hospice payments for patients who reside in nursing homes or revising
requirements for services provided by nursing homes for terminal patients. Any
such modifications could have a material adverse effect on the Company. See
"Business--Operation Restore Trust and Claims Reviews."
CLAIMS REVIEWS. Medicare and Medicaid fiscal intermediaries periodically
conduct post-payment reviews and other audits of healthcare claims, including
hospice claims. These contractors are under pressure from state and federal
governments to scrutinize healthcare claims to determine their validity and
appropriateness. During the past several years, the Company's previous Medicare
fiscal intermediary conducted a number of reviews of hospice provider claims,
including the Company's. These reviews included both focused medical reviews of
claims for patients with non-cancer terminal diagnoses and long-stay patients
(patients with lengths of stay greater than 210 days) and post-pay audits. In
order to conduct these reviews, the intermediary requested certain documentation
from the Company and then reviewed such documentation to determine technical
compliance with federal rules and regulations, eligibility of the patients for
hospice benefits and/or appropriateness of the documentation and the care
provided. There can be no assurance that reviews and/or similar audits of the
Company's claims by federal or state intermediaries will not result in material
recoupments or denials which could have a material adverse effect on the
Company. See "Business--Operation Restore Trust and Claims Reviews."
RECENT LOSSES; IMPACT OF CHANGES IN THE COMPANY'S OPERATING MODEL; TERMINATED
MERGER
The Company reported net losses of $2.8 million, $7.1 million and $0.9
million for the years ended September 30, 1995 and 1996 and the nine months
ended June 30, 1997, respectively. Over the past several years, the Company's
operations have undergone significant changes which have negatively affected its
financial performance. Prior to fiscal 1995, the Company had attempted to
diversify its operations to include non-hospice services, such as chronic
disease management, through the development of large multi-functional service
teams at the local program level with regional support capabilities. Developing
this infrastructure to support diversification significantly increased the
Company's operating expenses and
13
<PAGE>
affected the results of its acquired operations in California which were not
initially incorporated into the Company's existing support operations. Beginning
in fiscal 1995, the Company initiated the Restructuring, which included three
key initiatives: (i) the reorganization of senior management and other
personnel; (ii) the reduction of the size of the local program's patient care
teams within a new structure designed to provide exclusively hospice care; and
(iii) the elimination of various corporate, regional and local personnel
positions no longer deemed necessary to manage the Company's operations. In June
1996, the Company entered into the Proposed Merger Transaction, which was
terminated in November 1996. During this period, the Company experienced
significant disruptions as a result of the anticipated combination of the
operations of Vitas and Apria, particularly with respect to changes in the
Company's admissions and education activities. In addition, the Proposed Merger
Transaction caused a delay in the implementation of certain of the Company's
Restructuring efforts. For each of the three months ended March 31, 1997 and
June 30, 1997, however, the Company has reported net income of $29,000 and $1.2
million, respectively. While, to date, the Company's Restructuring efforts have
had a positive impact on the Company's results of operations, there can be no
assurance that such positive impact will continue, or that the Company will
continue to be profitable in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
NEED FOR ADDITIONAL WORKING CAPITAL
Continued expansion of the Company's business, including growth through
acquisitions, will require additional capital. In the past, the Company has
relied on funds raised through private equity and bank financing and its own
cash flow to support such growth. Although the Company expects to use
approximately $5.8 million of the proceeds of this Offering, together with funds
from a new credit facility currently being negotiated and cash flow from
operations, to provide funds for general corporate purposes, it is possible that
the Company may also require additional capital in the future to support its
operations, including making acquisitions. Sources of additional capital may
include cash flow from operations as well as further public and private equity
and debt financings. The ability of the Company to generate additional cash flow
will depend on a number of factors, including the success of the Company's
admissions and education activities as well as other factors that are not within
the Company's control, such as competitive conditions and government regulation.
There can be no assurance that the Company will be successful in producing
sufficient cash flows or raising sufficient debt or equity capital to satisfy
its working capital needs or that such funds, if available at all, will be
available on a timely basis on terms that are acceptable to the Company. Failure
to generate or raise sufficient funds may require the Company to delay or
abandon some or all of its future growth strategy, which could have a material
adverse effect on the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
DEPENDENCE ON RELATIONSHIPS WITH THIRD PARTIES
The profitability and growth of the Company's business depend on its ability
to establish and maintain close working relationships with managed care
organizations, private and governmental third-party payors, hospitals,
physicians, physician groups, home health agencies, long-term care facilities
and other institutional healthcare providers, and large self-insured employers.
There can be no assurance that the Company's existing relationships will be
successfully maintained or that additional relationships will be successfully
developed and maintained in existing or future markets. The loss of such
existing relationships or the failure to continue to develop such relationships
in the future could have a material adverse effect on the Company.
POTENTIAL IMPACT OF LARGE PAYORS
Managed care organizations have grown substantially in terms of the
percentage of the population that is covered by such organizations and in terms
of their control over an increasing portion of the healthcare economy. Managed
care plans have continued to consolidate to enhance their ability to
14
<PAGE>
influence the delivery of healthcare services and to exert pressure to control
healthcare costs. The Company has a number of contractual arrangements with
managed care organizations and other similar parties.
The Company provides hospice care to many Medicare beneficiaries who receive
their non-hospice healthcare services from health maintenance organizations
("HMOs") under Medicare risk contracts. Under such contracts between HMOs and
HHS, the Medicare payments for hospice services are excluded ("carved out") from
the per member per month payment from Medicare to HMOs and, instead, are paid
directly by Medicare to the hospices. As a result, the Company's payments for
Medicare beneficiaries enrolled in Medicare risk HMOs are processed in the same
way with the same rates as other Medicare beneficiaries. The recently-enacted
Balanced Budget Act codified that reimbursement for hospice services provided to
beneficiaries enrolled in Medicare HMOs and the new Medicare+Choice plans is
paid by Medicare directly to hospice programs rather than to Medicare managed
care plans. No assurances can be given, however, that payment for hospice
services will continue to be "carved out" of the HMO payment under Medicare risk
contracts and similar Medicare managed care plans or that, if not "carved out,"
managed care organizations or other large third-party payors would not use their
power to influence and exert pressure on healthcare providers to reduce costs in
a manner that could have a material adverse effect on the Company. See
"Business--Payment for Services."
POTENTIAL LIABILITY
Participants in the hospice industry are subject to lawsuits alleging
negligence, product liability or other similar legal theories, many of which
involve large claims and significant defense costs. From time to time, the
Company is subject to such lawsuits as a result of the nature of its business.
Although the Company currently maintains liability insurance intended to cover
such claims, there can be no assurance that the coverage limits of such
insurance policies will be adequate or that all such claims will be covered by
the insurance. In addition, these insurance policies must be renewed annually.
While the Company has been able to obtain liability insurance in the past, such
insurance varies in cost, is difficult to obtain and may not be available in the
future on terms acceptable to the Company, if at all. A successful claim in
excess of the insurance coverage could have a material adverse effect on the
Company. Claims, regardless of their merit or eventual outcome, also may have a
material adverse effect on the business and reputation of the Company.
COMPETITION
Hospice care in the U.S. is highly competitive. In many areas in which its
programs are located, the Company competes with a large number of organizations,
including major national and regional companies, hospital-based hospice and
palliative care programs, numerous local organizations, physician groups,
nursing homes, home health agencies, and infusion therapy companies and nursing
agencies. Some of the current and potential competitors of the Company have or
may obtain significantly greater financial and marketing resources than the
Company. Various healthcare companies have diversified into the hospice market.
For example, several large long-term care providers and other healthcare
providers have entered into the hospice business directly or through affiliates.
In addition, relatively few barriers to entry exist in the local markets served
by the Company. Accordingly, other companies, including hospitals and healthcare
organizations that are not currently providing hospice care, may enter the
markets and expand the variety of services offered. There can be no assurance
that the Company will not encounter increased competition in the future that
could limit its ability to maintain or increase its market position, including
competition from parties in a position to impact referrals to the Company. Such
increased competition could have a material adverse effect on the Company. See
"Business--Competition."
15
<PAGE>
ACQUISITION RISKS; DIFFICULTIES OF INTEGRATION
A significant element of the Company's future growth strategy is expansion
through the acquisition of other hospice programs. In the normal course of
business, the Company engages in acquisition discussions with a number of
not-for-profit and for-profit hospice programs regarding possible acquisitions,
and plans to continue expanding in selected locations. There can be no assurance
that the Company's acquisition strategy will be successful. The success of the
Company's acquisition program will be dependent upon a number of factors,
including the Company's ability to identify suitable acquisition candidates and
finance such acquisitions, competition for such acquisitions, the regulatory
environment and/or regulatory enforcement initiatives such as ORT, the purchase
price, the Company's compliance with any applicable covenants or restrictions in
its credit facilities, the financial performance of the programs after
acquisition and the ability of the Company to integrate effectively the
operations of the acquired hospice programs. Acquisitions involve a number of
risks related to integration, including possible adverse short-term effects on
the Company's reported operating results, diversion of management's attention
and dependence on retention, hiring and training of key personnel, some or all
of which could have a material adverse effect on the Company. In addition, there
can be no assurance that acquired operations will achieve net revenue or
earnings that justify the Company's investment therein or expenses related
thereto. Any failure by the Company to integrate or operate acquired programs
effectively may have a material adverse effect on the Company.
Since 1990 the Company has acquired hospice programs in Florida, California
and Ohio, some of which involved acquisitions of hospice programs from
not-for-profit entities. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Since more than 70% of the hospice
programs in the U.S. are not-for-profit or government-sponsored programs, it is
likely that a substantial number of acquisition opportunities will involve
hospice programs operated by not-for-profit entities. The Company believes that
the acquisition of such programs is more complex than acquisitions from
for-profit entities, since, among other things, such acquisitions are subject to
provisions of the Code and, in certain states, state attorney general powers
which have been interpreted to require that the consideration paid for the
assets purchased be at fair market value, and, where applicable, that any fees
paid for services be reasonable. In many states, there is no mechanism for state
attorney general pre-clearance of transactions to assure that applicable
standards have been met. Entities which acquire not-for-profit hospices could
face potential liability if the acquisition transaction is not structured to
comply with Code and state law requirements, and in some cases the transaction
could be enjoined or subject to recission. Recently, the acquisition of
not-for-profit businesses, including the fairness of the purchase price paid
therefor, has received increasing regulatory scrutiny by state attorneys general
and other regulatory authorities. Although the Company believes that reasonable
actions have been taken to date to establish the fair market value of the assets
purchased in prior acquisitions of hospice operations from not-for-profit
entities and the reasonableness of fees paid for services, there can be no
assurance that such transactions or any future similar transactions will not be
challenged or that, if challenged, the results of such challenge would not have
a material adverse effect on the Company.
DEPENDENCE ON PERSONNEL AND SKILLED EMPLOYEES
The Company's performance depends in large part upon the continued
contributions of its senior management, and the loss of services of certain of
the Company's executive officers and senior management could have an adverse
effect on the Company's business. Hugh A. Westbrook, the Company's Chairman of
the Board and Chief Executive Officer, has an employment agreement with the
Company. In addition, the Company has entered into severance agreements with
executive officers and several other officers that would provide for payments to
such individuals under certain circumstances relating to a change of control of
the Company. See "Management--Employment and Other Agreements." The Company's
performance also depends to a significant extent on the continued service of
non-management professional and other employees involved in operations and on
the Company's ability to continue to attract, motivate and retain highly
qualified employees. The loss of a significant number of these
16
<PAGE>
employees could have a material adverse effect on the Company. The Company's
employees may voluntarily terminate their employment with the Company at any
time. Competition for certain employees is intense, and the process of locating
and recruiting skilled personnel with the combination of skills and attributes
required to care effectively for terminally ill patients and their families can
be difficult and is often lengthy. There can be no assurance that the Company
will be successful in continuing to attract or retain highly skilled nursing,
management, operations, admissions and other personnel, and the Company's
operating results could be materially adversely affected if the Company is
unable to attract or retain these personnel.
CONTROL BY EXISTING STOCKHOLDERS
Upon the consummation of the Offering, the existing holders of Common Stock
and Common Stock equivalents of the Company will beneficially own approximately
60.6% of the outstanding shares of the Company's Common Stock and Common Stock
equivalents (including approximately 44.0% which will be beneficially owned by
the Company's directors, executive officers and their affiliates) which includes
approximately 4.7% to be held by the Company's Employee Stock Ownership Plan
(the "ESOP"). The sole trustee of the ESOP is Hugh A. Westbrook, the Company's
Chairman, Chief Executive Officer, and a significant stockholder, but Mr.
Westbrook's voting of the Common Stock held by the ESOP is subject to his
fiduciary duties as a trustee and additional restrictions on voting such Common
Stock. Nonetheless, the existing stockholders, if they act as a group, would be
able to influence the election of the Company's directors and the outcome of
matters requiring approval by the stockholders of the Company. See "Principal
Stockholders" and "Description of Capital Stock."
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER, BY-LAW AND STATUTORY PROVISIONS
The Company's Amended and Restated Certificate of Incorporation, as amended
(the "Charter"), and Amended and Restated By-laws, as amended (the "By-laws"),
as well as Delaware corporate law, contain certain provisions that could have
the effect of making it more difficult for a third party to acquire, or
discouraging a third party from attempting to acquire, control of the Company.
These provisions could limit the price that certain investors might be willing
to pay in the future for shares of the Company's Common Stock. Certain of these
provisions allow the Company to issue without stockholder approval preferred
stock having rights senior to those of the Common Stock. Other provisions impose
various procedural and other requirements that could make it more difficult for
stockholders to effect certain corporate actions. In addition, the Company's
Board of Directors is divided into three classes, each of which serves for a
staggered three-year term, which may make it more difficult for a third party to
gain control of the Company's Board of Directors. As a Delaware corporation, the
Company is subject to Section 203 of the Delaware General Corporation Law which,
in general, prevents an "interested stockholder" (defined generally as a person
owning 15% or more of a corporation's outstanding voting stock) from engaging in
a "business combination" (as defined) with a Delaware corporation for three
years following the date such person became an interested stockholder unless
certain conditions are satisfied. See "Description of Capital Stock." The
Company intends to adopt a Stockholder Rights Agreement which will become
effective upon the closing of the Offering. See "Description of Capital Stock--
Stockholder Rights Agreement" and "--Certain Anti-Takeover Provisions."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this Offering, there has been no public market for the Common Stock
of the Company. Although the Company's Common Stock is expected to be approved
for listing on the Nasdaq National Market, there can be no assurance that an
active trading market will be developed or sustained after this Offering or that
the market price of the Common Stock will not decline below the initial public
offering price. The initial public offering price of the Common Stock has been
determined by negotiations between the Company and the representative of the
Underwriters and may not be indicative of the price at which the Common Stock
will trade after this Offering. See "Underwriting" for a description of the
factors
17
<PAGE>
considered in determining the initial public offering price. In general, the
price of the Company's Common Stock after this Offering will be determined in
the marketplace and may be influenced by many factors, including variations in
the quarterly operating results of the Company, changes in earnings estimates by
securities analysts or the Company's ability to meet those estimates, fiscal
trends in the healthcare industry (including legislative and regulatory
proposals and changes), the depth and liquidity of the market for the Company's
Common Stock, investor perception of the Company and general economic,
legislative and market conditions. Accordingly, the market price of the
Company's Common Stock may be highly volatile.
The Company believes that immediately after this Offering it will be the
only publicly held company principally engaged in providing hospice services.
Most hospice programs operating today are not-for-profit organizations. The
Company's status as a for-profit, public company engaged in the hospice business
could result in unfavorable public comments or reactions which, in turn, could
affect the views of government officials, members of the investment community,
or others in a way that might adversely affect the Company's business and the
market price of the Company's Common Stock.
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of the Common Stock offered hereby will experience immediate and
substantial dilution of approximately ($16.33) per share. The net tangible book
value of the Common Stock outstanding subsequent to this Offering will be
substantially less than the initial per share public offering price of the
Common Stock. Further dilution is likely to occur upon the exercise of
outstanding stock options as well as any future equity financings conducted by
the Company to augment its working capital. See "Dilution."
POTENTIAL ADVERSE MARKET IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE;
REGISTRATION RIGHTS; OUTSTANDING WARRANTS AND OPTIONS
Sales of substantial amounts of Common Stock into the public market
following the Offering, or the perception that such sales could occur, could
adversely affect the prevailing market price of the Common Stock and adversely
affect the Company's ability to raise additional capital in the capital markets
at a time and on terms favorable to the Company. The Company can make no
prediction as to the effect, if any, that the sale or availability for future
sale of shares of additional Common Stock will have on the market price of the
Common Stock prevailing from time to time.
In addition to the 3,800,000 shares of Common Stock offered hereby (or a
maximum of 4,370,000 shares in the event the Underwriters' over-allotment option
is exercised in full), approximately 663,287 shares will be eligible for sale in
the public market immediately upon the date of this Prospectus without
restriction or further registration under the Securities Act of 1933, as amended
(the "Securities Act"), unless purchased by "affiliates" of the Company as that
term is defined in Rule 144 under the Securities Act. Holders of 3,320,402
outstanding shares and an additional 1,198,071 shares issuable upon the exercise
of stock options are subject to certain lock-up agreements entered into between
certain officers, directors, stockholders and option and warrantholders of the
Company and the representative of the Underwriters. Beginning 180 days after the
date of this Prospectus, upon the expiration of such lock-up agreements,
2,966,732 of these shares and all of the shares issuable upon the exercise of
such stock options (1,174,697 of which would be vested and exercisable following
the expiration of the 180 day lock-up period) will become available for sale,
subject, in most cases, to compliance with the restrictions of Rule 144. The
remaining 353,670 shares are "restricted securities" as defined under Rule 144
and were issued by the Company in private transactions in reliance upon one or
more exemptions under the Securities Act. Such restricted securities may be
resold in a public distribution only if registered under the Securities Act or
pursuant to an exemption therefrom, including Rule 144. The holders of up to
approximately 4,854,631 shares of Common Stock and certain options to purchase
shares of Common Stock are entitled to certain registration rights with respect
to such shares. By exercising their registration rights, such holders could
cause a large number of shares to be registered and sold in the public market.
See "Description of Capital Stock," "Shares Eligible For Future Sale" and
"Underwriting."
18
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of 3,800,000 shares of Common
Stock offered hereby (after deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company) are estimated to be
approximately $52.0 million (approximately $60.6 million if the Underwriters'
over-allotment option is exercised in full), based upon a public offering price
of $15.00 per share. In addition, the Company expects to receive $3.0 million in
connection with the exercise of a warrant to purchase Common Stock upon
consummation of the Offering. The Company anticipates that the net proceeds from
the Offering, together with the proceeds received by the Company upon exercise
of such warrant, aggregating approximately $55.0 million, will be used for the
following purposes: (i) $30.0 million to redeem all of the outstanding shares of
9% Preferred Stock, including the payment of all accrued but unpaid dividends
and an early redemption premium; (ii) $9.1 million to repay a portion of the
outstanding borrowings under the Company's existing bank debt (as further
described below); (iii) $8.6 million to repay two promissory notes issued in
connection with the CHC Acquisition (as defined below); (iv) $1.5 million to
repurchase a warrant for 522,289 shares at a per share price equal to the excess
of the public offering price over $12.19, assuming a public offering price of
$15.00 per share; and (v) the approximately $5.8 million remaining for general
corporate purposes, including possible acquisitions. The Company does not have
any agreements, arrangements or understandings with respect to any such
acquisitions and no portion of the net proceeds has been allocated for any
specific acquisition. See "Business--Business Strategy." Pending utilization of
the net proceeds from this Offering for the purposes set forth herein, the
Company intends to invest the net proceeds in short-term investment-grade,
interest-bearing securities or certificates of deposit.
The bank debt consists of a revolving credit facility and a term loan
pursuant to a credit agreement dated February 17, 1995, as amended, between the
Bank and the Company (the "Credit Agreement"). The revolving credit facility
bears interest at variable rates (based on the London Interbank Offered Rate
("LIBOR"), the prime rate or the federal funds rate), and the interest rate on
the term loan ranges from 11% to 12%. A significant portion of this debt was
incurred in connection with the acquisition of substantially all of the assets
and certain of the liabilities of Community Hospice Care, Inc. and its
affiliated partnerships (collectively, "CHC" and sometimes referred to herein as
the "CHC Acquisition"). See "Description of Indebtedness--Credit Agreement." In
addition to the bank debt incurred to fund the cash portion of the purchase
price in the CHC Acquisition, Vitas Healthcare Corporation of California, a
wholly owned subsidiary of the Company ("Vitas-California"), issued two
promissory notes to CHC as part of the purchase price. The interest rate on both
promissory notes is 9%. The two promissory notes mature on March 31, 1998 and
May 31, 1998, respectively. See "Description of Indebtedness--CHC Notes."
The Company is negotiating a new credit facility which it expects would be
in place upon consummation of this Offering. The revolving credit facility and
term loan, both of which mature upon the closing of this Offering, would be
replaced by a new credit facility, a portion of the funds from which would be
used, together with a portion of the proceeds of this Offering, to pay off the
existing credit facility and term loan. See "Capitalization" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock and
currently plans to retain earnings to finance the growth of the Company's
business rather than to pay cash dividends. Payments of any cash dividends in
the future will depend on the financial condition, results of operations and
capital requirements of the Company as well as other factors deemed to be
relevant by the Board of Directors. The Company is currently negotiating a new
credit facility that is expected to contain restrictions on the Company's
ability to pay cash dividends, and future borrowing arrangements may include
similar restrictions. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
19
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1997, and as adjusted to give effect to: (i) the automatic conversion of all
outstanding shares of the Company's Series B Preferred Stock into 2,026,293
shares of Common Stock on the closing of this Offering; (ii) the issuance of
246,634 shares of Common Stock by Chemed upon exercise of a portion of a warrant
to purchase Common Stock and expiration of the remaining portion of such
warrant; (iii) the sale by the Company of 3,800,000 shares of Common Stock in
this Offering (at an initial public offering price of $15.00 per share and after
deducting the estimated underwriting discounts and offering expenses payable by
the Company); (iv) the application by the Company of a portion of the net
proceeds of this Offering to redeem in full all outstanding shares of 9%
Preferred Stock (including the payment of all accrued but unpaid dividends and
an early redemption premium) and to repurchase a warrant to purchase Common
Stock following this Offering as described under "Use of Proceeds"; (v) the
repayment of $17.7 million of the Company's indebtedness with a portion of the
net proceeds of this Offering as described under "Use of Proceeds"; and (vi) the
exercise of the First Bank Warrant for 107,036 shares of Common Stock. The table
should be read in conjunction with the Consolidated Financial Statements of the
Company, and related notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------
ACTUAL AS ADJUSTED(1)
--------- --------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Cash.................................................................................... $ 9,225 $ 15,025
--------- -------
--------- -------
Debt, including current portion:
Bank debt (2)......................................................................... $ 30,400 $ 21,278
Capital lease obligations............................................................. 1,772 1,772
Other debt (3)........................................................................ 8,588 --
--------- -------
Total debt.......................................................................... 40,760 23,050
--------- -------
Redeemable preferred stock:
9% Preferred Stock (4)(5)............................................................. 27,376 --
Series B Preferred Stock (4)(5)....................................................... 34,741 --
--------- -------
Total redeemable preferred stock.................................................... 62,117 --
--------- -------
Stockholders' equity:
Common stock, $0.01 par value, 50,000,000 shares authorized; 1,652,806 and 7,832,769
shares issued and outstanding at June 30, 1997 and as adjusted, respectively (5).... 17 78
Additional paid-in capital............................................................ (32,403) 56,005
Loan to the ESOP...................................................................... (959) (959)
Accumulated deficit................................................................... (16,899) (19,741)
--------- -------
Total stockholders' equity (deficit)................................................ (50,244) 35,383
--------- -------
Total capitalization.............................................................. $ 52,633 $ 58,433
--------- -------
--------- -------
</TABLE>
- ------------------------
(1) Excludes 1,817,098 shares of Common Stock reserved for issuance upon the
exercise of options which have been granted (with an average exercise price
of $10.62 per share), 1,695,755 of which are exercisable within 60 days of
the date of this Prospectus, and 148,032 shares subject to stock options
that may be granted in the future under the Company's stock option plans and
up to 35,679 shares subject to the First Bank Warrant if this Offering is
not completed by November 29, 1997. See "Management-- Management Equity
Incentive Plans," "--Non-Plan Stock Option Grants," and "Description of
Capital Stock." Also excludes 570,000 shares issuable to the Underwriters
pursuant to the Underwriters' overallotment option.
(2) As adjusted, reflects approximate amount to be outstanding under a new
credit facility which the Company expects would be effective upon
consummation of this Offering.
(3) At the Closing of the CHC Acquisition, Vitas-California issued to CHC, as
part of the purchase price, two promissory notes (the "CHC Notes") in the
amounts of $6.0 million ("CHC Note A") and $5.4 million ("CHC Note B"),
respectively. See "Description of Indebtedness--CHC Notes."
(4) At June 30, 1997, the Company was authorized to issue 4,500,000 shares of
preferred stock of which 532,500 preferred shares were issued and
outstanding on that date. Such outstanding preferred shares consisted of (i)
9% Preferred Stock, cumulative, redeemable, $100 stated value, $1 par value,
270,000 shares issued and outstanding at June 30, 1997; and (ii) Series B
Preferred Stock, redeemable, convertible, $100 stated value, $1 par value,
262,500 shares issued and outstanding at June 30, 1997. No preferred shares
are outstanding as adjusted.
(5) Pursuant to an amendment to its Charter to be effective prior to the date of
this Prospectus, the Company increased its authorized shares of Common Stock
from 40 million shares to 50 million shares and its authorized shares of
preferred stock from 4.5 million shares to 10,270,000 shares, of which
270,000 shares will be retired upon redemption of the 9% Preferred Stock as
described in this Prospectus.
20
<PAGE>
DILUTION
The Company had a deficit in net tangible book value at June 30, 1997 of
approximately ($96.0) million or ($58.10) per share. Deficit in net tangible
book value per share at June 30, 1997 is equal to the Company's total tangible
assets less its total liabilities (including redeemable preferred stock),
divided by the total number of outstanding shares of Common Stock at that date.
After giving effect to the sale of the 3,800,000 shares of Common Stock offered
by the Company hereby at an assumed initial public offering price of $15.00 per
share and the application of the net proceeds therefrom, the conversion of the
Series B Preferred Stock into 2,026,293 shares of Common Stock, the purchase of
shares of Common Stock upon exercise of one of the warrants (and the expiration
of the remaining portion of such warrant) held by Chemed, and the repurchase of
the other warrant to purchase Common Stock held by Chemed, and the purchase of
107,036 shares of Common Stock upon exercise of the First Bank Warrant, the pro
forma deficit in net tangible book value of the Company's Common Stock at June
30, 1997 would have been approximately ($10.4) million, or ($1.33) per share.
This represents an immediate increase in net tangible book value of $56.77 per
share to existing stockholders and immediate dilution of ($16.33) per share to
purchasers of Common Stock in this Offering. The following table illustrates
this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per common share (1).......................... $15.00
Deficit in net tangible book value per common share prior to this Offering...... ($ 58.10)
Increase in net tangible book value per common share attributable to purchasers
of shares in this Offering (2)................................................. 28.06
Change in net tangible book value per common share attributable to the
conversion of the Series B Preferred Stock and the purchase of shares of Common
Stock upon exercise of two warrants and the repurchase of a third warrant to
purchase Common Stock.......................................................... 28.71
---------
Pro forma deficit in net tangible book value per common share after this Offering... (1.33)
---------
Dilution per common share to new investors in this Offering......................... ($ 16.33)
---------
---------
</TABLE>
- ------------------------
(1) Before deducting underwriting discounts and commissions and offering
expenses to be paid by the Company.
(2) After deducting underwriting discounts and commissions and offering expenses
to be paid by the Company.
The following table summarizes the differences between the existing
stockholders and the new investors with respect to the number of shares of
Common Stock purchased from the Company in the prior five years, the total
consideration paid and the average price per share paid (based upon an assumed
initial public offering price of $15.00 per share):
<TABLE>
<CAPTION>
SHARES PURCHASED
IN PRIOR FIVE YEARS TOTAL CONSIDERATION
---------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1)............................. 2,469,796 39.4% $ 29,384,819 34.0% $ 11.90
New investors......................................... 3,800,000 60.6 57,000,000 66.0 $ 15.00
--------- ----- ------------ -----
Total................................................. 6,269,796 100.0% $ 86,384,819 100.0%
--------- ----- ------------ -----
--------- ----- ------------ -----
</TABLE>
- ------------------------
(1) Includes the shares of Common Stock to be issued on the conversion of the
Series B Preferred Stock and the exercise of the warrants and the
consideration paid by the related purchasers.
The foregoing tables assume (i) no exercise of stock options for 1,817,098
shares of Common Stock, 1,695,755 of which are exercisable within 60 days of the
date of this Prospectus, (ii) no exercise of any options that may be granted in
the future under the Company's stock option plans and (iii) no exercise of the
First Bank Warrant for up to an additional 35,679 shares of Common Stock which
is exercisable at $0.03 per share after November 29, 1997. Outstanding options
to purchase Common Stock are at exercise prices ranging from $0.25 to $19.09 per
share. The weighted average exercise price for outstanding options as of June
30, 1997 was $10.62 per share. To the extent that options or additional shares
subject to the First Bank Warrant are exercised, there will be further dilution
to new investors. See "Management--Management Equity Incentive Plans,"
"--Non-Plan Stock Option Grants," and "Description of Capital Stock."
21
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data and
other operating information of the Company for fiscal years ended September 30,
1992 through 1996 which are derived from the Consolidated Financial Statements
of the Company, including the notes thereto, certain of which are contained
elsewhere in this Prospectus. The selected consolidated financial data for the
nine months ended June 30, 1996 and 1997 include all adjustments, consisting of
normal recurring adjustments and accruals, which the Company considers necessary
for a fair presentation of the financial position and the results of operations
for these periods. The consolidated operating results for the nine months ended
June 30, 1997 are not necessarily indicative of the results that may be expected
for the year ending September 30, 1997. The selected consolidated financial data
is qualified in its entirety by, and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company, including
the notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, JUNE 30,
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992(1) 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenue..................................... $ 101,737 $ 128,405 $ 148,535 $ 193,275 $ 213,856 $ 161,657 $ 150,323
Operating expenses:
Hospice program expenses...................... 80,135 93,833 110,251 155,570 175,495 131,319 121,604
Central support services...................... 15,507 22,304 22,036 25,241 23,790 17,290 16,120
Provision for bad debts....................... 1,316 3,283 3,973 6,828 7,958 4,035 3,283
Depreciation.................................. 1,018 1,794 2,931 4,197 5,438 3,993 4,308
Amortization of goodwill...................... 952 717 654 1,089 1,527 1,123 1,248
Nonrecurring charges (2)...................... -- 6,708 798 -- -- -- --
Restructuring costs (3)....................... -- -- -- 2,020 2,345 -- 3,480
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses........................ 98,928 128,639 140,643 194,945 216,553 157,760 150,043
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations................... 2,809 (234) 7,892 (1,670) (2,697) 3,897 280
Gain on terminated merger (4)................... -- -- -- -- -- -- 1,600
Gain on sale of assets.......................... -- -- -- -- -- -- 484
Interest and other income....................... 90 97 715 329 279 222 364
Interest expense................................ -- -- (316) (3,092) (4,674) (3,391) (3,652)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes and other
items......................................... 2,899 (137) 8,291 (4,433) (7,092) 728 (924)
Provision (benefit) for income taxes............ 992 46 3,150 (1,588) -- 248 --
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before other items................ 1,907 (183) 5,141 (2,845) (7,092) 480 (924)
Cumulative effect of change in
accounting principle for income taxes......... -- 259 -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)............................... $ 1,907 $ 76 $ 5,141 ($ 2,845) ($ 7,092) $ 480 ($ 924)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Pro forma net income (loss) (5)................. $ 1,662 $ 76 $ 5,141 ($ 2,845) ($ 7,092) $ 480 ($ 924)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) attributable to common
stockholders.................................. $ 544 ($ 3,038) $ 543 ($ 7,443) ($ 11,690) ($ 2,968) ($ 4,372)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Supplemental net loss attributable to
common stockholders (6)....................... ($ 9,590) ($ 1,393) ($ 2,797)
--------- --------- ---------
--------- --------- ---------
Supplemental net loss per common share (7)...... ($ 2.56) ($ 0.37) ($ 0.74)
--------- --------- ---------
--------- --------- ---------
OTHER DATA:
Admissions (8).................................. 13,780 15,808 17,727 23,512 26,256 19,888 19,487
Average length of stay (9)...................... 56.7 58.8 64.9 64.9 72.5 73.1 66.4
Average daily census (10)....................... 2,402 2,967 3,499 4,488 4,902 4,925 4,507
Adjusted EBITDA (11)............................ $ 4,779 $ 8,985 $ 12,275 $ 5,636 $ 6,613 $ 9,013 $ 9,318
Adjusted EBITDA as a % of net revenue........... 4.7% 7.0% 8.3% 2.9% 3.1% 5.6% 6.2%
(CONTINUED ON NEXT PAGE)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
----------------------------------------------------- --------------------
1992(1) 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and investments.......... $ 5,711 $ 17,247 $ 13,792 $ 4,545 $ 5,351 $ 2,396 $ 9,225
Working capital (deficit)....................... 1,282 12,769 14,813 7,623 (9,754) (27,332) (15,653)
Total assets.................................... 39,362 47,847 53,936 98,007 92,276 94,561 85,859
Total long-term debt............................ 4,932 1,947 2,606 41,484 39,487 9,024 31,227
Total redeemable preferred stock................ 27,053 53,987 56,155 58,323 60,491 59,949 62,117
Stockholders' equity (deficit).................. (19,227) (31,204) (30,283) (37,267) (48,475) (39,146) (50,244)
</TABLE>
- ------------------------------
(1) Selected consolidated financial information for the fiscal year ended
September 30, 1992 has been adjusted to combine the operations of
Vitas-Florida with those of the Company for the period through December 16,
1991. The Company's purchase of the outstanding stock of Vitas-Florida on
December 17, 1991 was accounted for as if a pooling of interests had
occurred since the Company was affiliated with Vitas-Florida through common
ownership.
(2) In fiscal 1993, nonrecurring charges of $6.7 million related to the
acceleration of performance bonus arrangements and vesting of non-qualified
stock options. In fiscal 1994, nonrecurring charges of $0.8 million related
to expense incurred in connection with a proposed public offering of the
Company's Common Stock that was not pursued due to market conditions.
(3) Represents restructuring costs principally to establish severance reserves.
(4) Includes a $4.0 million settlement relating to the Proposed Merger
Transaction, less $2.4 million of terminated merger costs.
(5) Through December 16, 1991, Vitas-Florida was an S Corporation under the
Code. Pro forma net income for the fiscal year ended September 30, 1992
represents net income after deducting the income tax expense that would have
been recorded had Vitas-Florida not been exempt from taxation under the S
Corporation election.
(6) Gives effect to the elimination of the dividends which would have been
payable under the mandatory redemption features of the Series B Preferred
Stock.
(7) Computed assuming the Series B Preferred Stock is converted into 2,026,293
shares of Common Stock and, pursuant to the Commission's SABs, includes all
Common Stock and Common Stock equivalents issued within the 12 months
immediately preceding the Offering as if they were outstanding for all
periods presented.
(8) Admissions is defined as the number of patients admitted into the Company's
programs during the period.
(9) Average length of stay represents the sum of days of care of patients who
have been discharged during the period divided by the total number of
patients discharged in such period. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(10) Average daily census is defined as the sum of the days of care of patients
who have been under the Company's care during the period divided by the
number of such days in the period.
(11) Adjusted EBITDA is defined as income before interest and other income,
interest expense, taxes, depreciation and amortization, and excludes the
$6.7 million and $0.8 million of nonrecurring charges in fiscal 1993 and
fiscal 1994; the $2.0 million, $2.3 million and the $3.5 million in
restructuring costs in fiscal 1995, fiscal 1996 and the nine months ended
June 30, 1997; and the $1.6 million gain on terminated merger and the $0.5
million gain on the sale of assets in the nine months ended June 30, 1997.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the Consolidated Financial
Statements of the Company, and related notes thereto, included elsewhere in this
Prospectus.
GENERAL
The Company is the largest provider of hospice services in the U.S., with
net revenue in fiscal 1996 of $213.9 million. Substantially all of the Company's
revenues are derived from providing end-of-life care to terminally ill patients
in their homes, which could be a residence or a long-term care or assisted
living facility, or an inpatient facility. The vast majority of the Company's
patients receive health insurance benefits under either the federal Medicare or
Medicaid programs. Reimbursement from such programs represented 94% of the
Company's net revenue in fiscal 1996. According to statistics developed by the
CBO, Medicare reimbursement for hospice services grew from approximately $318
million in 1990 to approximately $1.9 billion in 1995, and is expected to grow
to approximately $4.7 billion by 2000.
The Company's revenue in any particular period is affected by a number of
factors, including the average daily census and the level of hospice care
provided in such period. Average daily census, which is the total number of
patient days divided by the number of days in a period, is in turn impacted by
the number of admissions and the average length of stay for patients. Admissions
can typically affect average daily census in the period of admission as well as
in future periods, depending on the length of stay of patients and the length of
the period being measured. Average length of stay is affected by the timing of
discharges and of the patient's decision to enroll in hospice care after
diagnosis of a terminal illness. The admission decision may be influenced by the
Company's efforts to increase awareness of the benefits of timely enrollment in
hospice programs. Average length of stay, which is measured in any particular
period by examining the length of stay for the patients discharged from the
Company's hospice programs in that period, has recently been affected by the
impact of various events relating to the ORT initiatives and other claims review
activities, as described below. One of the Company's objectives is to increase
awareness and acceptance of hospice services among medical professionals in
order to increase both admissions and length of stay in its hospice programs.
To receive Medicare or Medicaid payment for hospice services, a hospice
physician and a patient's attending physician (if applicable), must certify that
the patient has a life expectancy of six months or less if the underlying
illness runs its normal course. Due to the uncertainty of such prognoses, it is
contemplated that a number of the Company's patients do not die within six
months of entering the hospice program. However, third party payors do not
terminate payments for hospice services based on the expiration of such period
or according to any other specified timetable. Continued eligibility for hospice
services is based on periodic recertifications by the hospice physician or the
patient's attending physician (if still involved in the patient's care) to
determine whether the life expectancy of the patient continues to be six months
or less. See "Business--Legislative Considerations." Various of the Company's
patients may be discharged, from time to time, for reasons other than death,
including discharges due to changes in their prognoses, their decisions to
pursue curative treatment and transfers to other hospices. In the nine months
ended June 30, 1997, approximately 88.9% of the Company's discharges were due to
death.
While the Company's average length of stay per patient was 66.4 days in the
nine months ended June 30, 1997, there is significant variability in the number
of days each of these patients spends in the Company's hospice programs. Of the
patients discharged for any reason, including death, in the nine months ended
June 30, 1997, 41.9% were discharged within 10 days of admission, 83.0% were
discharged within 90 days of admission and 91.2% were discharged within 180 days
of admission. During the same period, approximately 13.2% of the Company's total
days of care was provided to patients within 10 days of
24
<PAGE>
their admission, approximately 49.6% was provided within 90 days of admission,
approximately 66.0% was provided within 180 days of admission and the balance
was provided after 180 days of admission.
Hospice services are generally reimbursed under a "per diem" fee schedule
based on the level of care provided and adjusted based on geographic location.
Routine home care, which represented 78.8% of the Company's net revenue in
fiscal 1996, is reimbursed by Medicare at rates currently ranging from $95 to
$114 per day (depending on location). Continuous home care, which is provided
for a minimum of eight hours in any 24-hour period in the patient's home and
represented 3.0% of the Company's net revenue in fiscal 1996, is reimbursed by
Medicare at rates currently ranging from $555 to $664 per day (based on a
24-hour day). General inpatient care, which is provided in an appropriate
inpatient facility for pain control and symptom management which cannot be
managed in other settings and represented 16.9% of the Company's net revenue in
fiscal 1996, is reimbursed by Medicare at rates currently ranging from $423 to
$500 per day. Inpatient respite care, which is provided when the family or
caregiver of the patient requires a temporary reprieve for certain reasons other
than the patient's physical decline, is reimbursed by Medicare at rates
currently ranging from $98 to $113 per day, and physician services, which are
billed separately from hospice services and reimbursed at the lesser of the
actual charge of or the allowable charge for such services, represented the
remaining 1.3% of the Company's net revenue in fiscal 1996.
Annual rate adjustments for Medicare are generally determined by setting
annual increases based on the "market basket" inflation rate, as calculated by
HCFA for each federal fiscal year, which currently coincides with the Company's
fiscal year. Historically, annual payment rate increases for Medicare
reimbursement of hospice services have been based on the "market basket"
inflation rate, which inflation rate increases were 4.3%, 3.6%, 3.5% and 2.5%
for fiscal years 1994, 1995, 1996 and 1997, respectively, subject to the
following annual inflation rate percentage point reductions: 2.0%, 1.5%, 1.5%
and 0.5% in fiscal years 1994, 1995, 1996 and 1997, respectively. Thus, the
annual rate increases required for hospice services in these periods were 2.3%,
2.1%, 2.0% and 2.0%, respectively. Under the Balanced Budget Act, the annual
inflation rate percentage point reduction required for hospice services in each
of the fiscal years 1998 through 2002 is 1.0%. Therefore, the annual rate
increase for fiscal 1998 will be 1.7%, which is the "market basket" inflation
rate of 2.7%, minus one percentage point.
In addition, HCFA has recently modified the wage index methodology (to be
phased in over three years) used to adjust payment rates to account for
geographic variations in labor costs. Based on these adjustments, and assuming
the Company's current geographic locations and utilization rates, the Company
estimates that the modifications to the wage index methodology will reduce
reimbursement from Medicare by approximately 0.5% in fiscal 1998, approximately
1.0% in fiscal 1999 and approximately 1.5% in fiscal 2000.
Under the per diem reimbursement methodology, the Company is essentially at
risk for the cost of eligible services provided to hospice patients.
Profitability is therefore largely dependent upon the Company's ability to
manage the costs of providing hospice services to patients. Hospice program
expenses consist of labor and supply costs related to the delivery of patient
care, certain administrative costs related to the admission process as well as
other local program costs. Hospice program expenses also include the cost of
nursing home room and board services for Medicaid hospice patients in excess of
the amount which the Company bills and collects separately under the Medicaid
program. Central support services include labor and other overhead costs for
centralized support services, which include financial management, information
and telecommunications systems, admissions and education programs, clinical
operations support and human resources.
The Company has included in its analysis of its financial results adjusted
EBITDA which measures its income before interest and other income, interest
expense, taxes, depreciation and amortization and excludes all restructuring
costs, nonrecurring charges and certain other items. The Company believes that
adjusted EBITDA is a relevant measure of its recent historical operating
performance due to the
25
<PAGE>
significant impact of the Restructuring, the Proposed Merger Transaction and the
goodwill resulting from its acquisitions in fiscal 1995 and 1996 on its reported
financial results.
BACKGROUND
From fiscal 1994 to fiscal 1996, the Company's net revenue increased by
44.0% from $148.5 million to $213.9 million and its average daily census
increased by 40.1% from 3,499 patients to 4,902 patients. This growth was a
result of the Company's acquisitions of hospice operations in fiscal 1995 and
1996 (the "Acquisitions"), which included:
- in February 1995, the acquisition of the operations of CHC, which at the
time of its acquisition was the largest provider of hospice services in
California and the second largest for-profit provider in the U.S., and
which represented the Company's entry into California;
- in November 1995, the acquisition of the operations of Hospice of the
Miami Valley, Inc. ("HMV"), a not-for-profit hospice provider based in
Southwest Ohio, whose operations were combined with the Company's existing
operations in Cincinnati, making the Company the largest provider of
hospice services in the Greater Cincinnati area (the "HMV Acquisition");
and
- in August 1996, the acquisition of the operations of Hospice of Central
Florida, Inc. ("HCF"), a not-for-profit provider which was one of the
first providers of hospice services in the U.S., constituting the
Company's initial location in Central Florida (the "HCF Acquisition").
In addition, the Company's net revenue benefited from the opening of DE NOVO
sites in various locations, including Cincinnati, Ohio and Philadelphia,
Pennsylvania in fiscal 1993, and San Antonio, Texas and Milwaukee, Wisconsin in
fiscal 1994.
In the future, the Company expects to focus on acquisitions of hospice
operations with an average daily census of over 50 patients within its current
areas of service or in contiguous locations. In addition, the Company will
consider acquisitions of hospice providers in new regional locations which it
believes provide the necessary platform for significant consolidation and
opportunities for growth due to demographic characteristics. The Company
believes that there are significant opportunities to acquire both independent
hospice providers as well as the hospice operations of integrated service
providers that meet these criteria. Based on industry data, the Company
estimates there are approximately 3,000 hospice programs in the U.S., more than
70% of which are not-for-profit or government sponsored, and which have, on
average, a daily census of between 40 and 45 patients. In light of the capital
requirements and competitive pressures facing many hospice providers in the
current healthcare environment, the Company believes that many providers of
hospice care will find it attractive to combine their operations with other
providers that have greater access to capital to better fulfill their mission to
provide optimal end-of-life care in their communities. The Company believes that
its history of having completed such transactions, including acquisitions of
not-for-profit providers which are typically more difficult than acquisitions of
for-profit providers, and its operating model, which is designed to take
advantage of the economies of scale from such acquisitions, should enable it to
realize opportunities for acquisitions that may be presented in the future.
Over the past several years, the Company's operations have undergone
significant changes which have negatively affected its financial performance but
which, management believes, have resulted in an improved business model and
positioned the Company for future growth and profitability. Prior to fiscal
1995, the Company had attempted to diversify its operations to include
non-hospice services, such as chronic disease management, through the
development of large multi-functional service teams at the local program level
with regional support capabilities. Developing this infrastructure to support
diversification significantly increased the Company's operating expenses and
affected the results of its acquired operations in California which were not
fully incorporated into the Company's existing support operations. Beginning in
fiscal 1995, the Company initiated the Restructuring designed to return its
emphasis to
26
<PAGE>
expanding its hospice operations and to create a more efficient operating model
that emphasized a uniform structure in each of the Company's local hospice
programs supported by centralized corporate functions.
The Restructuring involved three key initiatives, which have been adopted
and implemented in various stages since fiscal 1995 and have included: (i) the
reorganization of senior management and other personnel; (ii) the reduction of
the size of the local program's patient care teams within a new structure
designed to provide exclusively hospice care; and (iii) the elimination of
various corporate, regional and local personnel positions no longer deemed
necessary to manage the Company's operations. The Company's current operating
model emphasizes the delivery of hospice services through a standardized hospice
program structure supported by centralized services provided from the Company's
corporate office located in Miami, Florida. The Company believes that this
operating model provides significant opportunities for the Company to expand
through acquisitions and to recognize operating and cost improvements in these
acquired operations.
In June 1996, the Company entered into the Proposed Merger Transaction,
which was terminated in November 1996. During this period, the Company
experienced significant disruptions as a result of the anticipated combination
of the operations of Vitas and Apria. These disruptions included the preparation
for integration of Vitas' senior management, initial communications to various
Vitas personnel of the projected termination date of their employment after the
closing of the Proposed Merger Transaction, communications relative to
anticipated reorganization of various support functions including admissions and
education activities and the need for communication to Vitas' general employee
base and healthcare professionals regarding the Proposed Merger Transaction. In
addition, the Proposed Merger Transaction caused a delay in the implementation
of certain of the Company's Restructuring efforts. In the first quarter of
fiscal 1997, the Company recognized a $1.6 million gain on terminated merger in
connection with the Proposed Merger Transaction, which represented the benefit
of a $4.0 million settlement offset by a $2.4 million charge for related costs.
The Company incurred restructuring charges of $2.0 million, $2.3 million and
$3.5 million in fiscal 1995 and 1996 and the first quarter of fiscal 1997,
principally to establish severance reserves for employees terminated in
connection with the Restructuring. Also, in the first quarter of fiscal 1997,
the Company recognized a gain on sale of assets of $0.5 million resulting from
the sale of an under-performing hospice program. Although certain aspects of the
Restructuring have not yet been fully implemented, the Company believes it has
adequate reserves for all anticipated restructuring activities. The
Restructuring and the Proposed Merger Transaction contributed significantly to
the Company's losses in fiscal 1995 and fiscal 1996 and the nine months ended
June 30, 1997. However, the Company has been profitable in the two most recent
quarters of fiscal 1997.
27
<PAGE>
QUARTERLY RESULTS
The following table sets forth selected operating results for each of the
seven quarters in the period ended June 30, 1997. The information for each of
these quarters is unaudited but includes all normal recurring adjustments and
accruals that management considers necessary for a fair presentation. Future
operating results may fluctuate depending on a number of factors including the
timing and operating results of acquisitions, the timing and opening of new
programs, and changes in the level of care, length of stay or patient census.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995 1996 1996 1996 1996 1997 1997
-------- -------- -------- --------- -------- -------- --------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenue................... $54,516 $54,564 $52,577 $52,199 $51,492 $48,838 $49,993
Operating expenses:
Hospice program expenses.... 44,017 44,111 43,191 44,176 42,473 39,960 39,171
Central support services.... 5,913 5,812 5,565 6,500 5,504 5,051 5,565
Provision for bad debts..... 1,453 1,250 1,332 3,923 1,360 1,004 919
Depreciation................ 1,243 1,355 1,395 1,445 1,462 1,415 1,431
Amortization of goodwill.... 368 377 378 404 425 412 411
Restructuring costs (1)..... -- -- -- 2,345 3,480 -- --
-------- -------- -------- --------- -------- -------- --------
Total operating expenses...... 52,994 52,905 51,861 58,793 54,704 47,842 47,497
-------- -------- -------- --------- -------- -------- --------
Income (loss) from
operations.................. 1,522 1,659 716 (6,594) (3,212) 996 2,496
Gain on terminated merger
(2)......................... -- -- -- -- 1,600 -- --
Gain on sale of assets........ -- -- -- -- 484 -- --
Interest and other income..... 94 73 48 64 89 107 168
Interest expense.............. (1,181) (1,142) (1,061) (1,290) (1,089) (1,074) (1,489)
-------- -------- -------- --------- -------- -------- --------
Income (loss) before income
taxes....................... 435 590 (297) (7,820) (2,128) 29 1,175
Provision (benefit) for income
taxes....................... 148 201 (101) (248) -- -- --
-------- -------- -------- --------- -------- -------- --------
Net income (loss)............. $ 287 $ 389 ($ 196) ($7,572) ($2,128) $ 29 $ 1,175
-------- -------- -------- --------- -------- -------- --------
-------- -------- -------- --------- -------- -------- --------
OTHER DATA:
Admissions (3)................ 6,392 7,012 6,484 6,368 6,448 6,740 6,299
Average length of stay (4).... 76.3 67.7 75.4 70.6 73.4 62.0 63.3
Average daily census (5)...... 4,982 4,938 4,854 4,837 4,685 4,384 4,448
Adjusted EBITDA (6)........... $ 3,133 $ 3,391 $ 2,489 ($2,400) $ 2,155 $ 2,823 $ 4,338
Adjusted EBITDA as a % of net
revenue..................... 5.7% 6.2% 4.7% (4.6%) 4.2% 5.8% 8.7%
</TABLE>
- ------------------------
(1) Represents restructuring costs principally to establish severance reserves.
(2) Includes a $4.0 million settlement relating to the Proposed Merger
Transaction, less $2.4 million of terminated merger costs.
(3) Admissions is defined as the number of patients admitted into the Company's
programs during the period.
(4) Average length of stay represents the sum of days of care of patients who
have been discharged during the period divided by the total number of
patients discharged in such period.
(5) Average daily census is defined as the sum of the days of care of patients
who have been under the Company's care during the period divided by the
number of days in such period.
(6) Adjusted EBITDA is defined as income before interest and other income,
interest expense, taxes, depreciation and amortization, and excludes the
$2.3 million and the $3.5 million of restructuring costs in the three months
ended September 30, 1996 and December 31, 1996, respectively, and the $1.6
million gain on the terminated merger and $0.5 million gain on the sale of
assets in the three months ended December 31, 1996.
28
<PAGE>
The following table sets forth, for the quarters indicated, selected
consolidated financial data expressed as a percentage of net revenue.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995 1996 1996 1996 1996 1997 1997
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(AS A PERCENTAGE OF NET REVENUE)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue.................................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Hospice program expenses................... 80.7 80.8 82.1 84.6 82.5 81.8 78.4
Central support services................... 10.8 10.7 10.6 12.5 10.7 10.3 11.1
Provision for bad debts.................... 2.7 2.3 2.5 7.5 2.6 2.1 1.8
Depreciation............................... 2.3 2.5 2.7 2.8 2.8 2.9 2.9
Amortization of goodwill................... 0.7 0.7 0.7 0.8 0.8 0.8 0.8
Restructuring costs........................ -- -- -- 4.5 6.8 -- --
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses..................... 97.2 97.0 98.6 112.6 106.2 97.9 95.0
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations................ 2.8% 3.0% 1.4% (12.6%) (6.2%) 2.1% 5.0%
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
The Company believes that its admissions, average length of stay and average
daily census have been negatively impacted in fiscal 1996 and fiscal 1997 by
several items, including (i) initial implementation of new guidelines developed
by NHO, in consultation with HCFA, which established more specific criteria for
analyzing terminal prognoses for certain non-cancer diagnoses; and (ii)
publicity resulting from, and reactions to, the ORT initiatives and other claims
review activities. See "Business--Operation Restore Trust and Claims Reviews."
The Company also believes that publicity regarding allegedly ineligible long-
stay patients of other hospices caused some hospice and attending physicians to
be overly conservative in referring patients to hospice and in determining
patients' prognoses, both at the time of admission and upon periodic
recertifications. Reflecting these events, the median length of stay for all
patients discharged decreased from approximately 18 days in fiscal 1996 to
approximately 16 days in the nine months ended June 30, 1997. The Company
believes that the length of stay data for fiscal 1996 and the beginning of
fiscal 1997 is distorted by the effects of these events, including reduced
admissions and increased discharges (particularly of long-stay patients) during
these periods. The Company believes that the average length of stay data after
the first quarter of fiscal 1997 reflects a more meaningful indication of trends
regarding length of stay for the Company's patients.
The Company's net revenue declined during the third and fourth quarters of
fiscal 1996 from the second quarter of fiscal 1996 as the Company experienced
disruptions in its admissions and other operations during the pendency of the
Proposed Merger Transaction. During this period, the Company's admissions in its
existing operations declined significantly, which was offset in part by the
Company's acquisition of the operations of HCF in August 1996.
In the first and second quarters of fiscal 1997, the Company's net revenue
continued to decrease from the fourth quarter of fiscal 1996 due to a decline in
average daily census and two fewer days in the second quarter compared to the
first quarter. This decline in average daily census reflected lower admissions
in the third and fourth quarters of fiscal 1996, and a decline in average length
of stay in the second quarter of fiscal 1997.
Net revenue increased in the third quarter of fiscal 1997 as compared to the
previous quarter as average daily census increased primarily due to an increase
in admissions in the first and second quarters of the fiscal year. Admissions
declined in the third quarter of fiscal 1997 as compared to the previous quarter
as changes in the Company's admissions program, designed to increase
accountability of admissions personnel, led to attrition among such personnel.
The Company has hired, and continues to hire, a number of experienced healthcare
professionals to fill these vacant positions.
29
<PAGE>
Average daily census in fiscal 1997 has been negatively impacted by the sale
and closure of certain hospice and other operations in the first and second
quarters of fiscal 1997, which collectively reduced average daily census by
approximately 100 patients.
Hospice program expenses remained relatively constant through each quarter
of fiscal 1996, but increased as a percentage of net revenue in the third and
fourth quarters of fiscal 1996 due to a decline in net revenue. Such expenses
decreased in the first and second quarters of fiscal 1997 as the Company
continued to implement certain of its Restructuring efforts, particularly (i)
the reduction of the size of the patient care teams in the local programs within
a new structure designed to provide exclusively hospice care, and (ii) the
elimination of certain functions at the local programs which are now performed
at the Company's corporate office.
In the third quarter of fiscal 1996, central support services were reduced
by the reversal of bonuses previously accrued, which management determined would
not be paid. In the fourth quarter of fiscal 1996, central support services
increased due to an increase in general corporate expenses. These expenses were
reduced in the first and second quarter of fiscal 1997 as the Company eliminated
certain redundant support functions in its corporate office. Central support
services increased in the third quarter of fiscal 1997 as the Company assumed
certain support services at the corporate office previously performed at the
local program level. The Company believes that its current structure should
enable it to increase its revenue base with modest increases in the level of
support services in the near future.
Provision for bad debts increased significantly in the fourth quarter of
fiscal 1996. This was due to, among other things, disruptions in normal
collection efforts during the Proposed Merger Transaction, which affected
billing and collection procedures, and a change in the Company's estimates as a
result of the Company's ongoing evaluation of collectibility of accounts
receivable. The Company has instituted a number of processes which it believes
has improved its billing and collections procedures and which have resulted in a
reduction of its provision for bad debts in the last several quarters. As a
result, the provision for bad debts as a percentage of net revenue for each
successive quarter beginning in the first quarter of fiscal 1997 has decreased.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
consolidated financial data as a percentage of net revenue.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, JUNE 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<CAPTION>
(AS A PERCENTAGE OF NET REVENUE)
<S> <C> <C> <C> <C> <C>
Net revenue................................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Hospice program expenses.................................. 74.2 80.5 82.1 81.2 80.9
Central support services.................................. 14.8 13.1 11.1 10.7 10.7
Provision for bad debts................................... 2.7 3.5 3.7 2.5 2.2
Depreciation.............................................. 2.0 2.2 2.5 2.5 2.9
Amortization of goodwill.................................. 0.4 0.6 0.7 0.7 0.8
Nonrecurring charges...................................... 0.5 -- -- -- --
Restructuring costs....................................... -- 1.0 1.2 -- 2.3
--------- --------- --------- --------- ---------
Total operating expenses.................................... 94.6 100.9 101.3 97.6 99.8
--------- --------- --------- --------- ---------
Income (loss) from operations............................... 5.3% (0.9%) (1.3%) 2.4% 0.2%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
30
<PAGE>
NINE MONTHS ENDED JUNE 30, 1997 COMPARED TO NINE MONTHS ENDED JUNE 30, 1996
Net revenue decreased 7.0% or $11.4 million from $161.7 million for the nine
months ended June 30, 1996 to $150.3 million for the nine months ended June 30,
1997. Excluding the benefit of the HCF Acquisition, net revenue decreased by
approximately 11.5% which management attributes to the business disruption from
the Proposed Merger Transaction, elimination and sale of certain underperforming
operations and the impact of publicity regarding the ORT initiatives and other
claims review activities on the Company's business. Net revenue for the nine
months ended June 30, 1997 includes the effect of a 2.0% Medicare rate increase
effective October 1, 1996.
Hospice program expenses decreased 7.4% or $9.7 million from $131.3 million
for the nine months ended June 30, 1996 to $121.6 million for the nine months
ended June 30, 1997. The decrease in expenses resulted from the Company
adjusting its staffing levels for the reduced number of patients served, the
reduction of the size of the local programs' patient care teams and the
elimination of regional support staff. Although revenue declined, these
adjustments enabled the Company to reduce expenses as a percentage of net
revenue from 81.2% during this period in 1996 to 80.9% during this period in
1997.
Central support services decreased $1.2 million or 6.8% from $17.3 million
for the nine months ended June 30, 1996 to $16.1 million for the nine months
ended June 30, 1997. The decrease in central support services related to the
elimination of various corporate personnel positions no longer deemed necessary
to administer the Company's operations and a reduction in professional fees and
recruiting costs, which was offset, in part, by expenses associated with the
assumption of certain support services at the corporate office.
Provision for bad debts decreased from $4.0 million for the nine months
ended June 30, 1996 to $3.3 million for the nine months ended June 30, 1997.
Provision for bad debts as a percentage of net revenue decreased from 2.5% for
the nine months ended June 30, 1996 to 2.2% for the nine months ended June 30,
1997 due to process improvements in billings and collections implemented in
fiscal 1997.
Depreciation increased $0.3 million from $4.0 million for the nine months
ended June 30, 1996 to $4.3 million for the nine months ended June 30, 1997.
Amortization of goodwill increased $0.1 million from $1.1 million for the
nine months ended June 30, 1996 to $1.2 million for the nine months ended June
30, 1997.
For the nine months ended June 30, 1997, the Company recorded restructuring
costs of $3.5 million related principally to the realignment of the composition
of the local patient care teams and elimination of the regional administrative
infrastructure.
For the nine months ended June 30, 1997, the Company recorded a gain on
terminated merger of $1.6 million, which includes a $4.0 million settlement in
connection with the Proposed Merger Transaction and $2.4 million of related
costs, and a gain in the amount of $0.5 million on the sale of one of the
Company's hospice programs.
Interest expense increased $0.3 million from $3.4 million for the nine
months ended June 30, 1996 to $3.7 million for the nine months ended June 30,
1997 due to the increase in average debt outstanding as a result of the HCF
Acquisition.
As a result of the various changes between the periods described above,
income before income taxes decreased from $0.7 million for the nine months ended
June 30, 1996 to a loss of ($0.9) million for the nine months ended June 30,
1997.
The Company's effective tax rate was 34.1% for the nine months ended June
30, 1996. For the nine months ended June 30, 1997, the Company did not recognize
a tax benefit on its loss due to a change in its deferred tax valuation
allowance.
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As a result of the above factors, adjusted EBITDA increased from $9.0
million for the nine months ended June 30, 1996 to $9.3 million for the nine
months ended June 30, 1997. As a percentage of net revenue, adjusted EBITDA
increased from 5.6% for the nine months ended June 30, 1996 to 6.2% for the nine
months ended June 30, 1997.
FISCAL YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1995
Net revenue increased 10.6% or $20.6 million from $193.3 million in fiscal
1995 to $213.9 million in fiscal 1996. The increase in net revenue was primarily
attributable to the CHC Acquisition (February 1995), the HMV Acquisition
(November 1995) and the HCF Acquisition (August 1996). Excluding these
acquisitions, net revenue decreased in fiscal 1996 by approximately 2.7%
reflecting both the disruption during the proposed Proposed Merger Transaction
and the impact of the publicity regarding the ORT initiatives and other claims
review activities on the Company's business. Net revenue in fiscal 1996 includes
the effect of a 2.0% Medicare rate increase effective October 1, 1995.
Hospice program expenses increased 12.8%, or $19.9 million, from $155.6
million in fiscal 1995 to $175.5 million in fiscal 1996. Hospice program
expenses as a percentage of net revenue increased from 80.5% in fiscal 1995 to
82.1% in fiscal 1996. This increase was attributable to the higher cost
structures of operations acquired in fiscal 1995 and fiscal 1996 and certain
hospice program expenses which did not decrease along with the decrease in net
revenue from the Company's existing operations.
Central support services decreased $1.4 million or 5.7% from $25.2 million
in fiscal 1995 to $23.8 million in fiscal 1996. The decrease in central support
services relates principally to the reduction in personnel in fiscal 1995,
including certain senior management and other corporate personnel.
Provision for bad debts increased from $6.8 million in fiscal 1995 to $8.0
million in fiscal 1996. As a percentage of net revenue, provision for bad debts
increased from 3.5% in fiscal 1995 to 3.7% in fiscal 1996.
Depreciation increased $1.2 million from $4.2 million in fiscal 1995 to $5.4
million in fiscal 1996, which is attributable to increased fixed assets from
acquired businesses and increased investment in the Company's information and
telecommunications system.
Amortization of goodwill increased $0.4 million from $1.1 million in fiscal
1995 to $1.5 million in fiscal 1996, which is attributable to amortization of
increased goodwill from the acquired businesses.
The Company recorded restructuring costs of $2.0 million in fiscal 1995 and
$2.3 million in fiscal 1996 related to management and other personnel positions
which were expected to be terminated.
Interest expense increased $1.6 million from $3.1 million in fiscal 1995 to
$4.7 million in fiscal 1996, which was due principally to increased debt
incurred in connection with the Acquisitions.
As a result of the various changes between the periods discussed above, the
loss before income taxes increased from $4.4 million in fiscal 1995 to $7.1
million in fiscal 1996.
The Company's effective tax rate was 35.8% in fiscal 1995. In fiscal 1996,
the Company did not recognize a tax benefit on its loss due to a change in its
deferred tax valuation allowance.
As a result of the above factors, adjusted EBITDA increased from $5.6
million in fiscal 1995 to $6.6 million in fiscal 1996. As a percentage of net
revenue, adjusted EBITDA increased from 2.9% in fiscal 1995 to 3.1% in fiscal
1996.
FISCAL YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1994
Net revenue increased 30.1%, or $44.8 million, from $148.5 million in fiscal
1994 to $193.3 million in fiscal 1995. The increase in net revenue was
attributable principally to the CHC Acquisition. Excluding the effect of the CHC
Acquisition, net revenue increased in fiscal 1995 approximately 9.5% due to
increased
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revenue in certain Vitas programs which had initially commenced operations in
fiscal 1993 and fiscal 1994. The fiscal 1995 period includes the effect of a
2.1% Medicare rate increase, effective October 1, 1994.
Hospice program expenses increased 41.1%, or $45.3 million, from $110.3
million in fiscal 1994 to $155.6 million in fiscal 1995. Hospice program
expenses as a percentage of net revenue increased from 74.2% in fiscal 1994 to
80.5% in fiscal 1995, due primarily to the higher cost structure of CHC's
operations which are reflected in the fiscal 1995 results subsequent to the
acquisition and the high cost structure of certain Vitas programs which had
commenced operations in fiscal 1993 and fiscal 1994.
Central support services increased 14.5%, or $3.2 million, from $22.0
million in fiscal 1994 to $25.2 million in fiscal 1995. The increase was
principally due to costs associated with the termination of certain executive
employee benefit programs, increased investment in the Company's business
development activities, including resources dedicated to new site development
and identification of acquisition candidates, and increased spending on support
services.
Provision for bad debts increased from $4.0 million in fiscal 1994 to $6.8
million in fiscal 1995 and as a percentage of revenue from 2.7% in fiscal 1994
to 3.5% in fiscal 1995. The increase in the provision was the result of more
stringent documentation requirements by certain of Vitas' third-party payors,
especially state Medicaid programs.
Depreciation increased $1.3 million from $2.9 million in fiscal 1994 to $4.2
million in fiscal 1995, which is principally attributable to increases in the
Company's investment in its information and telecommunications system.
Amortization of goodwill increased $0.4 million from $0.7 million in fiscal
1994 to $1.1 million in fiscal 1995, which is attributable to amortization of
increased goodwill from the CHC Acquisition.
In fiscal 1994, the Company incurred nonrecurring charges of $0.8 million in
connection with a terminated equity offering.
In fiscal 1995, the Company recorded restructuring costs of $2.0 million
related to the Company's efforts to reorganize senior management and other
corporate personnel and eliminate various corporate personnel positions no
longer deemed necessary to manage the Company's operations.
Interest expense increased $2.8 million from $0.3 million in fiscal 1994 to
$3.1 million in fiscal 1995, which is attributable to increased debt incurred in
the CHC Acquisition.
As a result of the various changes between the periods discussed above,
income before income taxes and other items decreased from $8.3 million in fiscal
1994 to a loss of ($4.4) million in fiscal 1995.
The Company's effective tax rate was 38.0% in fiscal 1994 and 35.8% in
fiscal 1995.
As a result of the above factors, adjusted EBITDA decreased from $12.3
million in fiscal 1994 to $5.6 million in fiscal 1995. As a percentage of net
revenue, adjusted EBITDA decreased from 8.3% in fiscal 1994 to 2.9% in fiscal
1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company, since its inception, has relied on funds raised through private
equity and bank financing transactions and its own cash flow to support external
growth through acquisitions and internal growth through DE NOVO start-ups.
Current bank debt consists of a revolving credit facility and a term loan.
The revolving credit facility bears interest at variable rates (based on LIBOR,
the prime rate or the federal funds rate) and the term loan bears interest at
rates from 11% to 12%. The maturity date of this bank debt has been extended on
various occasions through a number of amendments to the Credit Agreement to
accommodate the Company's working capital needs. In connection with one of the
extensions, various financial covenants
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(specifically, the Consolidated Interest Coverage, Consolidated Leverage and
Consolidated Fixed Charge Ratios) and related reporting requirements were waived
and, in certain circumstances, modified. The Company continues to be subject to
certain other financial requirements, including minimum liquidity and quarterly
EBITDA requirements, and is required to repay or refinance the debt upon
consummation of this Offering. A significant portion of the bank debt was
incurred in connection with the CHC Acquisition in addition to two subordinated
notes (CHC Note A in an initial amount of $6.0 million and CHC Note B in an
initial amount of $5.4 million) both bearing interest at 9%. The Company is
negotiating a new credit facility which it expects would be in place upon
consummation of this Offering. The revolving credit facility and term loan under
the existing credit facility, both of which mature upon the closing of this
Offering, would be replaced by a new credit facility, a portion of the funds
from which would be used, together with a portion of the proceeds of this
Offering, to pay off the existing credit facility and term loan, as required.
See "Use of Proceeds."
The Company's need for working capital is reduced through its participation
in the Medicare Periodic Interim Payment ("PIP") program. Under the PIP program,
the Company receives cash advances every 14 days from the Medicare fiscal
intermediary based upon anticipated Medicare claim service volume. Approximately
84.7% of fiscal 1996 net revenue was from the Medicare program. In addition, the
Company currently participates in electronic billing for two of its Medicaid
programs.
Capital expenditures were $6.7 million in fiscal 1994, $5.3 million in
fiscal 1995, $5.3 million in fiscal 1996 and $2.5 million in the nine months
ended June 30, 1997. Capital expenditures were made principally to purchase
computer hardware, to purchase or develop computer software, to purchase
telecommunications systems and for various leasehold improvements and equipment.
Capital expenditures for fiscal 1998 are currently budgeted at $5.2 million for
similar purposes. Capital expenditures were financed, in part, by capital leases
in amounts of $2.5 million and $1.3 million in fiscal 1994 and 1995,
respectively. There were no capital lease agreements entered into in fiscal 1996
or the nine months ended June 30, 1997.
Cash dividend payments on the outstanding shares of 9% Preferred Stock
amounted to $2.4 million in fiscal 1993 through 1996. No cash dividends were
paid during the nine months ended June 30, 1997. In August 1997, the Company
made a cash dividend payment on the 9% Preferred Stock amounting to
approximately $0.6 million, and the balance of accrued but unpaid dividends is
expected to be paid from a portion of the proceeds of the Offering.
As of June 30, 1997, approximately $45.8 million of the Company's assets are
intangible in nature. These intangible assets resulted principally from Vitas'
acquisitions of the operations of CHC, HMV and HCF and represent costs in excess
of net tangible assets acquired in those acquisitions which were accounted for
as purchase transactions and are being amortized over a period of 30 years. The
carrying value of costs in excess of net tangible assets acquired will be
reviewed if the facts and circumstances suggest that it may be impaired. If this
review indicates that these costs will not be recoverable, as determined based
on the undiscounted cash flows of the entity acquired over the remaining
amortization period, Vitas will reduce the carrying value by the estimated
shortfall of cash flows, such shortfall to be calculated using discounted cash
flows.
The Company expects that certain proceeds from this Offering will be
utilized to increase working capital by approximately $5.8 million and to
otherwise reduce borrowings currently outstanding under its credit facility by
approximately $9.1 million if it were not refinanced. The Company is currently
negotiating a new credit facility in connection with this Offering and expects
to have borrowings outstanding after this Offering in the approximate amount of
$21.3 million.
Management expects to continue its growth strategy through acquisitions and
DE NOVO start-ups which in part will be financed from cash flow from operations,
the new credit facility and to the extent required, additional debt or equity
offerings. The Company's ability to generate or raise sufficient funds could
ultimately impact its growth strategy.
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MATTERS CONCERNING THIRD-PARTY REIMBURSEMENT
For a discussion of the possible material adverse impact on the Company's
business relating to third-party reimbursement and the current ORT and OIG
review, see "Business--Payments for Services," "-- Regulatory
Environment--Reimbursement," and "--Operation Restore Trust and Claims Reviews."
EFFECT OF INFLATION
The effect of inflation on Vitas' results of operations has not been
material over the last three years. However, annual inflationary rate increases
under the Medicare program (and as a result, state Medicaid programs) were
reduced by the Omnibus Budget Reconciliation Act of 1993 ("OBRA 93") to the
following annual rates: 2.3% for fiscal 1994, 2.1% for fiscal 1995, 2.0% for
fiscal 1996, and 2.0% for fiscal 1997. Under the Balanced Budget Act, the annual
inflation-based update allowed for hospices will be reduced by one percentage
point for each of the federal fiscal years 1998 through 2002. The payment rates
(except those for physician services) are adjusted by wage indices to account
for geographic differences in wages. Under a final rule recently published by
HCFA, a new wage index methodology (to be phased in over three years) was
established which the Company estimates will reduce the Company's reimbursements
from Medicare by approximately 0.5% in fiscal 1998, approximately 1.0% in fiscal
1999 and approximately 1.5% in fiscal 2000, subject to possible change due to,
among other things, changes in the Company's utilization rates and the
geographic distribution of the Company's utilization. See "Business--Regulatory
Environment--Reimbursement." Additional future reductions in inflationary rate
increases are possible and normal inflationary increases in Vitas' operating
costs could in the future be at rates higher than those of Vitas' Medicare and
Medicaid rate increases.
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BUSINESS
THE COMPANY
Vitas is the largest provider of hospice services in the U.S. Hospice
services emphasize palliative medical care and related services that focus
primarily on improving the quality of life of terminally ill patients and their
families, as opposed to attempting to "cure" the underlying or end-stage
disease. Vitas provided hospice care to more than 31,000 patients in fiscal
1996, which the Company believes is more than four times the number of patients
served by the next largest U.S. hospice provider. The Company's hospice
operations, which were among the first in the U.S., were co-founded by the
Company's current Chairman of the Board and Chief Executive Officer, who has
been instrumental in the development of the legislative and clinical framework
for hospice care in the U.S.
The Company provides a comprehensive range of palliative services through 21
programs in 27 locations and believes it is the largest or second largest
provider of hospice services in substantially all of its service areas within
Florida, Texas, California, Illinois, Ohio, Pennsylvania and Wisconsin. For the
nine months ended June 30, 1997, the Company served an average daily census of
approximately 4,500 patients with an average length of stay of approximately 66
days. The Company expects to grow through a combination of: (i) acquisitions
which will allow it to benefit from the opportunities for consolidation
available in the fragmented hospice industry and (ii) greater demand for hospice
services to the extent such services become increasingly accepted as a means of
caring for terminally ill patients and based on an increasingly aging population
in the U.S. Since fiscal 1992, the Company's net revenue has increased from
approximately $102 million to approximately $214 million in fiscal 1996.
The Company's hospice programs in South Florida began operations in 1978.
The Company was incorporated in Delaware in 1983. Unless the context indicates
otherwise, all references to the "Company" refer to Vitas Healthcare Corporation
and its active wholly owned subsidiaries, which consist of Vitas-Florida, a
Florida corporation, Vitas Healthcare Corporation of Ohio, a Delaware
corporation ("Vitas-Ohio"), Vitas Healthcare Corporation of Pennsylvania, a
Delaware corporation ("Vitas-Pennsylvania"), Vitas-California, a Delaware
corporation and Vitas Healthcare Corporation of Central Florida, a Delaware
corporation ("Vitas-Central Florida"). The Company maintains its principal
executive offices at 100 South Biscayne Boulevard, Miami, Florida 33131, and its
telephone number is (305) 374-4143.
THE HOSPICE INDUSTRY AND END-OF-LIFE CARE
The hospice movement in the U.S. began in the mid-1970s to provide
terminally ill patients and their families with an alternative to
hospital-based, cure-oriented care. Hospice emphasizes palliative care (I.E.,
medical and related care that focuses primarily on the reduction of pain,
uncomfortable symptoms, the physical and psychological stress of terminal
disease, bereavement care for the families and improving the quality of the life
of the patient rather than attempting to cure such disease), and it focuses on
care provided outside of a hospital setting with family and patient
participation in the care planning and delivery. Most older people in the U.S.
die in nursing homes or hospitals while receiving aggressive therapy for
diseases that leave little or no hope for cure, such as distant metastasized
cancers, congestive heart failure ("CHF"), chronic obstructive pulmonary disease
("COPD") or cerebrovascular disease. Medical treatment for patients with
terminal illnesses often has involved technologically intense and uncoordinated
clinical care, aggressive curative procedures and high-cost, acute care hospital
stays.
A significant benefit of hospice to patients, their family members, and
payors is the comprehensive management by an interdisciplinary team of the
healthcare services and products needed by a terminally ill patient and his or
her family. Frequently, terminally ill patients not receiving hospice care
receive medical services from physicians, hospitals, home health agencies,
skilled nursing facilities, home infusion therapy companies and/or pharmacies,
which may include little or no effective coordination among them. The lack of
coordination often results in a lack of clear accountability for clinical
outcomes and the cost of services provided. In addition, the provision of
services in this manner may cause the patient and his or her family
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further stress and dysfunction. By contrast, hospice services are coordinated
through an interdisciplinary team of professionals and staff. These services
include nursing care, physician services, home health aide services, pastoral
care, social work, counseling services, short-term inpatient care, drugs for
symptom management and pain control, medical equipment and supplies, and
ancillary services such as respiratory, physical, speech and occupational
therapy services. Hospice care also includes various support and psychosocial
services and bereavement care to the families of patients for at least 12 months
after the patient's death. The interdisciplinary team assesses the clinical and
psychosocial needs of the patient and family, develops a plan of care, and
delivers, monitors and coordinates that plan with the goal of assuring
appropriate care for its patients and their families.
This interdisciplinary model of hospice care delivery is covered under the
Medicare program, which is the payor for the vast majority of end-of-life health
care in the U.S. as approximately 72% of all deaths in the U.S. are among people
older than 65 years of age. With bipartisan support, Congress enacted the
Medicare hospice benefit in 1982. In addition to Medicare, hospice care is now
covered by Medicaid in at least 41 states (including all the states in which
Vitas operates) and by most private insurance plans.
According to statistics developed by the CBO, Medicare reimbursement for
hospice services grew from $318 million in 1990 to $1.9 billion in 1995, and is
expected to grow to $4.7 billion by 2000. The Company believes, based on its own
experience, that this increase reflects a wider knowledge and acceptance of the
benefits to patients and families from receiving hospice care. Despite this
growth, the hospice industry represents approximately 1% of Medicare total
spending and less than 10% of Medicare spending for individuals during their
last six months of life. Medicare spends more than $200 billion per year, with
approximately $28 billion of that amount spent for patients in their last 60
days of life.
Based on industry data, the Company estimates there are approximately 3,000
hospice programs in the U.S., more than 70% of which are not-for-profit or
government-sponsored, and which have, on average, a daily census of between 40
and 45 patients. The Company believes that the small size of average hospice
programs makes it difficult for such programs to realize significant economies
of scale, to embrace up-to-date information systems and telecommunications
technology, and to recruit experienced managers. Vitas, by comparison, cared for
more than 31,000 patients in fiscal 1996, and for the nine months ended June 30,
1997, the Company served an average daily census of approximately 4,500
patients.
VITAS OPERATING MODEL
The Company has developed a distinct operating model that is designed to
make it a highly efficient hospice provider. This operating model, which
provides hospice care at the local program level supported by centralized
corporate services, focuses on the following fundamental aspects:
- INFORMATION AND TELECOMMUNICATIONS SYSTEMS INFRASTRUCTURE. After years of
operating with manual systems and off-the-shelf computer programs that were
principally designed for other types of healthcare providers, the Company
designed and implemented its own enterprise-wide information and
telecommunications system called "Vitas Exchange" or "Vx." The Vx information
system is a flexible, modular client server technology using advanced relational
data bases, dedicated phone lines, computer and telephonic input and remote
access to create a real-time electronic record with specified data for each
patient. While the Vx system is intended to store a variety of information
linked to the patient, it also has the capability to report numerous other types
of information in multiple formats, such as patient billing and employee
payroll. For example, nurses in the field can access the Vx system from a remote
location and enter information regarding their visits, which automatically
updates the patient's data files and the payroll time records through the Vx
system. Other Vx users have immediate real-time access to the newly entered
information on the patient and the nurse. In addition to supplying clinicians
with certain up to date information about their patients, the Vx information
system has the ability to perform multivariate regression analyses to help
determine the most efficient and efficacious ways of caring for patients. This
infrastructure also gives the Company the potential capacity to test clinical
protocols, experiment with new
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treatment methods, deliver after hours care in a more cost effective manner and
possibly test new palliative care drugs and therapies.
Since 1993, the Company has capitalized $6.7 million in the development,
implementation and improvement costs of this system. The Company believes the Vx
system is the most advanced system of its kind utilized in the hospice community
and can be made available for use by hospice programs the Company acquires
within a reasonably short period of time after such acquisitions. In April 1997,
the Company entered into an agreement with CareTools, Inc. ("CareTools")
pursuant to which, in exchange for certain royalties and a warrant to purchase
preferred stock of CareTools, the Company licensed to CareTools certain rights
with respect to the Vx system to enable CareTools to incorporate the components
of the Vx system into CareTools' software packages for use by other healthcare
providers.
- PIONEERING CLINICAL MANAGEMENT PROGRAMS. The Company has developed
innovative clinical tools to improve the manner in which it provides end-of-life
care. Specific guidelines for managing pain and symptoms have been developed by
the Company after researching and analyzing many different pain and symptom
protocols. The Company has also collaborated in the development of an innovative
assessment tool, the Missoula-Vitas Quality of Life Index ("MVQOLI"), which is
designed to measure quality of life in terminally ill patients. This tool, used
in combination with the Company's Vx information system, facilitates the ability
of the Vitas interdisciplinary team to adjust its care plan to reflect the needs
of the patient. In addition, this tool can be used retrospectively to monitor
and evaluate the Company's success in satisfying the unique needs of terminally
ill patients. As another example of the Company's pioneering outcomes management
initiatives, it has developed and is implementing a specialized pain measurement
protocol to evaluate the effectiveness of Vitas interventions in reducing pain
severity.
- EXPERTISE IN EDUCATING AND COMMUNICATING WITH HEALTHCARE PROFESSIONALS,
PATIENTS AND FAMILIES ABOUT END-OF-LIFE DECISIONMAKING AND PALLIATIVE CARE. The
Company believes that the U.S. healthcare delivery system has found it
challenging to educate medical professionals about end-of-life care, including
pain and symptom management. In addition, many healthcare professionals lack
training and experience difficulty in communicating with patients and families
about death and dying. As a result, the Company's operating model includes a
dedicated group of Vitas representatives that focuses on educating healthcare
professionals about the potential benefits for their patients of Vitas services.
These functions, performed by Vitas-trained employees, enhance the Company's
ability to meet the needs of the patients of such healthcare professionals.
- EFFICIENCIES FROM SIGNIFICANT LOCAL AND NATIONAL ECONOMIES OF SCALE. The
Company realizes significant efficiencies from its ability to bill and collect
from third parties (including Medicare) through a centralized operation at the
Company's corporate office, to make quantity purchases of drugs, medical
equipment, medical supplies, computers and certain other equipment and supplies,
to provide after hours "on call" services at relatively low cost, and to
purchase at a discount employee benefit programs.
BUSINESS STRATEGY
The Company believes that achieving a strong geographic presence in each of
its locations will result in significant advantages, including strong patient
care and demonstrable economies of scale. The Company's strategy for business
growth includes the following:
- GROWTH FROM ACQUISITIONS. The Company regularly analyzes expansion
opportunities in its existing markets and in selected new areas. In determining
where to expand, the Company considers factors such as local demographics,
hospice utilization, existing competition, and the opportunity to become the
leading hospice provider in the area.
The Company has recently expanded significantly through the acquisition of
three hospice organizations operating in eight locations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
California operations of the Company began in early 1995 through the
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acquisition of the second largest for-profit hospice operation in the U.S.
operating in six locations in Southern California. In November of the same year,
the assets acquired from a not-for-profit program in Ohio were added to the
Company's DE NOVO program in the same area, and when combined became the largest
provider of hospice care in Southwest Ohio. In August 1996, hospice operations
were acquired in Central Florida through the purchase of a not-for-profit
hospice program established in 1977. In addition, part of the Company's
geographic expansion since 1993 has been accomplished through development of DE
NOVO sites, including programs now in operation in Texas, Ohio, Pennsylvania and
Wisconsin.
Based upon the experience of the Company and its senior management, the
Company believes that it is well positioned to acquire hospice programs in both
new and existing markets. While hospices have extensive experience with
end-of-life care, management believes that many community hospices, in order to
continue fulfilling their organizational missions, will need and be challenged
to acquire advanced information system technology, greater access to capital,
and/or sophisticated relationships with large providers and payors. The Company
believes that its ability to implement its scalable operating model in a variety
of acquisition contexts satisfies these objectives. As continued consolidation
occurs throughout the healthcare industry, the Company believes that community
hospice programs will increasingly consider combining their operations with the
Company to overcome these challenges. In light of the Company's leading
historical role in the hospice movement and its capabilities, management
believes that many community hospices will conclude that an acquisition by Vitas
would provide an attractive way to seek to provide optimal end-of-life care in
their communities.
Since more than 70% of the hospice programs in the U.S. are not-for-profit
or government-sponsored programs, it is likely that a substantial number of
acquisition opportunities will involve hospice programs operated by
not-for-profit entities. Unlike acquisitions of for-profit hospice businesses,
the acquisition of not-for-profit hospice operations present complex and unique
challenges for the acquiring entity. For example, acquisitions of not-for-profit
operations are subject to provisions of the Code and, in certain states, state
attorney general powers which have been interpreted to require that the
consideration paid for the assets purchased be at fair market value, and, where
applicable, that any fees paid for services be reasonable. These acquisitions
require a thorough understanding of the legal standards that are likely to be
applicable to such transactions. In addition, not-for-profit hospices are often
concerned about a decline in the quality and level of patient care following the
acquisition by a for-profit organization. These concerns often necessitate
special efforts by the acquiring entity to work with the not-for-profit
organization to assure it that the quality and level of patient care and
bereavement will not be compromised. The Company believes that its recent
acquisition experience, coupled with its understanding of the not-for-profit
environment, distinguish the Company from other hospice providers and should
favorably position the Company for future acquisition opportunities with
not-for-profit organizations.
In the normal course of business, the Company engages in acquisition
discussions with a number of not-for-profit and for-profit hospice programs
regarding possible acquisitions and plans to continue expanding in selected
locations. However, the Company is currently not a party to any acquisition
agreements with respect to any future acquisitions.
- GROWTH IN EXISTING SERVICE AREAS. The Company believes that continued
education of healthcare providers, payors, and patients combined with the
Company's increasing sophistication in caring for terminal patients, including
patients with noncancer diagnoses, creates opportunities for continued growth in
existing markets. Even in highly penetrated areas like Broward County, Florida
(where 38% of all deaths and 68% of all cancer deaths occur under the care of a
hospice provider), the Company believes that further growth is achievable
because of factors such as: (i) increasingly sophisticated mechanisms to serve
terminally ill non-cancer (E.G., COPD and CHF) patients with services
specifically adapted to their disease-specific needs; (ii) GREATER availability
of inpatient care, and particularly hospice inpatient units, for patients whose
clinical needs cannot be met in the home setting; (iii) greater availability of
continuous care to help patients remain at home when their symptoms and
conditions require intense levels of care; (iv) an aging population, and
specifically the rapidly growing segment of those over 85 years of age, which
Vitas'
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experience has shown is the age segment with the highest rate of use of hospice
care; and (v) an increase in the average length of stay of hospice patients as
the patients and their healthcare providers are further educated about the
benefits from hospice services and elect hospice care earlier in the disease
process.
- GROWTH FROM EXPANDED BUSINESS ARRANGEMENTS WITH MANAGED CARE ORGANIZATIONS
AND OTHER HEALTHCARE PROVIDERS. The Company intends to pursue additional and
more expansive business arrangements with managed care organizations, healthcare
delivery systems, and other providers. Many of the regional and national
providers are attempting to develop a complete continuum of care for their
patients, but they often lack a depth of specialized expertise regarding
end-of-life care. The Company's operating model enables it to meet the most
important expectations of these providers: real-time patient information,
measurable quality and outcomes, competitive pricing, innovative programs and
high level business and clinician relationships. In addition, the Company
believes that it has significant name recognition in the hospice industry. Since
many managed care organizations and delivery systems operate regionally, the
Company believes that most of these business arrangements will be regional in
nature. As a result, the Company continues to expand in its service areas and
continues to pursue acquisitions in and contiguous to its current markets. In
addition, the Company is exploring the possibility of providing certain
management, consulting and other services to hospice providers by utilizing the
Company's information and telecommunications systems. The Company is also
exploring the formation of network or joint venture relationships with other
hospice providers for the purpose of offering hospice care to national or
regional managed care providers or other healthcare delivery systems on a
regional basis.
HOSPICE SERVICES
HOSPICE PROGRAM ORGANIZATION
Since 1995, the Company has initiated a series of Restructuring efforts
designed, in part, to create a more efficient operating model that emphasizes a
uniform structure in each of the Company's local hospice programs supported by
centralized corporate functions. Each hospice program has a general manager
supported by a senior management staff including a medical director, a patient
care administrator and a director of admissions. Human resources, information
systems, clinical, regulatory and financial services are provided by the
Company's corporate staff to support each program as needed.
GENERAL DESCRIPTION OF SERVICES
The capability of the Company to deliver high quality, cost-effective
clinical and psychosocial care to its patients and their families rests with an
interdisciplinary team that implements an individualized plan of care designed
to address the patient's and family's needs. The goal of these teams is to make
a patient's final stage of life as dignified and comfortable as possible.
Patient care is provided by teams that are managed by a team manager and staffed
with clinical and psychosocial services specialists. Together, these
professionals provide 24-hour per day, 365-day per year access to the following
services and supplies when required under the plan of care and related to the
patient's terminal illness:
- nursing services;
- physician services;
- home health aide services;
- medical social work services;
- medications for pain control and symptom management;
- family counseling and intervention;
- family bereavement care and survivor counseling;
- pastoral care services and support;
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- specialized therapies including respiratory, physical and speech therapy
and nutritional counseling;
- home medical equipment and medical supplies;
- homemaking services including occasional household chores, cooking and
shopping; and
- volunteer services and companionship.
The number of patients cared for by each specific team varies, as does the
staffing of each team. A typical team is composed of approximately 12-14
individuals who provide care to approximately 40-60 patients. Hospice care teams
typically serve an assigned geographic area of a community. The majority of team
services are delivered by full-time employees of the Company. Services and
supplies such as home medical equipment, medications, medical supplies and
certain specialty therapies are obtained under arrangements with selected
subcontractors and vendors.
When a patient elects to receive hospice care, the interdisciplinary team
establishes a plan of care with the patient and the patient's family which
specifies the frequency of patient/family visits and other services according to
assessed need. Patients with intense needs may receive more services, and
patients requiring round-the-clock nursing in periods of medical crisis can be
accommodated either by continuous (up to 24-hour per day) home care or by
placement in an inpatient setting. The treatment plan of every patient/ family
receiving hospice services is reviewed at least every two weeks in an
interdisciplinary team conference.
These services and supplies are delivered in various settings, typically in
the patient's home (which could include a long-term care or assisted living
facility), but are also provided, when necessary for more aggressive symptom
management, in an inpatient setting. During a patient's stay in a hospice
program, the patient's condition may change, necessitating management in more
than one location, in which case the Company oversees such changes and manages
the care in each site.
The Medicare program requires a hospice program to utilize volunteers to
provide administrative and patient-related services in an amount equal to at
least 5% of the patient care hours for such program. Volunteers are actively
involved in many phases of the Company's operations, including certain types of
patient care activities, psychosocial support (non-professional), community
relations, administrative activities and bereavement functions. Volunteers
receive no compensation, but the Company provides volunteers with certain types
of training and education. When appropriate, volunteers are assigned to tasks
they request. Services provided by volunteers enhance the services performed by
the Company's paid professional staff.
The Company's admissions originate from a variety of sources, including
physicians, nurses, discharge planners, social workers, clergy, nursing home
administrators and directors of nursing and managed care organizations and other
third party payors. Each of these sources contacts a Company admission
coordinator at the time it is determined that the patient's and his or her
family's needs may best be met through hospice care. The Company's admissions
personnel are trained in the management of the psychosocial issues surrounding
hospice admissions.
The principal objectives of the Company's admission process are to assure
that the patient and family understand the services offered by the Company and
have expectations that are consistent with the Company's program, to confirm
that informed consent takes place and to examine and, if appropriate, collect
information for compliance with payor requirements. The Company devotes
significant effort to seek to ensure the appropriateness of the patient for
admission and, further, to seek to ensure that its admission personnel
communicate clearly and concisely about the decision to elect hospice care. To
receive Medicare or Medicaid payment for hospice services, a hospice physician
and the patient's attending physician (if any) must certify that at the time of
admission the patient has a life expectancy of six months or less if the illness
runs its normal course. Following admission, the patient is assigned to an
interdisciplinary team which is responsible for developing and delivering the
patient's plan of care.
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In order to broaden the awareness and acceptance of hospice services,
Company-trained employees educate the community regarding the general benefits
of hospice care and the specific advantages of the Company's services. These
representatives describe the concept of hospice care and the Vitas program in
individual and group formats using customized informational materials developed
by the Company.
In recognition of the significance of ethical issues raised by the delivery
of care to terminally ill patients, the Company has organized and maintains
ethics committees at the national and local levels, which may include clinical
professionals, ethicists, members of the public, and representatives of the
Company's management and staff to address ethical issues that arise from time to
time in the operation of the Company's business.
INPATIENT SERVICES
On occasion, patients may require more intensive treatment in inpatient
settings, or families caring for hospice patients may require respite from the
demands of providing care and support in their homes. On these occasions, the
Company provides access to inpatient hospice services for short periods.
The Company typically offers inpatient services in one of two ways:
HOSPICE INPATIENT UNITS. Under this arrangement, the Company contracts
for space in a hospital or sub-acute facility and furnishes its own
employees as clinical and psychosocial staff. The hospital or sub-acute
facility provides dedicated space, housekeeping and dietary services, and
ancillary services such as laboratory, x-ray and pharmaceuticals on a usage
basis. The Company advises the institution on renovating the space to
conform to regulatory and Company specifications. Many hospitals and
sub-acute facilities find this arrangement attractive since they are able to
offer a wider range of services in the continuum of care. From a physical
standpoint, the typical hospice inpatient unit is a ten- to twenty-bed unit
designed with rooms to accommodate family members who wish to remain
overnight. The units, decorated in a home-like, comfortable manner, also may
include eat-in kitchens and living rooms. The units typically have few or no
visiting restrictions and families are encouraged to participate in patient
care decisions and caregiving. From a clinical standpoint, these units
incorporate intensive staffing, as well as counseling and chaplaincy
personnel and an inpatient team physician. As with other hospice patients,
the patient's personal physician may continue to provide primary medical
care. For those patients without primary care physicians, Company physicians
provide primary medical care.
CONTRACT RELATIONSHIPS. In addition to its hospice inpatient units, the
Company contracts with hospitals and sub-acute and other skilled nursing
facilities to provide hospice inpatient care on an as-needed basis. Under
this arrangement, the plan of care prepared by the interdisciplinary team is
implemented through provision of services by the hospital or sub-acute or
other skilled nursing facility and its employees. The members of the
interdisciplinary team retain ultimate responsibility for the patient and
quality of services provided and deliver those hospice services not provided
by the hospital or its employees.
HOME HOSPICE CARE SERVICES FOR RESIDENTS OF LONG-TERM CARE AND ASSISTED
LIVING FACILITIES
In 1996, approximately 17% of the 2.3 million deaths in the U.S. occurred in
long-term care facilities. In accordance with federal law, hospices may provide
hospice services to residents of long-term care facilities, treating the
facility as the patient's home for purposes of receiving hospice care.
Accordingly, the Company has entered into agreements with long-term care
facilities under which it makes its hospice services available to residents of
those facilities. The long-term care facility continues to render "room and
board" services, while the Company's interdisciplinary team develops a plan of
care and pursuant thereto provides care related to the terminal illness. For the
nine months ended June 30, 1997, approximately 23.1% of the patients admitted to
the Company's hospice programs were residing in long-term care facilities at the
time of admission, and approximately 34.7% of the Company's net revenue is
derived from
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routine home care and continuous care provided to such patients. In a similar
fashion, the Company provides hospice care services to residents of assisted
living and similar facilities as permitted under state law. See "--Operation
Restore Trust and Claims Reviews."
CENTRAL SUPPORT SERVICES
The Company's hospice operations are supported by a corporate office located
in Miami, Florida which provides coordination, centralized resources and direct
central support services to each hospice location. Central support services
include:
- FINANCIAL MANAGEMENT SYSTEMS AND PROGRAMS. Among other things, the
Company's corporate office provides electronic billing to the Medicare program
and certain state Medicaid programs. Company accounting personnel prepare
monthly operating statements for each hospice location as well as various
analyses on operating trends and performance as compared to budget. Operating
budgets are prepared at least annually for each hospice program to a level of
detail which includes various key elements of team-level cost. Treasury
management activities including cash disbursements are also performed in the
corporate office.
- INFORMATION AND TELECOMMUNICATIONS SYSTEMS. The Company has developed a
proprietary information system named "Vitas Exchange" or "Vx" which provides
integrated access to data related to, among other things, patient admission,
clinical information management, payroll and employee productivity management,
service billing and collection, and financial processing and reporting. In 1997,
Vitas granted to CareTools a license to, among other things, incorporate one or
more of the software components of the Vx system into the company's own software
package.
- ADMISSIONS AND EDUCATION PROGRAMS. Each of the Company's hospices employs
individuals responsible for presenting information regarding hospice care and
the Company's services to members of the local healthcare community and
providing logistical support in the admissions process. Professionals based in
the corporate office provide orientation and ongoing training for these
employees, many of whom have prior marketing experience. In addition,
centralized admissions programs are developed and implemented to support these
activities as well as to extend the Company's geographic reach and service
capabilities. These programs include market research, admissions support,
clinical education and outreach programs, communications and product
development.
- CLINICAL OPERATIONS SUPPORT. The corporate office includes various staff
members responsible for Company-wide development, coordination and management of
clinical and quality assurance programs. Quality assurance activities seek to
assure compliance with governmental, professional and Company standards of care.
The corporate office supports ongoing compliance activities related to the
accreditation process of the Joint Commission on Accreditation of Healthcare
Organizations.
The Company has developed a specialized pain measurement protocol to
evaluate the effectiveness of medical interventions in reducing pain severity.
The Company has also collaborated for more than three years with a nationally
recognized palliative care expert to develop MVQOLI. Validity of the measurement
tool has been supported by a national study. The tool profiles the person's
subjective experiences across multiple dimensions, including physical
discomfort, functional limitations, interpersonal relationships, well-being and
contentment, and the degree of feeling purpose in life. Results from these
assessment tools may be used in analyzing and enhancing the quality of care
provided by the Company.
The Company believes that ongoing clinical training and professional
education are necessary to continually update hospice professionals in advanced
symptom control techniques. The Company provides educational offerings for the
professional development of employees and for the benefit of healthcare
professionals in the community, and is accredited by the American Nurses
Credentialing Center and certain state agencies to award continuing education
credit hours for these offerings to nurses. Under the guidance of a preceptor,
the Company also provides lectures on palliative care and clinical experience
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caring for hospice patients to medical students, interns, nursing students and
advanced social work students.
- HUMAN RESOURCES. The Company maintains an employee assistance program and
has developed a specialized support program designed to address the specific
emotional and other support requirements of hospice employees and their
families. In addition, the Company is committed to employee ownership both at
the management and direct service levels, and maintains an ESOP and various
employee stock option programs. The Company also utilizes various cash-flow
advantaged employee benefit programs, including a national risk-retention
workers' compensation program. The various employee benefit programs are
administered by the Company's human resources department. The Company believes
that the provision of its benefits assists the Company in attracting and
retaining qualified personnel.
By assembling and using substantial technical and management talent in a
centralized office, and applying centralized office resources to support local
hospice programs, the Company seeks to reduce overhead, achieve a high degree of
patient and family satisfaction and generate growth in its various hospice
programs.
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SERVICE AREAS AND PROPERTIES
The following table sets forth a list of the Company's current hospice
programs (and their respective satellite offices, if any), the approximate month
and year in which each hospice program was initially licensed and/or commenced
operations, each hospice program's principal or licensed service area, and the
approximate square footage and expiration dates of each hospice program's
administrative offices. In addition to the administrative offices listed below,
the Company's corporate office is located in Miami, Florida (approximately
57,900 square feet of space under a lease which expires in 2000).
<TABLE>
<CAPTION>
ADMINISTRATIVE OFFICE(3)
--------------------------
LEASE
DATE OF LICENSED PRINCIPAL OR EXPIRATION
HOSPICE PROGRAM(1) OPERATION (2) LICENSED SERVICE AREA SQUARE FEET DATE
- --------------------- ---------------- ---------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
FLORIDA(4)
Broward County June 1978 Broward County 14,200 2007
Dade County June 1978 Dade County 2,900 2001
(Miramar) August 1996 North Dade County 15,300 2001
Orlando April 1977 Orange, Seminole and Oseola Counties 14,200 2000
TEXAS
Dallas April 1984 Greater Dallas 13,900 2000
(Denison) July 1993 Granson and Fannin Counties 1,400 1999
Friendswood January 1994 South Houston 2,700 1999
Grand Prairie December 1991 Dallas/Ft. Worth 8,800 1997
(Denton) July 1993 Montague, Gainsville, Wise and Denton 2,600 2001
Counties
(Ft.Worth) December 1990 Greater Ft. Worth Texas 8,500 2001
(Granbury) July 1993 Erath, Sumervelle, Hood, Johnson, 8,300 2001
Parker and Palo Pinto Counties 2,000 1998
Houston December 1989 Greater Houston 83,00 2001
San Antonio December 1993 Greater San Antonio 8,800 2002
CALIFORNIA
Covina November 1993 Los Angeles County (east) 4,800 2004
Encino November 1994 Los Angeles County (northwest) 11,000 2000
Orange August 1990 Orange County 12,700 2002
San Bernardino July 1992 San Bernardino and Riverside Counties 8,500 2002
(Cathedral City) July 1992 Cathedral City 1,800 1998
San Diego November 1992 San Diego County 8,900 1997
Torrance October 1992 Los Angeles County (west) 12,100 1998
ILLINOIS
Hyde Park September 1994 Central Chicago (downtown) 3,000 1999
Lincolnwood January 1998 North Chicago 7,000 2001
Lombard February 1988 West Central Chicago 22,400 2003
Matteson December 1990 South Chicago 11,600 2003
OHIO
Cincinnati October 1991 Greater Cincinnati 12,000 2001
PENNSYLVANIA
Philadelphia July 1993 Greater Philadelphia 4,600 1998
WISCONSIN
Milwaukee March 1994 Greater Milwaukee 5,900 2000
</TABLE>
- --------------------------
(1) Satellite offices and alternative delivery sites in parentheses.
(2) Consists of the earlier of the date of licensure for the Vitas program or an
acquired program in that location.
(3) In addition to these administrative offices, the Company also leases an
administrative office in Washington, D.C.
(4) The Company also leases various warehouse space in the Miami and Ft.
Lauderdale, Florida areas.
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The Company has arrangements for use of space in its hospice inpatient
units. The majority of these arrangements are renewable annually while others
have terms ranging from one to five years, subject to termination by either
party upon advance notice, typically 90 or 180 days, as specified in the
agreements evidencing these arrangements. The following table sets forth the
location and approximate square footage of such principal arrangements to which
the Company is a party:
<TABLE>
<CAPTION>
SQUARE
HOSPICE INPATIENT UNIT (INSTITUTION) FEET
- --------------------------------------------------------------------------------------------------------- ---------
<S> <C>
FLORIDA
Hollywood (Memorial Regional).......................................................................... 5,900
Ft. Lauderdale (North Broward Medical Center).......................................................... 6,800
Ft. Lauderdale (Florida Medical Center)................................................................ 4,600
Pembroke Pines (Memorial Hospital Pembroke)............................................................ 8,600
Tamarac (University Community Hospital)................................................................ 3,400
Miami (North Shore Medical Center)..................................................................... 4,900
Miami (Columbia Adventura Hospital and Medical Center)................................................. 5,300
TEXAS
Dallas (Trinity Medical Center)........................................................................ 4,800
Fort Worth (All Saints Episcopal Hospital)............................................................. 5,900
Houston (Diagnostic Center Hospital)................................................................... 10,400
San Antonio (San Antonio Community Hospital)........................................................... 7,200
CALIFORNIA
Riverside (free standing inpatient unit (1))........................................................... 16,500
ILLINOIS
Lincolnwood (Ravenswood Hospital and Medical Center)................................................... 5,300
Matteson (St. James Hospital).......................................................................... 10,400
Lombard (Alexian Brothers Medical Center (2)).......................................................... N/A
PENNSYLVANIA
Philadelphia (Graduate Hospital)....................................................................... 3,500
</TABLE>
- ------------------------
(1) The Company's Riverside, California freestanding inpatient unit is licensed
in California as a skilled nursing facility.
(2) The arrangement includes the use of 12 beds in a defined area.
PAYMENT FOR SERVICES
The Company derived 94% of its fiscal 1996 net revenue from the Medicare and
Medicaid programs. Medicare is a federally funded and administered health
insurance program primarily for individuals entitled to Social Security who are
65 years of age or older or who are disabled. Coverage of hospice services was
added to the Medicare program in 1982 for Medicare beneficiaries who elect and
are eligible for, the hospice benefit. To receive Medicare or Medicaid payment
for hospice services, a hospice physician and the patient's attending physician
(if any) must certify that the patient has a life expectancy of six months or
less if the illness runs its normal course. By electing the hospice benefit, the
Medicare beneficiary waives all rights to other Medicare payments for services
related to the terminal illness for which hospice care was elected, except for
services provided by the patient's attending physician.
MEDICARE. Medicare reimbursement for hospice care is made at one of several
predetermined rates for each day in which a Medicare beneficiary is under the
care of the hospice. The rates are prospective rates, subject to annual
adjustments for inflation. Inflationary increase adjustments in Medicare rates
(as adjusted by OBRA 93) were 2.3%, 2.1%, 2.0% and 2.0% at October 1, 1994,
1995, 1996, and 1997,
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respectively. The rate paid for any particular day varies depending on which of
the four levels of care, as set forth below, is being furnished to the
beneficiary:
ROUTINE HOME CARE. The hospice is paid the routine home care rate (for
Company programs, currently $95 to $114 per day depending upon location) for
each day the patient is under the care of the hospice and not receiving one
of the other levels of hospice care. This rate is paid without regard to the
volume or intensity of routine home care services provided on any given day.
For fiscal 1996, 78.8% of net revenue was attributable to routine home care.
GENERAL INPATIENT CARE. Payment at the inpatient rate (for Company programs,
currently $423 to $500 per day depending upon location) is made when
inpatient care is provided in an appropriate inpatient facility for pain
control and symptom management which cannot be managed in other settings.
For fiscal 1996, 16.9% of net revenue was attributable to general inpatient
care.
CONTINUOUS HOME CARE. The hospice is paid the continuous home care rate (for
Company programs, currently $555 to $664 per day depending upon location)
when continuous home care is provided. The daily continuous home care rate
is divided by 24 in order to arrive at an hourly rate. For every hour of
continuous care furnished, the hourly rate is paid for up to 24 hours a day.
A minimum of eight hours must be provided in any given day. For fiscal 1996,
3.0% of net revenue was attributable to continuous home care.
INPATIENT RESPITE CARE. The hospice is paid at the inpatient respite care
rate (for Company programs, currently $98 to $113 per day depending upon
location) for each day on which the beneficiary is in an approved inpatient
facility and is receiving respite care. Respite care is provided when the
family or caregiver of the patient requires a temporary reprieve for certain
reasons other than the patient's physical decline. Payment for respite care
may be made for up to five consecutive days; payment for the sixth day and
any subsequent days is at the routine home care rate. For fiscal 1996, less
than 0.1% of net revenue was attributable to inpatient respite care.
With respect to direct patient care physician services, payment for such
services delivered by hospice physicians is billed separately by the hospice to
the Medicare intermediary and paid at the lesser of the actual charge or the
Medicare allowable charge for these services. Payment for hospice physicians'
administrative and general supervisory activities is included in the per diem
payment rates discussed above. Payments for attending physician professional
services (other than services furnished by hospice physicians) are not paid to
the hospice, but rather are paid directly to the attending physician by the
Medicare carrier. For fiscal 1996, 1.3% of net revenue was attributable to
physician services.
The Company provides hospice care to many Medicare beneficiaries who receive
their non-hospice healthcare services from HMOs under Medicare risk contracts.
Under such contracts between HMOs and HHS, the Medicare payments for hospice
services are carved out of the per member per month payment from Medicare to
HMOs and, instead, are paid directly by Medicare to the hospices. As a result,
the Company's payments for Medicare beneficiaries enrolled in Medicare risk HMOs
are processed in the same way with the same rates as other Medicare
beneficiaries. The recently-enacted Balanced Budget Act codified that
reimbursement for hospice services provided to beneficiaries enrolled in
Medicare HMOs and the new Medicare+Choice plans is paid by Medicare directly to
hospice programs rather than to Medicare managed care plans.
For the five years ended September 30, 1996, an average of approximately
1.9% of the Company's services (based upon Medicare equivalent rates for such
services) were provided on a non-compensated or charity basis, and were not
included in net revenue. The Company also has recorded a provision for bad debts
(which provision has averaged 3.0% of net revenue over the past five fiscal
years). The Company's bad debts relate principally to the inability to collect
deductibles and coinsurance under insurance plans and to certain patients who
apply for Medicaid coverage at the point of admission but do not subsequently
obtain such Medicaid coverage.
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Under a Medicare rule known as the "80-20" rule, if the number of inpatient
care days furnished by a hospice to Medicare beneficiaries exceeds 20% of the
total days of hospice care furnished by such hospice to Medicare beneficiaries,
Medicare payments to the hospice for inpatient care days exceeding the inpatient
cap are reduced to the routine home care rate. Each of the Company's hospice
programs is separately subject to the inpatient cap. During the Company's
history, the Company has never exceeded the inpatient cap.
Medicare payments to a hospice are also subject to a separate cap based on
overall average payments per admission. This cap period also runs from November
1 through October 31 of each year, and any payments exceeding the overall
hospice cap must be refunded by the hospice. Each of the Company's hospice
programs is separately subject to the overall hospice cap. This cap was set at
$13,469 per admission through the October 31, 1996 cap period and is adjusted
annually using the consumer price index. While historically the Company's
revenues per admissions have generally not exceeded the applicable cap, there
can be no assurance that the Company's hospices will not be subject to future
payment reductions or recoupments as the result of this cap.
In addition to the above regulatory limitations, Medicare fiscal
intermediaries also periodically conduct focused medical reviews and other
audits of hospice claims. There can be no assurance that focused medical reviews
and other audits of the Company's hospice programs will not result in material
recoupments or denials. Further, there can be no assurance that Medicare,
Medicaid and third party payments for hospice services will continue to be
available at their current levels. See "--Regulatory
Environment--Reimbursement," "--Operation Restore Trust and Claims Reviews" and
"--Legislative Considerations."
Currently, the Company's need for working capital is reduced through its
participation in the Medicare PIP program which provides for cash advances every
14 days by the Medicare fiscal intermediary to the Company based upon
anticipated Medicare claim service volume. Although the Company is unaware of
any legislative proposals to reduce or eliminate PIP for hospices, as there are
for home health agencies, it is possible that the PIP program could undergo
revision or elimination. While the Company believes that it could favorably
respond over time to a change in the PIP program through accelerated processing
of Medicare claims by the fiscal intermediary, there is no assurance that a
change in, or the elimination of, PIP would not adversely affect the Company's
financial condition or the need for working capital.
MEDICAID. Medicaid is a state-administered program financed by state funds
and matching federal funds to provide medical assistance to the indigent and
certain other eligible persons. Hospice services became an optional state
Medicaid benefit in 1986. States which elect to cover hospice services under
their Medicaid programs are required to pay hospice rates which are at least at
the same level, and use the same methodology, as Medicare hospice rates. In
addition, the Omnibus Budget Reconciliation Act of 1989 requires that for
patients receiving nursing home care under a state Medicaid program who elect
hospice care under Medicare or Medicaid, the state must pay to the hospice, in
addition to the applicable Medicare or Medicaid hospice per diem rate, an amount
equal to at least 95% of the Medicaid per diem nursing home rate, for "room and
board" furnished to the patient by the nursing home (the "unified rate"). The
legislative history of this provision suggests that, in enacting it, Congress
intended to assure access to hospice services for individuals residing in
nursing homes. Pursuant to this provision, the Company contracts with various
nursing homes for the nursing homes' provision of certain "room and board"
services which the nursing home would otherwise provide a Medicaid nursing home
patient, and bills and collects from the applicable state Medicaid program an
amount equal to 95% of the amount which would otherwise have been paid directly
to the nursing home under the state's Medicaid plan. Under its standard nursing
home contract, the Company reimburses nursing homes for such services furnished
to Medicaid patients at the Medicaid per diem nursing home rate.
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<PAGE>
OTHER ISSUES. In addition, the Medicare and Medicaid programs are subject
to statutory and regulatory changes, retroactive and prospective rate
adjustments, administrative rulings, and freezes and funding reductions, all of
which may adversely affect the level of program payments to the Company for its
services. See "--Regulatory Environment--Reimbursement." In addition to reducing
hospice rates, federal or state legislators or regulators could limit or
restrict the availability of the current hospice benefit (such as by placing a
new ceiling or cap on, or eliminating, certain benefits or categories of
benefits, by changing or reducing the benefit period, or by adjusting rates
based upon certain criteria), change the current payment structure, or impose
additional conditions on hospice providers. Beyond recent reductions in the
inflation-based update for Medicare hospice rates, the Company could be
materially adversely affected by additional efforts of governmental payors to
control the amount of reimbursement or change the structure or methodology of
payments for healthcare or hospice services. There can be no assurance that
payments under governmental reimbursement programs will continue to be based on
the current methodology or remain comparable to present levels.
LEGISLATIVE CONSIDERATIONS
The Balanced Budget Act, signed into law on August 5, 1997, makes numerous
changes in Medicare coverage of and payment for hospice care services. Regarding
Medicare payment to hospices, the law limits reimbursement by setting the
payment rate increases at the "market basket" inflation rate minus one
percentage point for each of the fiscal years 1998 through 2002. In addition,
HHS is required to collect data from participating hospices on the costs of care
they provide for each fiscal year beginning with fiscal year 1999. Effective for
cost reporting periods beginning on or after October 1, 1997, hospices are
required to submit claims on the basis of the location where a service is
actually furnished. Instructions to implement these changes have not yet been
issued, and as a result, the Company cannot predict whether these changes will
have a material adverse effect on the Company. Nevertheless, with respect to
submitting claims based on where services are provided, the Company understands
that HCFA may seek to implement this change immediately on a basis to be
established.
In addition, the Balanced Budget Act extends Medicare "waiver of liability"
to findings of patient ineligibility for hospice, on the grounds that the
patient is not terminally ill. This allows a hospice to appeal a denial based on
the determination that the patient did not meet the terminal illness
requirement. As with current "reasonable and necessary" denials for which waiver
of liability applies, the hospice, to succeed in such appeal, would have to show
that it did not know, or could not have reasonably been expected to know, that
the services furnished would not be covered. This provision could benefit the
Company if its Medicare intermediary or other governmental entity were to make a
finding--for example, in the context of focused medical review--that one or more
patients receiving services from the Company were ineligible for the Medicare
hospice benefit, and the Company were held liable for the payment amount. In
such a case, the Company could seek to have such liability "waived" if it did
not know, and could not reasonably have been expected to know, that the hospice
services were not covered due to the patient's prognosis.
The Balanced Budget Act also makes certain changes affecting hospice
operations and the process of assessing whether the patient is terminally ill.
The law restructures hospice benefit periods to include two 90-day periods,
followed by an unlimited number of 60-day periods. This provision will require
more frequent reevaluation of patients to recertify that each beneficiary is
terminally ill. The law also extends the period for initial physician
certification of an individual's terminal illness to eliminate the current
requirement that a written physician certification must be submitted within two
days after hospice care begins (or eight days if a verbal certification is made
within two days). Under the law, the physician must certify that the beneficiary
was terminally ill at the beginning of each benefit period. HCFA is given
discretion to establish specific documentation requirements for physician
certifications. The law also amends the definition of hospice care to clarify
that Medicare services, in addition to those specifically required, are covered
hospice services as long as they are included in a patient's plan of care. This
provision codifies existing HCFA policy which allows the provision of Medicare
services not specifically
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required of hospices, such as chemotherapy services and diagnostic tests, as
long as they are stated in the patient's plan of care. This provision becomes
effective for items and services furnished on or after April 1, 1998. The law
also waives certain staffing requirements for rural hospice care programs, and
grants hospices the flexibility to employ physicians or to contract with
physicians or physician groups on an independent contractor basis.
In addition to Medicare, the Balanced Budget Act contains a number of
changes affecting the Medicaid program. Among other things, the Balanced Budget
Act allows states to mandate enrollment in managed care systems without seeking
approval from HHS for waivers from certain Medicaid requirements as long as
certain standards are met. Although historically (as discussed below) these
managed care programs have covered hospice services, no assurance can be given
that these programs ultimately will not change the reimbursement system for
hospice services from per diem to managed care negotiated or capitated rates or
otherwise affect the levels of payment to the Company. The Company believes that
its operating model and Vx information system place it in a strong position to
adapt to such changes, relative to its competitors.
Reductions or changes in Medicare or Medicaid funding could significantly
affect the Company's results of operations. In addition, several states
(including Florida, Illinois and Ohio) have considered and enacted healthcare
reform legislation, including healthcare reform programs involving Medicaid
waivers. HCFA has approved waiver requests for several states in which Vitas
operates, including Florida, Ohio and Illinois. Hospice care is included as a
covered benefit in these states. It is uncertain at this time whether any
additional healthcare reform initiatives will be implemented, or whether there
will be other changes in the administration of governmental healthcare programs
or interpretations of governmental policies, or other changes affecting the
healthcare system. The Company believes that its operations and services respond
favorably to budgetary and other concerns which have been expressed with the
country's existing healthcare system. In this regard, various studies have
indicated that hospice care is cost-effective when compared with other
end-of-life options. This savings is largely because hospice care reduces the
number of acute care inpatient days. Despite these findings, there can be no
assurance that future healthcare legislation or other changes will not have a
material adverse effect on the results of operations of the Company, that
hospice services will continue to be funded by governmental or private
healthcare programs and plans, or that if so funded, funding will continue at
existing levels.
REGULATORY ENVIRONMENT
REGULATION-GENERAL. The healthcare industry and the Company's hospice
programs are subject to extensive federal and state regulation. The Company's
hospices are licensed as required under state law as either hospices or home
health agencies, or both, depending on the regulatory requirements of each
particular state. In addition, the Company's hospices are required to meet
certain conditions of participation to be eligible to receive payments under the
Medicare and Medicaid programs. These requirements include, among other things:
establishment, review and update of written plans of care by an
interdisciplinary group; routine provision of substantially all of the "core
services" (nursing, counseling, medical social services, and until recently,
physician services) directly by hospice employees; in-service training; quality
assurance; use of volunteers; and retention by the hospice of financial and
professional management responsibility for services and for qualifications of
staff. All of the Company's hospices are certified for participation in the
Medicare program, and are also eligible to receive payments as hospices in each
Medicaid program in the states in which the Company operates. The Company's
hospices are subject to periodic survey by governmental authorities to assure
compliance with both state licensing and certification requirements. From time
to time in the ordinary course of its business, the Company, like other
healthcare providers, receives survey reports containing statements of
deficiencies for alleged failure to comply with various regulatory requirements.
The Company reviews such reports and takes appropriate corrective action. The
Company believes that its hospices are in substantial compliance with such
licensure and certification requirements. The reviewing agency is authorized to
take various adverse actions against a
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noncomplying hospice, including the imposition of fines, or suspension or
revocation of a hospice's license. If a Company hospice were found to be out of
compliance and such actions were taken against a Company hospice, they could
materially adversely affect the hospice's ability to continue to operate, to
provide certain services, and to participate in the Medicare and Medicaid
programs which could materially adversely affect the Company.
Many states have enacted certificate of need ("CON") laws or similar health
planning laws which require various demonstrations or determinations of service
need prior to the provision, change or expansion of certain healthcare services
or the undertaking of certain capital expenditures. Some states may apply such
laws to certain hospice services. While several states have abolished CON laws,
and other states do not apply them to certain hospice services, such laws could
affect the Company's ability to provide new services or to expand to new
geographic markets. To date, only one state in which the Company currently
operates -Florida- has enacted a CON or similar health planning law requiring a
CON as a precondition to providing hospice services. See "--Competition."
REIMBURSEMENT. A substantial portion of the Company's revenues is
attributable to payments received from third-party payors, including the
Medicare and Medicaid programs and private insurers. In fiscal 1996,
approximately 94% of the Company's net revenue was attributable to Medicare and
Medicaid payments. Both public and private payors are increasing pressures to
decrease or limit increases in reimbursement rates for healthcare services. In
addition, reimbursement is subject to legislative and regulatory changes to the
Medicare and Medicaid programs. For example, HCFA recently published a final
rule to update the wage index amounts used to adjust Medicare hospice rates for
geographic differences in wages. Under the rule, based on the recommendations of
a negotiated rulemaking committee (on which a representative of the Company
participated as a member), the new wage index (which will be updated annually)
is based on the hospital wage index with certain adjustments, and will be phased
in over a three-year transition period beginning October 1, 1997. While the
impact on the Company is dependent upon a number of factors, the Company
estimates that the new wage index methodology will reduce reimbursement from
Medicare by approximately 0.5% in fiscal 1998, approximately 1.0% in fiscal 1999
and approximately 1.5% in fiscal 2000, subject to possible change due to, among
other things, changes in the Medicare hospital wage index, geographic
distribution and utilization rates of each Company program, and future national
utilization rates for all hospice programs. Because Medicaid hospice
reimbursement is generally based upon Medicare rates, the Company anticipates
that state Medicaid plans may ultimately make similar adjustments in Medicaid
hospice rates, although, to date, none has occurred in states where the Company
operates. Various payment changes were also mandated by the Balanced Budget Act.
The levels of revenues and profitability of the Company, similar to those of
other healthcare companies, will be subject to the effect of such changes and
possible reductions in coverage or payment rates by private third-party payors.
These changes could have a material adverse effect on the Company.
Each state which maintains a Medicaid program has the option to provide
reimbursement for hospice services. All states in which the Company operates
cover Medicaid hospice services; however, there can be no assurance that the
states in which the Company is presently operating or states into which it could
expand operations will cover Medicaid hospice services. In addition, the
Medicare and Medicaid programs are subject to statutory and regulatory changes,
retroactive and prospective rate and payment adjustments, administrative
rulings, freezes and funding reductions, all of which may adversely affect the
level of program payments and could have a material adverse effect on the
Company.
FRAUD AND ABUSE LAWS. As a provider of services under the Medicare and
Medicaid programs, the Company is subject to federal and state healthcare
program fraud and abuse laws. In general, these laws prohibit certain direct and
indirect payments between healthcare providers that are intended to, among other
things, induce or encourage the referral of patients to, or the recommendation
of, a particular provider of items or services. These laws include the Medicare
and Medicaid anti-kickback statute, which prohibits, among other things, the
offer, payment, solicitation or receipt of any remuneration in return for the
referral of patients for items or services, or arranging for the furnishing of
items or services, for which
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payment may be made under the Medicare, Medicaid or other federally funded
healthcare programs, or to induce the purchase of items or services reimbursable
under these programs. These provisions have been broadly interpreted by the
courts and governmental enforcement agencies to apply to a wide range of
business transactions, including certain contractual relationships between
healthcare providers and potential sources of referrals, including persons or
entities who arrange for referrals. Under current law, courts and federal
regulatory authorities have stated that this law is violated if one purpose (as
opposed to a sole or primary purpose) of the arrangement is to induce referrals.
Violation of the anti-kickback statute may result in criminal fines and/or
imprisonment, administrative exclusion from the Medicare and Medicaid programs,
and in the case of a criminal conviction, mandatory exclusion from participation
in the Medicare and Medicaid programs. The Health Insurance Portability and
Accountability Act of 1996 includes an expansion of certain fraud and abuse
provisions, such as extending the application of Medicare and Medicaid fraud
penalties to certain other federal healthcare programs. The recently-enacted
Balanced Budget Act also includes numerous health fraud provisions, including
new civil money penalties for violating the Medicare and Medicaid anti-kickback
statute and an expansion of the mandatory and permissive exclusions added by the
Health Insurance Portability and Accountability Act of 1996 to any federal
health care program (other than the Federal Employees Health Benefits Program).
In addition, several healthcare reform proposals in recent years have included
an expansion of the anti-kickback laws to include referrals of any patients
regardless of payor.
Limited "safe harbor" regulations exempt certain practices from enforcement
action under the prohibitions, including payments for bona fide employment
relationships, for certain contracts for the rental of space, and for certain
personal services and management contracts. While failure to satisfy all of the
criteria for a safe harbor does not necessarily mean that an arrangement is
unlawful, arrangements that are of the same generic kind as those for which a
safe harbor is available may be subject to scrutiny if they fail to qualify for
the appropriate safe harbor. Parties to such transactions either may or may not
be subject to prosecution. In addition, an increasing number of states in which
the Company operates have laws, which vary from state to state, prohibiting
certain direct or indirect remuneration or fee-splitting arrangements between
healthcare providers, regardless of payor source, for the referral of patients
to a particular provider. In addition, some state laws lack some of the explicit
"safe harbors" that may be available under federal law. Sanctions under these
state anti-remuneration laws may include civil money penalties, license
suspension or revocation, exclusion from Medicare or Medicaid, and criminal
fines or imprisonment.
In addition, under separate statutes, submission of claims for items and
services that are "not provided as claimed" may lead to civil money penalties,
criminal fines and imprisonment, and/or exclusion from participation in
Medicare, Medicaid and other federally funded state healthcare programs. These
false claims statutes include the Federal False Claims Act, which allows any
person to bring suit alleging false or fraudulent Medicare or Medicaid claims or
other violations of the statute and to share in any amounts paid by the entity
to the government in fines or settlement. Such QUI TAM actions have increased
significantly in recent years and have increased the risk that a healthcare
company will have to defend a false claims action, pay fines or be excluded from
the Medicare and/or Medicaid programs as a result of an investigation arising
out of such an action.
Under the Medicare conditions of participation and some state licensure
laws, the Company, because of its method of service delivery, is required to
contract with numerous healthcare providers and practitioners, including
hospitals, nursing homes and physicians, when it arranges for such individuals
or entities to provide services to its patients. In addition, the Company has
contracts with other suppliers, such as pharmacies, ambulance services, and
medical equipment companies. Some of these individuals or entities may refer, or
be in a position to refer, patients to the Company, and the Company may refer,
or be in a position to refer, patients to certain of these individuals or
entities. Such arrangements may not qualify for a safe harbor. In the event that
offers to pay or payments made (or amounts retained) by the Company or such
other individuals or entities under these arrangements were deemed to implicate
noncompliance with the anti-remuneration laws and did not satisfy all the
criteria for a safe harbor, where available, the
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arrangements could be found to violate such laws. The Company from time to time
seeks guidance from regulatory counsel as to the changing and evolving
interpretations and the potential applicability of these anti-remuneration laws
to its programs, including those it acquires, and in response thereto, takes
such actions as it deems appropriate. The Company believes generally that its
contracts and arrangements with providers, practitioners and suppliers should
not be found to violate applicable anti-remuneration laws. However, there can be
no assurance that such laws will ultimately be interpreted in a manner
consistent with the Company's practices.
Finally, in 1993 Congress enacted legislation to extend the existing
prohibition against Medicare payment for clinical laboratory services referred
by a physician with an ownership interest or other financial relationship with
the provider, to referrals for certain additional "designated health services"
rendered to patients referred by a physician with such a financial relationship.
The law, which for the majority of services covered became effective for
services rendered on or after December 31, 1994, applies to both Medicare and
Medicaid patient referrals. Hospice care, as such, is not included in the
enumerated designated health services subject to the prohibition; however, some
of the designated health services (such as physical therapy, pharmacy services
and certain infusion therapies) are among the specific services furnished by the
Company's hospices. Various exceptions are available for financial arrangements
that would otherwise prohibit physician self-referrals. These include, under
certain conditions, space rental agreements, employment relationships, personal
services arrangements, payments for services unrelated to the designated
services, physician recruitment, and certain isolated transactions. Although
implementing regulations have been issued with respect to clinical laboratory
services, proposed regulations have not yet been issued with respect to other
designated health services, and there can be no assurance that existing services
offered by the Company, or new services, will not be interpreted to be subject
to such prohibitions on physician self-referrals. Many states (including
California, Florida and Illinois) have enacted physician self-referral
provisions, which generally prohibit financial relationships with referral
sources that are not limited to services for which Medicare or Medicaid payment
may be made. Similar penalties, including loss of licensure or eligibility to
participate in governmental reimbursement programs and civil and criminal fines,
apply to violations of these state self-referral prohibitions. These laws vary
from state to state and have seldom been interpreted by the courts or regulatory
agencies. The Company from time to time seeks guidance from regulatory counsel
on these self-referral prohibitions, and the Company believes that its practices
should not be found to violate such provisions. In the event such prohibitions
were deemed to apply to the Company's services, however, many of the Company's
arrangements would likely meet an exception. If an exception were not available,
the Company could, among other things, seek to modify its contractual
arrangements so as to satisfy an available exception, or the physicians with
whom the Company has compensation arrangements could be limited in their ability
to refer patients to the Company for certain health services.
OTHER FEDERAL AND STATE REGULATIONS. The federal government and all states
regulate various aspects of the hospice industry. In particular, the Company's
operations are subject to federal and state health regulatory laws including
those covering professional services, the dispensing of drugs and certain types
of hospice activities. Certain of the Company's employees are subject to state
laws and regulations governing the ethics and professional practice of medicine,
respiratory therapy, pharmacy and nursing. The Company's operations are subject
to periodic survey by governmental and private accrediting entities to assure
compliance with applicable state licensing, Medicare and Medicaid certification,
and accreditation standards, as the case may be. From time to time in the
ordinary course of business, Vitas, like other healthcare companies, receives
survey reports containing deficiencies for alleged failure to comply with
applicable requirements. The Company reviews such reports and takes appropriate
corrective action. The failure to effect such action or to obtain, renew or
maintain any of the required regulatory approvals, certifications or licenses
could materially adversely affect the Company's business and could prevent the
programs involved from offering products and services to patients. In addition,
laws and regulations often are adopted to regulate new products, services and
industries. There can be no assurances that either the states
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or the federal government will not impose additional regulations upon the
activities of the Company which might adversely affect its business, results of
operations or financial condition.
The Company maintains an internal regulatory compliance review program and
from time to time retains regulatory counsel for guidance on applicable laws and
regulations. However, no assurance can be given that the practices of the
Company, if reviewed, would be found to be in compliance with applicable health
regulatory laws, as such laws ultimately may be interpreted, or that any
non-compliance with such laws would not have a material adverse effect on the
Company.
OPERATION RESTORE TRUST AND CLAIMS REVIEWS
OPERATION RESTORE TRUST. In recent years, the federal government, some
state enforcement agencies, and private insurers have all increased efforts to
enforce the fraud and abuse laws. ORT is a federal/state effort, which includes
audits, investigations and aggressive surveys, to focus the financial and human
resources involved in such enforcement on specific geographic and subject areas.
In May 1995, President Clinton announced this coordinated effort by federal and
state agencies to review industry practices and regulatory compliance of home
health agencies, nursing homes, and certain durable medical equipment suppliers.
The initiative was initially targeted to California, Florida, Illinois, Texas
and New York, the five states in which Medicare spending is the highest. In June
1995, federal officials announced the expansion of ORT to include hospices in
these five states.
As part of its review of hospices under ORT, the OIG has published audit
reports on the OIG's reviews of five hospice programs unrelated to the Company.
These OIG audit reports focused on the hospice eligibility of long-stay patients
(those who are in a hospice program for longer than 210 days). In its first
audit report on one unrelated Florida hospice issued in August 1996, the OIG
concluded that, based upon a review of 364 medical records of certain long-stay
patients, (i) 176 of the medical records did not support the beneficiaries'
eligibility for hospice coverage, and (ii) for 118 beneficiaries, the OIG was
not able to determine whether the beneficiaries were terminally ill. As a result
of these findings, the OIG recommended that the fiscal intermediary (i) recover
a minimum of $8.9 million for the beneficiaries determined by the OIG not to be
eligible for Medicare hospice benefits, and (ii) conduct medical reviews of the
other cases in which the OIG was unable to determine whether the beneficiaries
were terminally ill, which cases, if determined to be ineligible, could result
in an additional recoupment of up to $5.9 million. Since that August 1996 audit
report, the OIG has issued four additional audit reports on hospice programs
unrelated to the Company. These audit reports are similar in nature to the first
Florida hospice audit report. Based upon reviews of 147, 60, 78 and 77 medical
records, respectively, the OIG recommended that the respective fiscal
intermediaries (i) recover a minimum of $4.0 million, $973,000, $2.1 million,
and $1.2 million, respectively, for the beneficiaries determined by the OIG not
to be eligible for Medicare hospice benefits (71, 20, 37 and 25 cases,
respectively), and (ii) conduct medical reviews of the other cases in which the
OIG was unable to determine whether the beneficiaries were terminally ill (45, 2
and 19 cases, respectively), which cases, if determined to be ineligible, could
result in additional recoupments of up to $2.5 million, $69,000, and $1.35
million, respectively, for three of the four hospice programs (and none with
respect to the fourth hospice program).
Three different fiscal intermediaries serve the five hospice programs that
are the subject of these audit reports, and each responded in writing to the
audit reports on the hospices it serves. One fiscal intermediary raised several
issues regarding the recoupment process and expressed a willingness to meet with
the OIG and HCFA on these issues. Another fiscal intermediary stated that it
would be "reluctant to recover payments." The third fiscal intermediary
indicated that, due to the subject hospice's excellent reputation, it would need
to consult with HCFA before seeking to recover any overpayments. None of these
fiscal intermediaries has, to the Company's knowledge, made a final
determination as to whether it will seek to follow the OIG's recommendations or
demanded recoupments based on the OIG reports for the applicable hospices.
Nevertheless, a senior HHS official has stated subsequently that the agency
still intends to seek recoveries under certain limited circumstances.
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In testimony before congressional subcommittees, senior OIG officials stated
the OIG's belief that it has identified $83 million in overpayments as a result
of the audit of 12 hospices located in Illinois, Florida, Texas and California.
These officials also stated the OIG's belief that these audits had uncovered
other problems regarding internal controls, questionable hospice marketing
practices and potential illegal incentives to refer nursing home patients to
hospices, and that the OIG has ongoing investigations. The provision of hospice
care to residents of long-term care facilities has come under OIG scrutiny as
part of the ORT initiatives. In September 1997, the OIG issued a report based on
a sample of hospices and hospice patients unrelated to the Company entitled
"Hospice Patients in Nursing Homes" in which the OIG recommended that HCFA seek
legislation to modify Medicare or Medicaid payments for hospice patients living
in nursing homes. The OIG report suggested that such modifications could include
but are not limited to lowering hospice payments for patients who reside in
nursing homes or revising requirements for services provided by nursing homes
for terminal patients. The OIG report further suggested that representatives
from the nursing home and hospice industry along with HCFA work in a
collaborative manner to develop additional options to preserve and enhance
hospice care for those who need it when living in a nursing home. Such
modifications could have a material adverse effect on the Company. In addition,
the Company understands that the OIG intends to issue another general report
focusing on hospice eligibility issues.
In May 1997, HHS announced the expansion of ORT during the next two years to
include the following additional 12 states: Arizona, Colorado, Georgia,
Louisiana, Massachusetts, Missouri, New Jersey, Ohio, Pennsylvania, Tennessee,
Virginia, and Washington. Vitas currently operates in two of these states:
Pennsylvania and Ohio. The OIG stated that it will focus on potential fraud
involving additional types of health care services, reportedly to include
partial hospitalization, psychiatric hospitals, and independent physiological
laboratories, and it is unclear whether hospices will continue to be a focus in
these additional states.
The Company operates in four of the five initial ORT states. As a part of
the OIG's review of hospices under ORT, beginning in July 1995, the OIG
conducted on-site medical and operational reviews at six of the Company's
hospice programs and at its corporate office. The medical review focused on the
eligibility of long-stay patients. No reports have been issued by the OIG on the
Company's hospice programs. Although no exit conferences have been held, in
response to the Company's request for information, in September 1995 OIG
auditors indicated they would discuss their preliminary views regarding their
initial on-site visits to the three hospice programs that had been visited prior
to that time. Based on such discussions, the Company understands that the
auditors had formed a preliminary view that, of the 215, 211 and 106 medical
records of long-stay patients reviewed in the three programs, they considered
164, 141 and 85, respectively, not to be eligible for Medicare hospice services.
With respect to the first two of these programs, they considered the charts for
30 and 16 (and none with respect to the third program) to be inconclusive as to
whether the beneficiaries were terminally ill. Despite repeated requests for
additional information, the Company has received no further audit results from
the OIG, including preliminary or final results of the audit of any of the other
three Company programs audited since that time or preliminary or final results
of any other issues the OIG may believe to be of regulatory concern. The OIG has
reviewed medical records of a total of approximately 1,150 of the Company's
patients at the six audited Company programs. The Company, through outside
healthcare regulatory counsel, retained a recognized physician expert in peer
review to examine a random sample of the charts reviewed by the OIG at one of
the Company's programs. Based on the documentation in the patient charts, the
independent physician expert concluded that, in every case in this sample, the
patient's physician could reasonably have concluded that the patient was
eligible for hospice services.
In a 1997 report, the Institute of Medicine Committee on Care at the End of
Life questioned in general the OIG's assumptions on the degree of precision
expected in making terminal prognoses. The Committee pointed out that, in the
case of the OIG's first audit report of a Florida hospice unrelated to the
Company, the long-stay patients reviewed represented only about two percent of
all patients enrolled
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in the hospice during that period. Further, the Committee urged regulators to
exercise caution in interpreting hospice stays that exceed six months as
"evidence of anything other than the consequence of prognostic uncertainty." In
addition, in a June 1997 letter from a representative of HHS to the Company in
response to previous correspondence from the Company, the HHS representative
indicated, among other things, that "it may seem ironical that a longer life
(and longer length of stay in hospice) could result from a terminal diagnosis,
but the Medicare program recognizes this possibility and would not penalize an
individual for living longer than originally expected, nor would we penalize a
hospice for caring for that same individual."
The Company strongly disagrees with the OIG's apparent interpretation and
application of the Medicare hospice eligibility requirements, and believes that
it met applicable Medicare eligibility documentation requirements in all
material respects. The Company understands that the activities of the OIG Office
of Audit Services and the OIG Office of Investigations involving the Company are
ongoing. The scope and ultimate disposition of the ORT and OIG activities, and
the possible impact on the Company of such activities, cannot currently be
predicted. Numerous factors may limit the comparability of the results of the
five published OIG audit reports to any final results of the reviews of any of
the Company's hospice programs, including, without limitation, the length of
stay, the case mix, acuity or other circumstances of the patients, the
randomness of the sampling, and the specific policies and practices of the
particular hospice programs. The Company believes that its admissions, average
length of stay and average daily census have been negatively impacted in fiscal
1996 and fiscal 1997 by several items, including implementation of new
guidelines developed by NHO (described below), in consultation with HCFA, which
established more specific criteria for analyzing terminal prognoses in certain
non-cancer diagnoses, and publicity resulting from, and reactions to, the ORT
initiatives and other claims review activities. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Further, the Company
believes that publicity regarding allegedly ineligible long-stay patients of
other hospices caused some hospice and attending physicians to be overly
conservative in referring patients to hospice and in determining patients'
prognoses, both at the time of admission and upon periodic recertifications. If
the OIG releases an adverse report or takes some other adverse action with
respect to patient eligibility or other issues, the Company expects to
vigorously defend its position. However, there can be no assurance that these
matters, including any costs of defense, will not have a material adverse effect
on the Company. In addition, the publication of any adverse report, or any
adverse publicity regarding these matters, regardless of their merit or eventual
outcome, could have a material adverse effect on the Company's business and
reputation for a least some period of time.
CLAIMS REVIEWS. Medicare and Medicaid fiscal intermediaries periodically
conduct post-payment or other reviews and other audits of healthcare claims,
including hospice claims. These contractors are under pressure from state and
federal governments to scrutinize healthcare claims to determine their validity
and appropriateness. During the past several years, the Company's previous
Medicare fiscal intermediary conducted a number of reviews of hospice provider
claims, including the Company's. These reviews included both focused medical
reviews of claims for patients with non-cancer terminal diagnoses and long-stay
patients (patients with lengths of stay greater than 210 days) and post-pay
audits. In order to conduct these reviews, the intermediary requested certain
documentation from the Company and then reviewed it to determine eligibility of
the patients, technical compliance with federal rules and regulations and
appropriateness of the documentation and the care provided.
Concurrently with these reviews, industry representatives, including NHO and
the Company's national medical director, developed and distributed guidelines to
hospice providers with parameters for determining a terminal prognosis in
selected non-cancer diseases. Working in consultation with HCFA, NHO developed
these new guidelines for patients with non-cancer diagnoses which were adopted
by HCFA in November 1995.
Between March 1, 1996 and August 1, 1997, as part of its focused medical
review, the Company's previous Medicare fiscal intermediary reviewed 3,557
claims and denied approximately 210 of such claims.
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The Company is in the process of challenging approximately 164 of the denials
through requests for reconsideration or appeals to an administrative law judge.
These challenges have not been fully resolved. The other denials have either
been reversed (and paid) or the Company has chosen not to challenge them.
In support of the Company's view that it has materially satisfied applicable
regulatory requirements, of approximately 200 patient charts reviewed by both
OIG auditors pursuant to the ORT audits and Vitas' former fiscal intermediary
pursuant to focused medical review, the intermediary approved for payment all of
the claims reviewed for approximately 94% of these patients, and approved part
of the claims for an additional 5% of these patients (and most of the denied
claims are in the appeal process). Focused medical review has not had a material
adverse effect on the Company, but no assurance can be given that, in the
future, it will not have a material adverse effect.
In May 1997, due to the decision of Aetna Life & Casualty to discontinue
serving as a Medicare fiscal intermediary, the Company's fiscal intermediary
changed to Palmetto Government Benefits Administrators. Several of the Company's
programs have continued under focused medical review since transitioning to the
new intermediary. The Company does not anticipate that the change to a new
fiscal intermediary will have an impact on its reimbursement process.
Florida's Medicaid program implemented a utilization review program for
hospice providers in order to determine compliance with Medicaid hospice policy,
to verify appropriate admission of patients, and to ensure that Medicaid
beneficiaries were receiving appropriate services. The utilization review
program requires each Florida hospice provider to regularly submit certain
documentation for all long-stay hospice patients receiving Medicaid benefits
(with lengths of stay greater than 210 days). The utilization review program
also includes reviews of a random sample of all Florida Medicaid hospice
patients. From February 1, 1997 through June 30, 1997, retrospective reviews of
documentation for approximately 1,000 Florida hospice patients, including
approximately 250 patients of the Company, were conducted by the state's peer
review organization. This initial review was characterized by the Florida
Medicaid intermediary as a "demonstration period," during which no denials or
recoupments were to be made. The intermediary has announced that effective July
1, 1997, any charts submitted for review could be subject to denial of payment
or recoupment. Since July 1, 1997, the Company's programs in Florida have been
required to submit information regarding 28 long-stay patients. No results of
these reviews have been provided to the Company.
There can be no assurance that reviews and/or similar audits of Vitas'
claims by federal or state intermediaries will not result in material
recoupments or denials which could have a material adverse effect on the
Company.
EMPLOYEES
As of June 30, 1997, the Company had approximately 2,050 full-time and 900
part-time employees, or approximately 2,310 full-time equivalent employees. Of
these full-time equivalent employees, approximately 560 are registered nurses,
110 are licensed practical/vocational nurses, 560 are home health aides and
homemakers, 40 are physicians, 120 are social workers and case workers, 80 are
chaplains, 240 are employed as team managers or in team support activities, 230
are admissions employees (including hospice representatives, clinical employees
assigned to the admissions department and admissions support employees) and
admissions management engaged in admission-related activities, 170 are employed
in management activities and 190 are employed in administrative or clerical
activities. The Company is not a party to any collective bargaining agreements.
The Company also maintains self-insured workers' compensation insurance coverage
and considers its relations with its employees to be good.
The Company competes with hospices, hospitals, nursing homes, home health
agencies, and other healthcare providers for qualified personnel in the various
medical and psychosocial professions. There is intense competition for certain
medical and psychosocial specialists in certain geographic areas of the country.
It is possible that the shortage of and demand for certain medical and
psychosocial professionals
57
<PAGE>
in various geographic regions could materially affect the Company's existing
operations and its ability to expand and develop new sites in certain markets.
COMPETITION
The hospice care market is highly fragmented. Based on industry data, the
Company estimates that approximately 70% of the existing hospice programs are
operated as local not-for-profit or government-sponsored programs. In addition,
the Company competes with hospitals, nursing homes, home health agencies,
physicians and other healthcare providers, including those with which the
Company presently maintains contractual relationships, that offer hospice and/or
palliative care services. Many of them offer home care to patients who are
terminally ill, and some actively market palliative care and "hospice-like"
programs. Certain of these existing healthcare providers are significantly
larger and better capitalized than the Company. Various healthcare companies
have diversified into the hospice market.
In addition, competition in Florida (and potentially other states) is
affected by CON laws. For example, a healthcare provider recently was awarded a
CON in the Orlando, Florida area, which is currently being challenged by the
Company. If the Company is unsuccessful in its challenge, it will experience
increased competition among hospice care providers in that area, which could
have a material adverse effect on the Company's Central Florida operations. If
these CON laws were to change, the Company could be subject to increased
competition. See "--Regulatory Environment."
The Company maintains proprietary rights to certain service marks,
promotional materials, and computer software which the Company considers to be
important to effective differentiation from other hospice providers. The Company
does not, however, have proprietary rights to many of the items and modes of
service which it uses to furnish patient care. As such, competitors may copy the
Company's methods of operation and make use of the same items and modes of
service. Currently there are no independent publicly traded companies that offer
predominantly hospice services.
LEGAL PROCEEDINGS
The Company from time to time is subject to various disputes and other
litigation arising in the ordinary course of business, none of which is expected
to have a material adverse effect on the Company. The Company has had a
relatively small number of malpractice-type claims since its inception. The
Company has general and professional liability insurance in the amount of $10
million.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning each of the
Company's directors and executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Hugh A. Westbrook (1)................................ 52 Chairman of the Board of Directors and Chief
Executive Officer
Esther T. Colliflower (1)............................ 71 Vice Chairperson of the Board of Directors
J. R. Williams, M.D. (1)............................. 58 Executive Vice President, Chief Patient Care Officer
and Director
Mark A. Sterling..................................... 43 Senior Vice President-Strategic Development, Special
Counsel for Regulatory Affairs and Secretary
Thomas E. Combs...................................... 50 Senior Vice President-Hospice Operations
Deirdre Lawe......................................... 42 Senior Vice President-Marketing and Admissions
David A. Wester...................................... 38 Vice President, Chief Financial Officer, Treasurer
and Assistant Secretary
Donald J. Gaetz...................................... 49 Director
William P. Ferretti (2)(3)........................... 53 Director
Patrick T. Hackett (3)............................... 36 Director
Timothy S. O'Toole (2)(3)............................ 41 Director
Bruce F. Wesson (2).................................. 54 Director
</TABLE>
- ------------------------
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
HUGH A. WESTBROOK, a co-founder of the Company's operations in 1978, has
served as Chief Executive Officer of the Company since 1983 and as Chairman of
the Board since 1986. Mr. Westbrook has co-chaired the National Hospice
Education Project that ultimately led to Congress passing Medicare reimbursement
for hospice services in 1981. In addition, Mr. Westbrook helped author and gain
passage of the statutory licensing of hospices in Florida. In November 1996, Mr.
Westbrook was awarded the NHO's Founder's Award. Prior to his work with hospice,
Mr. Westbrook was a pastor for ten years in North Carolina and Florida, which
included being a hospital chaplain specializing in care of terminally ill
patients and their families. Mr. Westbrook also served as Associate Dean of
Miami-Dade Community College from 1976 to 1978. Mr. Westbrook serves the
community as a board member of several organizations, including the South
Florida Make-A-Wish Foundation, U.S. Coast Guard Foundation, Inner City Youth
Center, Inc., and Duke University Divinity School. Mr. Westbrook received his
divinity training at Duke University and a bachelor of arts from Emory
University.
ESTHER T. COLLIFLOWER, a co-founder of the Company's operations in 1978, has
served as a director since 1983 and Vice Chairperson of the Board of Directors
of the Company since 1988 and served as Senior Vice President of the Company
from 1986 to 1996. Prior to 1978, Ms. Colliflower was Director of the Life Lab
program at Miami-Dade Community College and later became an Associate Dean. Ms.
Colliflower has a nursing degree from the University of Pennsylvania and a
Master's degree with a focus on adult education from Lone Mt. College in San
Francisco, California.
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<PAGE>
J. R. WILLIAMS, M.D., joined the Company in 1984 as Medical Director of the
Dallas hospice. He has served as Executive Vice President and a director of the
Company since 1990, and as Chief Patient Care Officer since January 1995. Dr.
Williams was the Company's Chief Operating Officer from 1990 to 1993. Previously
he served as National Medical Director and later as Regional Vice President in
Texas and Chicago. Dr. Williams co-founded Texas Oncology, P.A., a statewide
network of oncologists that consults and treats cancer patients. While
developing the oncology network, Dr. Williams was an oncology specialist at
Baylor University Medical Center in Dallas. Dr. Williams researched the
production and prevention of certain cancers for the National Cancer Institute
and was a research fellow in medicine for Harvard Medical School. He is board
certified in both Internal Medicine and Medical Oncology. Dr. Williams has a
medical degree and a master's degree in biochemistry from Tulane University and
an A.B. in chemistry from Princeton University.
MARK A. STERLING, who joined the Company in 1993, serves as Senior Vice
President--Strategic Development, Special Counsel for Regulatory Affairs and
Secretary. He previously served as Vice President--Legal and Regulatory Affairs.
Prior to joining the Company, Mr. Sterling was a partner at the law firm of
Hogan & Hartson L.L.P. in Washington, D.C., focusing on healthcare transactional
and regulatory matters. While at Hogan & Hartson L.L.P., he also served as
President and as a director of Hospice Care of the District of Columbia. He is a
director of Comprehensive Care Management Corporation.
THOMAS E. COMBS, who joined the Company in 1989, serves as Senior Vice
President--Hospice Operations. He has served the Company in various roles,
including Regional Vice President of each of four regions, Vice President of
Acquisitions and Development, and began his service as General Manager of the
Company's Dallas, Texas program. Mr. Combs previously held positions as
President of Hospice of Southwest Florida in Sarasota and Director of Finance
for Hospice Care, Inc. in Pinellas County, Florida.
DEIRDRE LAWE, who joined the Company in 1987, serves as Senior Vice
President--Marketing and Admissions. Ms. Lawe served as the Regional Vice
President for the Southeast Region and subsequently for the West Coast Region,
and she served as the General Manager of the Company's Broward County, Florida
hospice program from 1989 to 1990. Prior to joining Vitas, she was the Director
of Pacemaker Monitoring with Survival Technology in New York City. Ms. Lawe has
clinical experience as a senior and staff nurse in the coronary care unit of
Montefiore Medical Center in the Bronx, New York.
DAVID A. WESTER, who joined the Company in 1997, serves as Vice President,
Chief Financial Officer, Treasurer and Assistant Secretary. Prior to joining the
Company, Mr. Wester was Executive Vice President for the Florida subsidiaries'
operations of Foundation Health Systems, a diversified provider of managed
health care benefits and related services for individuals, employers and
government agencies. Prior to his work with Foundation Health Systems, Mr.
Wester served in various senior capacities for companies affiliated with Foster
Management, a private investment firm, and assisted in the development of
several healthcare companies, involved in managed care, physical therapy and
orthopedics and prosthetics.
DONALD J. GAETZ, a co-founder of the Company and a director of the Company
since 1983, also served as Vice Chairperson of the Board of Directors of the
Company from 1991 to 1996. From 1983 to 1991, Mr. Gaetz served as Executive Vice
President of the Company.
WILLIAM P. FERRETTI has been a director of the Company since 1988. Mr.
Ferretti is the Chairman and Chief Executive Officer of Medstar Communications,
Inc., a television programming company, which he co-founded in 1982. Mr.
Ferretti also is a general partner of the NEPA Venture Fund-II. He currently
serves as a director of MHM Services, Inc. and U.S. PHYSICIANS, Inc. Previously,
he served as a director of Access Health, Inc. and Co-Care Eye Centers.
PATRICK T. HACKETT has been a director of the Company since 1993. Mr.
Hackett is a Managing Director and member of E.M. Warburg, Pincus & Co., LLC
("E.M. Warburg"), and its predecessor since 1994. Mr. Hackett is a member of the
Board of Directors of Transition Systems, Inc. and Coventry Corporation.
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<PAGE>
TIMOTHY S. O'TOOLE has been a director of the Company since 1991. Mr.
O'Toole serves as Executive Vice President and Treasurer and a director of
Chemed, a diversified public corporation with strategic investments in companies
in various industries including healthcare services, which positions he has held
since May 1992, February 1989 and 1991, respectively. He is also a director of
National Sanitary Supply Co. and Patient Care, Inc., which are subsidiaries of
Chemed.
BRUCE F. WESSON has been a director of the Company since 1993. Mr. Wesson is
a General Partner and the President of Galen Associates, a New York healthcare
investment partnership. Prior to joining Galen Associates in 1991, Mr. Wesson
was employed in Smith Barney Shearson Inc.'s Corporate Finance Department for 23
years, most recently as a Senior Vice President and Managing Director. He is a
director of Witco Corporation.
The Company's Charter and By-Laws provide that the Board of Directors of the
Company, which presently consists of eight members, shall consist of that number
of directors as determined by resolution of the Board of Directors. Directors
are divided into three classes, each consisting of approximately one-third of
the total number of directors. The term of office of each class is three years
and expires in successive years at the time of the annual meeting of
stockholders. Class I directors, consisting of Messrs. Ferretti and O'Toole and
Ms. Colliflower, will hold office until the 2000 annual meeting of stockholders;
Class II directors, consisting of Dr. Williams and Mr. Hackett, will hold office
until the 1998 annual meeting of stockholders; and Class III directors,
consisting of Messrs. Westbrook, Gaetz and Wesson, will hold office until the
1999 annual meeting of stockholders. Mr. O'Toole has served as a director as a
designee of the holder of the 9% Preferred Stock and Messrs. Wesson and Hackett
have served as directors as designees of the holders of Series B Preferred
Stock. See "Description of Capital Stock--Investor Agreement" and
"--Stockholders' Agreement."
COMMITTEES OF THE BOARD OF DIRECTORS
EXECUTIVE COMMITTEE. The members of the Executive Committee of the
Company's Board of Directors are Mr. Westbrook and Dr. Williams and Ms.
Colliflower. The Executive Committee has been delegated all of the powers of the
Board of Directors to the extent permitted under the Delaware General
Corporation Law.
AUDIT COMMITTEE. The members of the Audit Committee of the Company's Board
of Directors are Messrs. Ferretti, O'Toole and Hackett, all of whom are
nonemployee directors. The Audit Committee, among other things, makes
recommendations concerning the engagement of independent auditors and reviews
the results and scope of the annual audit and other services provided by the
Company's independent auditors.
COMPENSATION COMMITTEE. The members of the Compensation Committee of the
Company's Board of Directors are Messrs. Ferretti, O'Toole and Wesson, all of
whom are nonemployee directors. The Compensation Committee makes recommendations
to the full Board of Directors concerning salaries, incentive compensation and
benefits for executive officers and certain other employees of and consultants
to the Company, and grants options under the Company's Management Equity
Incentive Plans and otherwise. In addition, the Compensation Committee reviews
and makes recommendations to the full Board of Directors concerning special
compensation arrangements.
COMPENSATION OF DIRECTORS
Except for Messrs. Ferretti and O'Toole, members of the Company's Board of
Directors do not receive compensation for serving on the Board or any committee
thereof. Messrs. Ferretti and O'Toole each receive a $25,000 annual fee for
serving on the Board and their respective committees of the Board. All directors
receive reimbursement for expenses incurred in attending Board and committee
meetings.
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<PAGE>
Directors are eligible to receive option grants under the Company's
Management Equity Incentive Plans. The terms of options granted under these
plans are determined at the time of grant. See
"--Management Equity Incentive Plans." No options were granted to directors
under the Management Equity Incentive Plans in fiscal 1996.
Pursuant to a Consulting Agreement effective as of January 1, 1997 between
the Company and Ms. Colliflower, the Company has agreed to pay Ms. Colliflower
$2,000 for each day that Ms. Colliflower is requested to provide and does
provide consulting services to the Company in addition to any continued services
she may provide as a member of the Board of Directors of the Company. These
consulting services include (but are not limited to) consulting to the Patient
and Family Services Department on clinical matters, design and implementation of
the patient care team model, policy and procedures, visits to hospice locations
regarding management issues, interdisciplinary team processes and overall
employee motivation matters and other matters as directed by the Company. The
agreement also provides for the reimbursement by the Company of reasonable
business expenses incurred by Ms. Colliflower in furtherance of her duties and
performance of consulting services. The term of the agreement began as of
January 1, 1997 and expires on January 1, 1998, is subject to earlier
termination upon death, for cause, or for any reason by either party upon sixty
(60) days' written notice to the other party, and may be extended by mutual
written agreement. The agreement was conditioned upon Ms. Colliflower entering
into a Confidentiality and Non-Disclosure Agreement with the Company. With
respect to any intellectual property rights or other works made for the benefit
of the Company, the agreement provides that the Company shall be considered the
author of the work and is regarded as the initial owner of the copyright or
other intellectual property rights unless the parties have expressly agreed
otherwise in a written agreement signed by them.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1996, Messrs. Ferretti, O'Toole and Wesson, all of whom are
non-employee directors, served on the Compensation Committee of the Board of
Directors. Mr. O'Toole is an executive officer and director of Chemed. Upon
completion of the Offering, the Company intends to redeem all of the outstanding
shares of the 9% Preferred Stock, which is owned by Chemed, at an aggregate
redemption price of approximately $30.0 million. It is currently anticipated
that, on the closing of this Offering, Chemed will exercise a portion of one of
its two warrants and purchase 246,634 shares of Common Stock, with the remaining
portion of the warrant expiring by its terms. In addition, after the Offering,
the Company will use a portion of the net proceeds from the Offering to
repurchase the other warrant held by Chemed for a purchase price per share equal
to the excess of the public offering price over $12.19, or an aggregate of $1.5
million based on an assumed public offering price of $15.00 per share. See "Use
of Proceeds."
The Company has entered into a Registration Rights Agreement with certain
stockholders of the Company, Chemed, the holders of Series B Preferred Stock and
the Bank providing for the registration of Common Stock held by such persons
under certain terms and conditions. For a description of the terms of the
Registration Rights Agreement, see "Description of Capital Stock--Registration
Rights."
The Company has entered into an Investor Agreement with Chemed providing
Chemed with board representation and other rights relating to its ownership of
securities of the Company. For a description of the terms of the Investor
Agreement, see "Description of Capital Stock--Investor Agreement."
The Company has entered into a Stockholders' Agreement with Mr. Westbrook,
Carole S. Westbrook and the holders of Series B Preferred Stock providing
certain rights of first refusal relating to Common Stock owned by such parties,
and other rights. This agreement terminates upon the closing of this Offering.
For a description of the terms of the Stockholders' Agreement, see "Description
of Capital Stock-- Stockholders' Agreement."
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<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain summary information concerning the
compensation paid to the Company's Chief Executive Officer and each of the three
most highly compensated executive officers whose salary and bonus exceeded
$100,000 in fiscal 1996 for services rendered in all capacities to the Company
for fiscal 1996. All of the executive officers named below are referred to
herein as the "named executive officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------
<S> <C> <C> <C>
OTHER
ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION(S) SALARY COMPENSATION COMPENSATION
- ----------------------------------------------------------------------- ---------- ------------- -------------
Hugh A. Westbrook...................................................... $ 421,425 $ 42,701(2) $ 128,750(3)
Chairman of the Board and Chief Executive Officer
J.R. Williams, M.D..................................................... 315,000 -- 8,216(4)
Executive Vice President and Chief Patient Care Officer
Mark A. Sterling....................................................... 180,000 -- 2,439(5)
Senior Vice President-Strategic Development, Special Counsel for
Regulatory Affairs and Secretary
Esther T. Colliflower (1).............................................. 200,000 -- 75,000(6)
Vice Chairperson of the Board and Senior Vice President (former)
</TABLE>
- ------------------------
(1) Ms. Colliflower was no longer employed with the Company as of December 1996,
but continues to serve as the Vice Chairperson of the Board of Directors of
the Company, and provides consulting services pursuant to a consulting
agreement with the Company. See "--Compensation of Directors." Ms.
Colliflower is also receiving severance payments pursuant to a severance
arrangement with the Company. See "--Employment and Other Agreements."
(2) Includes (i) $30,300 attributable to portion of salary for personal
assistant and (ii) $11,701 attributable to amortization of purchase price of
car furnished for Mr. Westbrook's use.
(3) Consists of (i) $85,000 received in consideration of the non-compete
restrictions in Mr. Westbrook's employment agreement, (ii) $37,226
representing the approximate value to Mr. Westbrook with respect to the
payment of premiums by the Company in connection with a split-dollar
insurance arrangement, and (iii) $6,524 representing premiums paid on behalf
of Mr. Westbrook with respect to a supplemental disability insurance policy.
See "--Employment and Other Agreements."
(4) Consists of $8,216 representing premiums paid on behalf of Dr. Williams with
respect to a supplemental disability insurance policy.
(5) Includes (i) $872 representing the amount of the matching contribution made
by the Company to its contributory retirement plan (the "401(k) Plan") and
(ii) $1,567 representing premiums paid on behalf of Mr. Sterling with
respect to a supplemental disability insurance policy.
(6) Consists of an amount received in consideration of the non-compete
restrictions in Ms. Colliflower's employment agreement. See "--Employment
and Other Agreements."
David A. Wester joined the Company as Vice President, Chief Financial
Officer, Treasurer and Assistant Secretary in August 1997. Mr. Wester's initial
annual salary is $198,000.
OPTION GRANTS
During fiscal 1996, no options were granted to any of the named executive
officers of the Company. The Company granted stock options to Mr. Wester for
20,166 shares at an exercise price of $13.64 per share, upon commencement of his
employment.
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OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information concerning the fiscal
year-end value of unexercised stock options held by the named executive
officers. None of the named executive officers exercised any options during
fiscal 1996.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT SEPTEMBER 30, IN-THE-MONEY OPTIONS
1996 AT SEPTEMBER 30, 1996 (1)
-------------------------- ---------------------------
<S> <C> <C> <C> <C>
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------- ----------- ------------- ------------ -------------
Hugh A. Westbrook...................................... 843,325 -- $ 5,562,797 --
J.R. Williams, M.D..................................... 123,748 -- 1,644,267 --
Mark A. Sterling....................................... -- 25,666 -- $ 43,645
Esther T. Colliflower (2).............................. 128,332 -- 846,511 --
</TABLE>
- ------------------------
(1) There was no public market for the Common Stock at September 30, 1996. These
values have been calculated based on the difference between the exercise
price and a valuation of the Common Stock, prepared for the Vitas ESOP by an
"independent appraiser" as required by the Code, of $16.36 per share as of
September 30, 1996.
(2) Ms. Colliflower was no longer employed with the Company as of December 1996,
but continues to serve as the Vice Chairperson of the Board of Directors of
the Company, and provides consulting services pursuant to a consulting
agreement with the Company. See "--Compensation of Directors."
EMPLOYMENT AND OTHER AGREEMENTS
WESTBROOK EMPLOYMENT AGREEMENT. Mr. Westbrook is employed pursuant to an
Amended and Restated Employment Agreement, dated September 12, 1994, effective
as of May 3, 1994, pursuant to which Mr. Westbrook serves as the Chairman and
Chief Executive Officer of the Company. The terms of the agreement provide,
among other things, for an annual base salary of $600,000 (subject to increase
in the Board of Directors' sole discretion), bonuses as may be authorized,
declared and paid by the Board of Directors in its sole discretion, and
eligibility to participate in the various employee benefit plans that the
Company has adopted or may adopt for the benefit of its employees on the same
basis as other executive officers. In July 1995, Mr. Westbrook voluntarily
agreed to reduce his base salary under his employment agreement to $420,000. Mr.
Westbrook's current base salary is $420,000. The Company is also obligated to
furnish a car for use by Mr. Westbrook.
The employment agreement also obligates the Company to maintain a $5 million
split dollar life insurance policy insuring the lives of Mr. Westbrook and his
spouse, in accordance with the terms of a split dollar agreement (the "Split
Dollar Agreement") among the Company, Mr. Westbrook, and a trust of which Mr.
Westbrook is the grantor (the "Owner"). For so long as Mr. Westbrook is employed
under the employment agreement, the Company is required to make annual premium
payments into the policy equal to the excess of $65,000 over the premiums
required to be paid by the Owner under the Split Dollar Agreement. The Company
also is required to pay to Mr. Westbrook annual bonuses equal to the amount
necessary to net Mr. Westbrook, after applicable state and federal taxes, the
annual premiums required to be paid by the Owner each year under the Split
Dollar Agreement. The Split Dollar Agreement provides for the Company to be
reimbursed from any insurance proceeds or withdrawals disbursed from the policy
for all premiums paid by the Company.
Mr. Westbrook's employment agreement expires on June 4, 1998. Mr.
Westbrook's services terminate upon his death or "disability" (as defined in the
agreement), and may be terminated by the Company at any time with or without
"cause" (as defined in the agreement), provided that Mr. Westbrook may not be
terminated without "cause" except by the affirmative vote of two-thirds of the
members of the Company's
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entire Board of Directors. The employment agreement also provides that in the
event of Mr. Westbrook's death, "disability", termination of employment by the
Company without "cause" or in the event Mr. Westbrook terminates his employment
with "good reason" (generally defined as (i) a proposed reduction in his annual
base salary, (ii) a material reduction in his duties or authority, his failure
to be elected or re-elected as a director or as Chairman or Chief Executive
Officer of the Company or its successor, or his removal as a director, as
Chairman or as Chief Executive Officer of the Company or its successor, in each
case other than for "cause" or on account of his inability to substantially
perform his duties for a specified period, or (iii) any termination by Mr.
Westbrook in his sole discretion within two years after a "change in control" of
the Company (as defined in the agreement)), the Company shall continue to pay
Mr. Westbrook's then current base salary, commencing on the effective date of
his termination of employment, for the greater of (a) the remainder of the term
of the agreement or (b) six months (the "Continuation Payments").
During the period in which Mr. Westbrook is receiving any payments under the
employment agreement and for a period of one year thereafter, Mr. Westbrook is
prohibited from competing with the Company and, without the prior written
consent of the Company, soliciting, hiring or inducing the termination of
employment of persons providing services to the Company or any of its
subsidiaries. In consideration for such restrictive covenants, Mr. Westbrook
receives $85,000 per year for the period he is employed under the Agreement and
for any period during which he is entitled to receive the Continuation Payments.
In addition, Mr. Westbrook received a payment of $175,000 on July 1, 1994 and is
to receive a January 2, 1998 payment to be equal to the number of days from
January 1, 1998 to the end of the term of the Agreement multiplied by $233. The
employment agreement also prohibits Mr. Westbrook from disclosing any
confidential information of the Company or any of its subsidiaries at any time
during or subsequent to the term of the agreement.
Mr. Westbrook is currently negotiating a new employment agreement with the
Company.
COLLIFLOWER EMPLOYMENT AGREEMENT. During fiscal 1996, Ms. Colliflower was
employed pursuant to an employment agreement dated December 18, 1992, as
amended, pursuant to which Ms. Colliflower served as Senior Vice President of
the Company. The terms of the agreement provided for, among other things, an
annual base salary commencing on October 1, 1993 of $200,000 (subject to
increase in the Board of Directors' sole discretion), bonuses as may be
authorized, declared and paid by the Board of Directors in its sole discretion,
eligibility to participate in the various employment benefit plans that the
Company has adopted or may adopt for the benefit of its employees on the same
basis as other executive officers. The term of Ms. Colliflower's employment
pursuant to the employment agreement was to have run through June 4, 1998.
During the period that Ms. Colliflower receives any payments under the
employment agreement and for a period of one (1) year thereafter, Ms.
Colliflower is prohibited from competing with the Company and, without the prior
written consent of the Company, soliciting, hiring or inducing the termination
of employment of persons providing services to the Company or any of its
subsidiaries. In consideration for such restrictive covenants, Ms. Colliflower
is entitled to receive $50,000 per year for the period she is employed under the
agreement and for any period during which she is entitled to receive her base
salary under the employment agreement. The employment agreement also prohibits
Ms. Colliflower from disclosing any confidential information of the Company or
any of its subsidiaries at any time during or subsequent to the term of the
agreement.
In December 1996, by mutual agreement between the Company and Ms.
Colliflower, Ms. Colliflower terminated her employment with the Company.
Pursuant to an understanding between the parties, upon termination of employment
with the Company, Ms. Colliflower became entitled to severance payments through
June 4, 1998, payable bi-weekly, calculated based on an annual severance of
$200,000.
OTHER EMPLOYMENT AGREEMENTS. Dr. Williams is employed by the Company
pursuant to an agreement dated as of October 1, 1990, providing for an annual
base salary of $250,000 (currently $314,999). In
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<PAGE>
addition, Dr. Williams' employment agreement provides for, among other things, a
performance bonus plan (to be based on pre-determined qualitative and
quantitative factors), comprised of a series of one-time bonuses to be paid
during or at the end of a year or other measurement period, which may total 25%
of his annual base salary. The employment agreement also provides for health
insurance, life insurance and other customary benefits. Upon termination with
"cause" (as defined in the employment agreement), Dr. Williams is entitled to
receive the base salary to the date of termination and all earned benefits. Upon
termination without "cause," Dr. Williams is entitled to 12 months of severance
and all earned benefits. Dr. Williams' employment agreement also incorporates
certain covenants restricting him from engaging in certain competitive
activities during his employment and for a period of time following termination
of employment.
Mr. Sterling is employed by the Company pursuant to a letter agreement dated
June 17, 1993, as amended by a supplemental letter agreement dated June 29,
1993, pursuant to which his annual salary is currently $180,000, and
discretionary bonuses as determined by the Board of Directors, relocation
expenses, a $500 car allowance and normal benefits available to Vitas employees.
In addition, Mr. Sterling has received two stock option grants, each of which
consists of the right to purchase 12,833 shares of Common Stock. The letter
agreement also provides for 13 bi-weekly severance payments in the event of
termination other than for "cause."
SEVERANCE AGREEMENTS. The Company has entered into severance agreements
with certain officers, including Messrs. Westbrook, Williams and Sterling, in
each case dated as of January 28, 1997, and with Mr. Wester dated as of August
4, 1997. All of these severance agreements terminate on January 31, 2000. These
agreements entitle the employees to severance benefits if such employee is
terminated within two years after a "change in control" (as defined in the
agreement) whether or not such termination is for "good reason" (as defined in
the agreement) or by the Company other than for "cause" (as defined in the
agreement). The amount of severance payments is to be equal to two times the
employee's "current compensation" (as defined in the agreement), payable as
follows: (i) a lump sum payment within five business days of the date of his or
her termination equal to one times the employee's "current compensation" and
(ii) the remaining amount in substantially equal installments in accordance with
the Company's normal payroll practices; provided, that no severance payments are
to be made if the employee terminates employment because of permanent and total
disability or death. Severance payments pursuant to the severance agreements do
not affect an employee's entitlement to other benefits or payments. Continuing
employment with the Company or acceptance of a new position with the Company
after a "change in control" is not deemed a waiver of the employee's right to
terminate his or her employment, and receive severance payments, within two
years after a "change in control."
Employees are not obligated to seek further employment in order to mitigate
the amount of severance paid be the Company. However, in the event the employee
terminates employment other than for "good reason," the Company has the right to
offset against the unpaid portion of any severance payments the portion of the
employee's compensation from new employment received during the severance
payment period. The employee is obligated to immediately inform the Company of
any such new employment.
EMPLOYEE STOCK OWNERSHIP PLAN
Effective as of October 1, 1989, the Company adopted the ESOP, a
tax-qualified employee stock ownership plan and trust for the benefit of current
and former employees of the Company age 21 or over who satisfy certain annual
service requirements. Upon adoption of the ESOP, the Company contributed 73,333
shares of Company Common Stock and $260,000 in cash to the ESOP. In December
1991, the ESOP purchased an additional 293,330 shares of Company Common Stock
from Mr. Gaetz, who serves as a director of the Company and who immediately
prior to such purchase served as both a director and an officer of the Company.
The ESOP's purchase of such shares from Mr. Gaetz was financed by a 15-year term
loan from the Company in the amount of $2.9 million, which has been repaid with
the proceeds of the $2.9 million ESOP Loan. The ESOP Loan is being paid by
contributions by the Company. Such
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contributions totaled $396,000, $669,000, $655,000 and approximately $516,000 in
1994, 1995, 1996 and the nine months ended June 30, 1997, respectively. Mr.
Westbrook is the sole trustee of the ESOP, and in such capacity may vote shares
of Company Common Stock held by the ESOP, subject to his fiduciary duties as
trustee; provided, however, that participants may direct the vote of such shares
allocated to participant accounts in connection with certain corporate
transactions. As of September 30, 1996, 240,238 shares were allocated to
participant accounts. Participant account balances vest ratably over the first
four years of service rendered to the Company by participants. As of September
30, 1996, there were 2,590 participants in the ESOP. All executive officers and
most management employees who have received option grants under the Company's
Management Equity Incentive Plans do not participate in the ESOP.
MANAGEMENT EQUITY INCENTIVE PLANS
Effective as of June 29, 1992, the Board of Directors of the Company adopted
the Management Equity Incentive Plan (the "1992 MEIP"), which was approved by
the Company's stockholders on August 21, 1992. Effective as of January 25, 1994,
the Board of Directors of the Company adopted the 1994 Management Equity
Incentive Plan (the "1994 MEIP"), which was approved by the Company's
stockholders on February 28, 1994. The 1992 MEIP and the 1994 MEIP provide for
the granting of options to acquire Common Stock ("Options"), which may be either
incentive stock options (an "ISO") intended to satisfy the requirements of
Section 422 of the Code or non-qualified stock options (an "NSO"). Both the 1992
MEIP and the 1994 MEIP are administered by the Compensation Committee of the
Board of Directors, and all full-time employees, officers, non-employee
directors and independent contractors of the Company and its subsidiaries are
eligible to receive grants of Options thereunder. Neither the 1992 MEIP nor the
1994 MEIP has a termination date; however, ISOs may not be granted 10 years from
the effective date of each plan. The 1992 MEIP and the 1994 MEIP provide for the
grant of Options to purchase up to 470,062 shares and up to 366,663 shares,
respectively, of Common Stock. Under the 1994 MEIP, the maximum number of shares
subject to Options that can be granted to any person is 183,332 during the first
10 years after the effective date of the 1994 MEIP and 18,333 per year
thereafter. Under both the 1992 MEIP and the 1994 MEIP, the purchase price per
share of Common Stock subject to an Option is fixed by the Board of Directors
when the Option is granted. The terms of Options granted under both the 1992
MEIP and the 1994 MEIP, including the vesting provisions of such Options, are
established at the time of grant. Option holders who discontinue service to the
Company prior to the completion of vesting of their Options forfeit any unvested
Options. Options granted under both the 1992 MEIP and the 1994 MEIP cannot be
exercised until the happening of certain events. Option holders may exercise
Options to the extent vested on the happening of certain events, including the
closing of the Offering. The 1992 MEIP, the 1994 MEIP and the Options issued
thereunder terminate upon certain extraordinary corporate transactions, unless
provision is made in connection with such transaction for the continuation of
the plans and/or the assumption of, or substitution for, such Options. Options
granted under the 1992 MEIP and 1994 MEIP are generally conditioned upon option
holders executing an agreement providing for confidentiality and, except for
residents of California, for non-competition for a period of one year after
termination of employment. No Options have been granted to Messrs. Westbrook or
Williams under either the 1992 MEIP or the 1994 MEIP. Mr. Sterling has received
12,833 Options under each of the 1992 MEIP and the 1994 MEIP, with a per share
exercise price of $12.95 and $16.36, respectively. Mr. Wester has received
grants of 20,166 Options under the 1994 MEIP, with a per share exercise price of
$13.64.
FEDERAL INCOME TAX TREATMENT OF THE MANAGEMENT EQUITY INCENTIVE PLANS
An Option holder will not be deemed to have received taxable income upon the
grant or exercise of any ISO (except that the alternative minimum tax may
apply). Any gain realized upon a disposition of shares received pursuant to the
exercise of an ISO will be taxed as a long-term capital gain, so long as the
Option holder holds the shares for at least two years after the date of grant
and for at least one year after the date of exercise. Upon exercise of an NSO,
an Option holder will be deemed to receive ordinary
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income in an amount equal to the difference between the exercise price and the
fair market value of the underlying stock on the date of the exercise.
Generally, neither gain nor loss will be recognized by the Company upon the
grant or exercise of an ISO. Upon the exercise of a NSO, the Company will be
entitled to a deduction for the amount recognized as ordinary income by the
Option holder. If Common Stock acquired upon the exercise of an ISO is disposed
of prior to satisfaction of the holding periods described above, generally the
Option holder will be deemed to have realized as ordinary income, and the
Company will be allowed to deduct, the excess of the market value at the date of
exercise over the Option price unless the deduction is limited by Section 162(m)
of the Code, discussed below. If an Option holder pays for the exercise of an
Option by delivering shares of Common Stock, the exchange of shares generally
will be treated as a non-taxable transaction (provided, in the case of an ISO,
that the shares delivered in payment are not shares acquired upon exercise of an
ISO which have not satisfied the holding period requirements discussed above).
Under Section 162(m) of the Code, which was enacted in 1993, if the employer
of the Option holder is a publicly held corporation and the Option holder is one
of certain specified executive officers, then, unless certain exceptions apply,
the employer is not entitled to deduct compensation with respect to the Option
holder, including compensation related to the exercise of stock options, to the
extent such compensation in the aggregate exceeds $1,000,000 for the taxable
year. If Options granted pursuant to the 1992 MEIP and the 1994 MEIP are
exercised by any of certain senior executive officers in an amount such that,
given the then prevailing value of the Common Stock, the officer realizes total
compensation for the taxable year in excess of $1,000,000, Section 162(m) may
limit the total deduction allowable. Regulations under Section 162(m) contain an
exception for certain plans described in the offering material for initial
public offerings which exception is expected to apply to the 1992 MEIP and the
1994 MEIP.
NON-PLAN STOCK OPTION GRANTS
As of the date of this Prospectus, the Company has granted 1,128,405
nonqualified stock options outside of the 1992 MEIP and the 1994 MEIP to a total
of seven individuals, including grants of 843,325, 123,749 and 128,332 to Mr.
Westbrook, Dr. Williams and Ms. Colliflower, respectively. With the exception of
68,749 non plan options granted to Dr. Williams with an exercise price of $1.91
per share, the exercise price of all non-plan options that have been granted was
equal to the fair market value per share of Company Common Stock as of the date
of grant, ranging from $0.25 to $12.95 per share. All such non-plan option
grants were made prior to October 1993. In general, such non-plan options vest
ratably over a four-year period. Dr. Williams received a grant of a non-plan
option in 1990 for 36,666 at an exercise price of $1.91 per share, which were
fully vested on the date of grant. In general, the non-plan options expire 10
years after the date of grant and are nontransferable, except in the event of
death or disability. If an employee's employment with the Company or a
subsidiary terminates by reason of death or permanent and total disability, his
or her non-plan options, whether or not then exercisable, may be exercised
within one year after such death or disability (but not later than the date the
option would otherwise expire). If the employee's employment terminates for any
reason other than death or disability, options held by such optionee terminate
three months after the date of such termination, except Mr. Westbrook's option
for 843,325 shares granted December 17, 1991 expires three months after
termination of provisions of services to the Company. The non-plan options also
terminate upon certain extraordinary corporate transactions, unless provision is
made in connection with such transaction for the assumption of the options or
for the substitution for such options. In the event of such termination, all
outstanding non-plan options become exercisable in full during such period
immediately prior to the occurrence of such termination as the Board in its
discretion determines if the option holder was employed by the Company within
thirty (30) days of such termination regardless of whether they were exercisable
at the time of such termination.
The federal income tax treatment of non-plan options is the same as the
treatment of NSOs described above in "Management Equity Incentive Plans--Federal
Income Tax Treatment of the Management Equity Incentive Plans."
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401(K) PLAN
The Company has adopted the 401(k) Plan, a contributory retirement plan, for
its employees age 21 and over with at least one year of service to the Company.
The 401(k) Plan provides that each participant may contribute up to 10% of his
or her salary (not to exceed the annual statutory limit). The Company
makes a matching contribution to each participant's account equal to 20% of such
participant's contribution up to 3% of such participant's annual compensation.
Company matching contributions vest ratably over four years. Amounts, if any,
contributed to the 401(k) Plan by the Company on behalf of its named executive
officers are shown in the Summary Compensation Table.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of Vitas Common Stock as of September 15, 1997 by (i) each
person known to Vitas to be the beneficial owner of more than five percent of
the outstanding shares of Vitas Common Stock or Series B Preferred Stock, (ii)
by each executive officer and director of Vitas and (iii) all executive officers
and directors of Vitas as a group.
<TABLE>
<CAPTION>
BEFORE OFFERING (1) AFTER OFFERING (1)(2)
---------------------------------------------------------- --------------------------
SERIES B
COMMON STOCK (3) PREFERRED STOCK COMMON STOCK
-------------------------- ------------------------------ --------------------------
AMOUNT AND AMOUNT AND AMOUNT AND
NATURE OF NATURE OF NATURE OF
BENEFICIAL PERCENT BENEFICIAL PERCENT BENEFICIAL PERCENT
OWNERSHIP OUTSTANDING OWNERSHIP OUTSTANDING OWNERSHIP OUTSTANDING
----------- ------------- ------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Hugh A. Westbrook (4)(5)(6)(18)(20)..... 1,599,804 38.2% -- -- 1,599,804 19.9%
Carole S. Westbrook (4)(6).............. 1,234,000 30.1 -- -- 1,234,000 15.7
Westbrook Family Partnership, Ltd.
c/o Westbrook Family Corporation,
General Partner (6)................... 106,699 2.9 -- -- 106,699 1.4
Chemed Corporation (7).................. 1,478,080 28.7 -- -- 246,634 3.1
Galen Entities (8)...................... 863,588 23.5 100,000 38.1 863,588 11.0
Warburg, Pincus Investors, L.P. (9)..... 771,922 21.0 100,000 38.1 771,922 9.9
Vitas Healthcare Corporation Employee
Stock Ownership Trust (5)(6).......... 240,238 9.9 -- -- 240,238 4.7
Esther T. Colliflower (6)(10)(18)(20)... 236,537 6.2 -- -- 236,537 3.0
Colliflower Family Partnership, Ltd.
c/o The Colliflower Family
Corporation,
General Partner (6)................... 106,699 2.9 -- -- 106,699 1.4
Thomas E. Combs (11)(20)................ 20,247 * -- -- 20,247 *
Deirdre Lawe (12)(20)................... 20,937 * -- -- 20,937 *
Donald J. Gaetz (13)(18)................ 186,066 5.0 -- -- 186,066 2.4
J.R. Williams, MD (14)(18)(20).......... 134,421 3.5 -- -- 134,421 1.7
Mark A. Sterling (15)(20)............... 22,458 * -- -- 22,458 *
William P. Ferretti (18)................ 20,900 * -- -- 20,900 *
Timothy O'Toole (16)(18)................ 7,333 * -- -- 7,333 *
Patrick T. Hackett (17)(18)............. 771,922 21.0 100,000 38.1 771,922 9.9
Bruce F. Wesson(18)(19)................. 863,858 23.5 100,000 38.1 863,858 11.0
Deutsche Beteiligungsgesellschaft mbH &
Co. Fonds I KG (21)................... 173,682 4.7 22,500 8.6 173,682 2.2
All executive officers and directors as
a group (12 persons).................. 3,967,743 81.7 200,000 76.2 3,967,743 44.0
</TABLE>
- ------------------------------
* Less than one percent.
(1) Under Rule 13d-3 under the Securities Exchange Act of 1934, as amended, (the
"Exchange Act"), a person has beneficial ownership of any securities as to
which such person, directly or indirectly, through any contract,
arrangement, undertaking, relationship or otherwise has or shares voting
power and/or investment power and as to which such person has the right to
acquire such voting and/or investment power within 60 days. Beneficial
ownership as to any person as of a particular date is calculated by dividing
the number of shares beneficially owned by such person by the sum of the
number of shares outstanding as of such date and the number of shares as to
which such person has the right to acquire voting and/or investment power
within 60 days.
(2) Upon completion of the Offering, all of the shares of Series B Preferred
Stock will be automatically converted into an aggregate of 2,026,293 shares
of Common Stock. These columns reflect beneficial ownership after giving
effect to the conversion of all outstanding Series B Preferred Stock. Assume
no exercise of the Underwriters' over-allotment option. See "Underwriting."
(3) For purposes of determining beneficial ownership of Common Shares, includes
all shares of Series B Preferred Stock based on the current conversion ratio
with respect to each person.
(4) Includes 106,699 shares owned by the Westbrook Family Partnership, Ltd.,
whose general partner is the Westbrook Family Corporation (a corporation
owned by Hugh A. Westbrook and Carole S. Westbrook) which votes the shares
held by the
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partnership. For Mr. Westbrook, includes 843,325 shares issuable upon the
exercise of options that are or become exercisable within 60 days of
September 15, 1997, 240,238 shares held by the ESOP, as to which Mr.
Westbrook is the sole Trustee (but see footnote 5) and 39,579 shares
beneficially owned by Carole S. Westbrook. For Ms. Westbrook, includes
1,319,987 shares beneficially owned by Hugh A. Westbrook. Mr. Westbrook
disclaims beneficial ownership of shares held by his wife, Carole S.
Westbrook, and Carole S. Westbrook disclaims beneficial ownership of shares
held by her husband, Hugh A. Westbrook.
(5) Mr. Westbrook is the sole Trustee of the ESOP and as such votes the shares
held by the ESOP, except in connection with certain corporate transactions,
including a merger, in which case the ESOP participants direct the voting of
240,238 shares allocated as of September 30, 1996 and the unallocated shares
are voted by the Trustee.
(6) The business mailing address of the named person or entity is c/o Vitas
Healthcare Corporation, 100 South Biscayne Boulevard, Suite 1500, Miami,
Florida 33131.
(7) As of September 15, 1997, Chemed held warrants to purchase 1,478,080 shares
of Common Stock. Chemed also owns 270,000 shares of 9% Preferred Stock. The
mailing address of Chemed is 2600 Chemed Center, 255 East Fifth Street,
Cincinnati, Ohio 45202.
(8) As of September 15, 1997, includes shares owned by the following Galen
entities (collectively, the "Galen Entities") which are affiliates through
common ownership and/or control: (i) Galen Partners II, L.P. which held
72,114 shares of Series B Preferred Stock which are convertible into 556,664
shares of Vitas Common Stock and 66,013 shares of Vitas Common Stock, or a
total of 622,677 equivalent shares of Vitas Common Stock; (ii) Galen
Partners International II, L.P. which held 27,591 shares of Series B
Preferred Stock which are convertible into 212,981 shares of Vitas Common
Stock and 25,257 shares of Vitas Common Stock, or a total of 238,508
equivalent shares of Vitas Common Stock; and (iii) Galen Employee Fund, L.P.
which held 295 shares of Series B Preferred Stock which are convertible into
2,277 shares of Vitas Common Stock and 396 shares of Vitas Common Stock, or
a total of 2,673 equivalent shares of Vitas Common Stock. The mailing
address of the Galen Entities is 610 Rockefeller Center, New York, New York
10020.
(9) The sole general partner of Warburg, Pincus Investors, L.P. ("Investors") is
Warburg Pincus & Co., a New York general partnership ("WP"). Lionel I.
Pincus is the Managing Partner and may be deemed to control it. E.M. Warburg
manages Investors. WP has a 20% interest in the profit of Investors. Patrick
T. Hackett, a director of Vitas, is a general partner of WP and a Managing
Director and member of E.M. Warburg. As such, Mr. Hackett may be deemed to
have an indirect pecuniary interest (within the meaning of Rule 16a-1 of the
Exchange Act) in an indeterminate portion of the shares beneficially owned
by Investors and WP. Mr. Hackett disclaims beneficial ownership of shares
beneficially owned by Investors and WP within Rule 13d-3 under the Exchange
Act. The mailing address of Investors is 466 Lexington Avenue, New York, New
York 10017.
(10) Includes 106,699 shares owned by the Colliflower Family Partnership, Ltd.
whose general partner is The Colliflower Family Corporation (a corporation
owned by Esther T. Colliflower and her husband Owen Colliflower) which votes
the shares held by the partnership. Includes 128,332 shares issuable upon
the exercise of options that are or become exercisable within 60 days of
September 15, 1997. Includes 1,506 shares held by the ESOP allocated to Ms.
Colliflower's ESOP account.
(11) Consists of 20,166 shares issuable upon the exercise of options that are or
become exercisable within 60 days of September 15, 1997 and 81 shares held
by the ESOP allocated to Mr. Combs' ESOP account.
(12) Consists of 20,166 shares issuable upon the exercise of options that are or
become exercisable within 60 days of September 15, 1997 and 771 shares held
by the ESOP allocated to Ms. Lawe's ESOP account.
(13) Pursuant to a call agreement between Mr. Gaetz, Ms. Colliflower and Mr.
Westbrook, Mr. Gaetz has the right to purchase up to 18,333 shares of Vitas
Common Stock from each of Ms. Colliflower and Mr. Westbrook at $9.76 per
share, which call right becomes exercisable in increments, subject to
certain terms and conditions, through December 17, 1998. Under such Call
Agreement, as of September 15, 1997 Mr. Gaetz has the right to purchase
18,333 shares of Vitas Common Stock from each of Mr. Westbrook and Ms.
Colliflower. Includes such 36,666 shares and 1,506 shares of Vitas Common
Stock held by the ESOP allocated to Mr. Gaetz' ESOP account.
(14) Includes 123,748 shares issuable upon the exercise of options that are or
become exercisable within 60 days of September 15, 1997 and 1,506 shares
held by the ESOP allocated to Dr. Williams' ESOP account.
(15) Consists of 22,458 shares issuable upon exercise of options that are or
become exercisable within 60 days of September 15, 1997.
(16) Consists of 7,333 shares issuable upon exercise of options that are or
become exercisable within 60 days of September 15, 1997. Mr. O'Toole
disclaims beneficial ownership of the shares held by Chemed.
(17) Mr. Hackett disclaims beneficial ownership of the shares beneficially owned
by Investors and WP within Rule 13d-3 under the Exchange Act. Mr. Hackett's
mailing address is c/o Warburg, Pincus Investors, L.P., 466 Lexington
Avenue, New York, New York 10017.
(18) Messrs. Westbrook, Gaetz, Williams, Ferretti, O'Toole, Hackett, Wesson and
Ms. Colliflower are all directors of Vitas.
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<PAGE>
(19) Bruce F. Wesson, a director of Vitas, is a General Partner of the General
Partner of Galen Partners II, L.P. and Galen Partners International II, L.P.
and a General Partner of Galen Employee Fund, L.P. Except to the extent of
his partnership interest, Mr. Wesson disclaims beneficial ownership of the
shares held by the Galen Entities.
(20) Mr. Westbrook serves as the Chairman and Chief Executive Officer. Ms.
Colliflower serves as a Vice Chairperson. Dr. Williams serves as Executive
Vice President and Chief Patient Care Officer. Mr. Sterling serves as Senior
Vice President-Strategic Development, Special Counsel for Regulatory Affairs
and Secretary. Mr. Combs serves as Senior Vice President-Hospice Operations.
Ms. Lawe serves as Senior Vice President-Marketing and Admissions.
(21) The mailing address for Deutsche Beteiligungsgesellschaft mbH & Co. Fonds I
KG is E mil-von-Behring-Strasse 2, D-60439 Frankfurt am Main, Frankfurt,
Germany.
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CERTAIN TRANSACTIONS
INVESTOR AGREEMENT
In December 1991, the Company completed a private placement of 270,000
shares of its 9% Preferred Stock for an aggregate purchase price of $27.0
million to Chemed to provide working capital to the Company and funds to expand
the Company's business. In connection with this transaction, the Company also
issued to Chemed two warrants to purchase Common Stock of the Company and
entered into an Investor Agreement (the "Investor Agreement"), dated December
17, 1991, with Chemed. Pursuant to the terms of the Investor Agreement, as long
as Chemed beneficially owns at least 10% of the outstanding shares of Company
Common Stock, the Company is obligated to nominate one person designated by
Chemed for election as a director of the Company. Timothy S. O'Toole, an officer
and director of Chemed Corporation, was nominated to serve as a director of the
Company in accordance with this provision. In addition, in the event the
Company's Board of Directors is comprised of more than 10 directors, persons
designated by Chemed must constitute no less than one-ninth ( 1/9) of the entire
Board of Directors of the Company (rounded up to the nearest whole number). The
Company anticipates that Chemed will beneficially own approximately 3.1% of the
outstanding shares of Company Common Stock immediately following the Offering.
See "Principal Stockholders."
Under the terms of the Investor Agreement, Chemed also has agreed that it
will not, directly or indirectly offer to acquire or acquire any Common Stock
(other than pursuant to the exercise of two warrants), except with the prior
written approval of the Company's Board of Directors. However, the Investor
Agreement also provides that in the event Chemed ceases to own beneficially at
least 20% of the Common Stock at any time during the term of such Agreement as a
result of any action taken by the Company, Chemed will be entitled to acquire
additional Common Stock without the Company's prior approval in the open market
or in private transactions so as to maintain its beneficial ownership level at
up to 20% provided that Chemed shall not exceed such 20% interest without the
Company's prior written approval.
The Investor Agreement further provides that except in tender offers or
exchange offers that the Board of Directors of the Company does not oppose,
Chemed will not knowingly offer, sell or transfer any shares of Common Stock
beneficially owned to any person or company who would then beneficially own,
control or hold proxies or options for 5% or more of the outstanding Common
Stock except with the prior written approval of the Company, unless the Company
or its designee is first given an opportunity to acquire such shares on certain
terms and conditions, provided that in sales other than in the open market
Chemed is required to obtain appropriate representations from each purchaser as
to compliance with such 5% limitation. The Investor Agreement also imposes
certain restrictions on sales by Chemed of Common Stock pursuant to tender
offers or exchange offers that the Board of Directors of the Company opposes.
Under the Investor Agreement, Chemed also has agreed that so long as it
beneficially owns at least 5% of the outstanding Common Stock and no change in
control (as defined therein) of the Company has occurred, Chemed will not,
without the prior written approval of the Company's Board, among other things
(i) propose to acquire or solicit any person or company to acquire the Company
or a substantial portion of its assets or more than 10% of its Common Stock,
(ii) propose directors in opposition to the nominees proposed by the management
or Board of the Company, or (iii) exercise, directly or indirectly, control over
the management, policies or business operations of the Company, except solely in
connection with the performance of duties by Chemed's designee on the Board of
the Company. The Investor Agreement terminates upon mutual agreement of the
parties or when Chemed ceases to beneficially own more than 10% of the
outstanding Common Stock for a period of six months.
TRANSACTIONS WITH MANAGEMENT
Pursuant to a registration rights agreement dated as of June 4, 1993 among
the Company, certain stockholders of the Company, Chemed and the purchasers of
the Series B Preferred Stock, the Company, among other things, granted certain
incidental registration rights to Messrs. Westbrook, Gaetz, and Dr. Williams and
Ms. Colliflower, subject to certain terms and conditions. See "Description of
Capital Stock--Registration Rights."
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DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, par value $0.01 per share (the "Common Stock") and 10,270,000
shares of Preferred Stock, par value $1.00 per share (the "Preferred Stock"). At
September 15, 1997 there were outstanding 1,652,806 shares of Common Stock held
by 52 holders of record (as adjusted to reflect the redemption of the 9%
Preferred Stock and the repurchase of one of the warrants to purchase Common
Stock held by Chemed, and the conversion of all Series B Preferred Stock, the
issuance of 246,634 shares of Common Stock upon exercise of a second warrant
held by Chemed upon the closing of this Offering). After the sale of the shares
of Common Stock in this Offering, assuming no exercise of the Underwriters'
over-allotment option, 7,832,769 shares of Common Stock (not including shares
issued pursuant to outstanding stock options and the First Bank Warrant) and no
shares of Preferred Stock will be outstanding. All of the currently outstanding
shares of Common Stock are, and all shares of Common Stock to be outstanding
after this Offering, will be, validly issued, fully paid and nonassessable under
the Delaware General Corporation Law.
The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and qualified
in its entirety by, the provisions of the Company's Charter which, as amended,
will be filed with the Delaware Secretary of State and become effective
simultaneously with the closing of this Offering, and by the provisions of
applicable law. A copy of the Charter, as it is proposed to be amended, is
included as an exhibit to the Registration Statement on Form S-1 (the
"Registration Statement") of which this Prospectus is a part.
COMMON STOCK
Except as provided in the Charter or in any resolutions adopted by the Board
of Directors, the holders of Common Stock possess exclusively all voting power.
Each holder of Common Stock is entitled to one vote for each share held by such
holder. The Charter does not provide for cumulative voting, and accordingly, the
holders of a majority of the shares of Common Stock entitled to vote in any
election of directors may elect all of the directors standing for election. The
Charter provides that whenever there is paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the Common Stock as to the payment of dividends, the full amount
of dividends and of sinking fund or retirement fund or other retirement
payments, if any, to which such holders are entitled respectively in preference
to the Common Stock, then dividends may be paid on the Common Stock and on any
class or series of stock entitled to participate therewith as to dividends, out
of any assets legally available for the payment of dividends; but only when and
as declared by the Board of Directors of the Company. The Charter also provides
that in the event of any liquidation, dissolution or winding up of the Company,
after there is paid to or set aside for the holders of any class of stock having
preference over the Common Stock in the event of liquidation, dissolution or
winding up the full amount to which such holders are entitled respectively in
preference to the Common Stock, then the holders of the Common Stock, and of any
class or series of stock entitled to participate therewith, in whole or in part,
as to the distribution of assets, shall be entitled, after payment or provision
for payment of all debts and liabilities of the Company, to receive the
remaining assets of the Company available for distribution, in cash or in kind.
The payment of dividends to the holders of Common Stock or any other class or
series of stock may also become subject to certain contractual restrictions in
any credit facility entered into between the Company and a lender. The holders
of Common Stock have no preemptive, subscription, redemption or conversion
rights. The rights, preferences and privileges of holders of Common Stock will
be subject to the rights of the holders of any shares of any series of Preferred
Stock that the Company may issue in the future.
PREFERRED STOCK
In December 1991, the Company issued 270,000 shares of 9% Preferred Stock,
stated value $100 per share to Chemed, and received gross proceeds from such
issuance of $27.0 million. Related to this placement of 9% Preferred Stock,
Chemed received two warrants to purchase Common Stock. These warrants provide
that they may be exercised in whole or in part either through payment by the
holder of
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cash or through the surrender of the 9% Preferred Stock. Chemed has agreed that,
on the closing of this Offering, it will exercise a portion of one of the
warrants to purchase 246,634 shares of Common Stock, with the remaining portion
of such warrant expiring by its terms. The Company expects to use a portion of
the net proceeds to the Company from the Offering to repurchase the other
warrant. See "Use of Proceeds." The Company will also redeem all of the
outstanding 9% Preferred Stock through use of $30.0 million of the net proceeds
of this Offering. No shares of 9% Preferred Stock will be outstanding after this
Offering.
In June 1993, the Company issued 262,500 shares of Series B Preferred Stock,
stated value $100 per share, to certain investors and received gross proceeds
from such issuance of $26.25 million. Pursuant to the terms of the Certificate
of Designation, Preferences and Other Rights of the Series B Convertible
Preferred Stock of Vitas Healthcare Corporation, each share of Series B
Preferred Stock will be converted into 7.72 shares of Common Stock upon the
completion of this Offering. No shares of Series B Preferred Stock will be
outstanding after this Offering.
The Charter provides that the Board of Directors of the Company is
authorized by resolution or resolutions from time to time adopted and by filing
a certificate pursuant to the Delaware General Corporation Law to provide for
the issuance of Preferred Stock in series and to fix and state the voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative participating, optional or other special rights of the shares of
each such series and the qualifications, limitations and restrictions thereof.
Such action may be taken by the Board without further stockholder approval.
Under the Charter, each share of each series of Preferred Stock is to have the
same relative rights as, and be identical in all respects with, all other shares
of the same series. A purpose of authorizing the Board of Directors to fix such
powers, designations, preferences and other rights is to eliminate delays
associated with a stockholder vote on specific issuances. While providing
flexibility in connection with possible financings, acquisitions and other
corporate purposes, the issuance of Preferred Stock, among other things, could
adversely affect the voting power of the holders of Common Stock and, under
certain circumstances, be used as a means of discouraging, delaying or
preventing a change in control of the Company. There will be no shares of
Preferred Stock outstanding after this offering and the Company has no present
plan to issue shares of its Preferred Stock.
COMMON STOCK PURCHASE WARRANT
The Company has outstanding the First Bank Warrant, a common stock purchase
warrant for up to 178,393 shares of Common Stock, which was originally issued to
the Bank on July 18, 1997. The First Bank Warrant is exercisable for shares of
Common Stock at a exercise price of $0.03 per share, subject to various
anti-dilution adjustments. The First Bank Warrant expires on March 24, 2007. The
First Bank Warrant is currently exercisable for 107,036 shares of Common Stock,
subject to automatic increases to (i) 142,715 shares effective as of November
30, 1997 in the event the Company has not paid in full its obligations as set
forth in the Credit Agreement on or prior to November 29, 1997 and (ii) 178,393
shares effective as of January 31, 1998 in the event the Company has not paid in
full its obligations on or prior to January 30, 1998.
Under the First Bank Warrant, if the Company is a party to a merger,
consolidation or sale of all or substantially all of its assets in which holders
of Common Stock of the Company are entitled to receive cash, stock, securities
or assets in exchange for Common Stock, then the right to exercise the First
Bank Warrant terminates at the close of business on the date as of which such
holders are entitled to such exchange. The First Bank Warrant may be exercised
upon delivery of a notice on or prior to the expiration date at a designated
office of the Company, accompanied by cash in the amount of the aggregate
purchase price or in lieu thereof, by exercise of a conversion right as
described therein. The Company is not required to issue fractional shares of
Common Stock and in lieu thereof will make an adjustment in cash based on the
fair market value of the fractional share. The First Bank Warrant does not
entitle the holder to any rights as a stockholder of the Company.
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Under the First Bank Warrant, until the Company consummates a "Qualified
Initial Public Offering" (as defined in the Warrant Agreement executed in
connection therewith), the Company and/or its designees have, subject to certain
terms and conditions, a right of first refusal on the purchase of any warrants
or warrant shares prior to the assignment, transfer or sale of any such warrants
or warrant shares by the Bank (other than to a sale to an Affiliate, as defined
in the Warrant Agreement). A "Qualified Initial Public Offering" is defined as a
public offering of the Company's Common Stock resulting in gross proceeds to the
Company of not less than $12 million and at a total market capitalization of the
common equity of the Company at that time of not less than $60 million. This
right of first refusal will terminate upon consummation of the Offering.
The First Bank Warrant provides that the Bank (and its permitted assignees)
is entitled to exercise the rights of registration granted to, and shall be
subject to the obligations of, "Other Stockholders" under the Registration
Rights Agreement. See "--Registration Rights."
In connection with a recent amendment to the Credit Agreement, the Company
issued a second common stock purchase warrant to the Bank for up to 107,036
shares of Common Stock at an exercise price of $0.03 per share (the "Second Bank
Warrant"). The Second Bank Warrant is currently not exercisable for any shares
of Common Stock. In the event the Company has not paid in full its obligations
as set forth in the Credit Agreement on or prior to April 29, 1998, the Second
Bank Warrant shall become exercisable for 35,679 shares of Common Stock, subject
to two subsequent automatic increases of 35,679 shares each in the event the
Company has not paid in full its obligations on or prior to July 30, 1998 and
September 29, 1998, respectively. The terms of the Second Bank Warrant are
substantially identical to First Bank Warrant, except the expiration date of the
Second Bank Warrant is September 1, 2007. Because the Company intends to repay
amounts outstanding under the existing credit facility using a portion of the
net proceeds from this Offering, together with funds from a new credit facility,
the Company expects that the Second Bank Warrant will terminate prior to any
portion of such warrant becoming exercisable.
INVESTOR AGREEMENT
In connection with the Company's issuance and sale of shares of its 9%
Preferred Stock and the issuance of two warrants, the Company entered into the
Investor Agreement. See "Certain Transactions-- Investor Agreement."
STOCKHOLDERS' AGREEMENT
In connection with the Company's issuance and sale of shares of its Series B
Preferred Stock, the Company entered into a Stockholders' Agreement dated June
4, 1993, as amended, with Hugh A. Westbrook, Carole S. Westbrook and the
purchasers of the Series B Preferred Stock (the "Stockholders' Agreement").
Pursuant to the terms of the Stockholders' Agreement, so long as certain
principal purchasers of the Series B Preferred Stock (the "Principal
Purchasers") each has voting power equal to at least 5% of the total votes
entitled to be cast at meetings of the Company's stockholders when all classes
are voting together and not as individual classes, the holders of the majority
of the outstanding shares of Series B Preferred Stock will be entitled to elect
two persons designated by such principal purchasers as directors of the Company.
Bruce F. Wesson and Patrick T. Hackett are serving as directors of the Company
in accordance with this provision. All of the Series B Preferred Stock will be
converted into 2,026,293 shares of Common Stock upon completion of the Offering.
The Stockholders' Agreement will terminate upon the closing of the Offering.
REGISTRATION RIGHTS
The Company, along with certain holders of Common Stock, Chemed, the Bank
and the purchasers of the Series B Preferred Stock (collectively, the "holders")
are parties to a Registration Rights Agreement, dated June 4, 1993, as amended,
(the "Registration Rights Agreement"), pursuant to which the holders are
entitled to certain registration rights as summarized below. The following
summary of certain provisions of the Registration Rights Agreement does not
purport to be complete and is subject to, and qualified in its
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entirety by, the Registration Rights Agreement. A copy of the Registration
Rights Agreement is attached as an exhibit to the Registration Statement.
REGISTRATION ON REQUEST. Following this Offering, certain holders are each
entitled to a one-time request that the Company register all or part of the
Common Stock held by such holder. In each case, the Company is required to use
its best efforts to file the registration statement at the earliest possible
date, including such number of shares of registrable stock as a holder may (and
is entitled to) request, subject to certain terms and conditions.
INCIDENTAL REGISTRATION. The Registration Rights Agreement further provides
that, subject to certain limitations, if the Company proposes to register any of
its securities under the Securities Act on a form other than Form S-4 or S-8 and
in a manner that would permit registration of shares of Common Stock for sale to
the public under the Securities Act, it is required to include in such
registration such number of shares of registrable stock as a holder may (and is
entitled to) request, subject to certain terms and conditions. Such rights have
been waived in connection with this Offering in accordance with the terms of the
Registration Rights Agreement.
FORM S-3 REGISTRATION. Under the Registration Rights Agreement, certain
holders may request that the Company effect a registration on Form S-3 (or
successor form) and any related qualification or compliance with respect to all
or a part of the applicable Common Stock owned by such holder or holders,
subject to certain terms and conditions.
LIMITATION OF LIABILITY AND INDEMNIFICATION
LIMITATION OF DIRECTOR LIABILITY. Section 102(b)(7) of the Delaware General
Corporation Law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of directors' duty of care. Although Section 102(b)(7) does
not change directors' duty of care, it enables corporations to limit available
relief to equitable remedies such as injunction or rescission. The Certificate
limits the liability of directors to the Company or its stockholders to the full
extent permitted by Section 102(b)(7). Specifically, directors of the Company
are not personally liable for monetary damages to the Company or its
stockholders for breach of the director's 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
that involve intentional misconduct or a knowing violation of law; (iii) for
unlawful payments of dividends or unlawful stock repurchases or redemptions as
provided in Section 174 of the Delaware General Corporation Law; or (iv) for any
transaction from which the director derived an improper personal benefit.
INDEMNIFICATION. To the maximum extent permitted by law and subject to
certain terms and conditions, the By-laws provide for mandatory indemnification
of directors and officers of the Company against any expense, liability and loss
to which they may become subject, or which they may incur as a result of being
or having been a director or officer of the Company. In addition, the Company
must advance or reimburse directors and officers for expenses incurred by them
in connection with indemnifiable claims.
The Company has also entered into separate indemnification agreements with
its directors and various officers. Each indemnification agreement provides for,
among other things: (i) indemnification against any and all expenses,
liabilities and losses (including attorneys' fees, judgments, fines, taxes,
penalties and amounts paid in settlement) of any claim against an indemnified
party unless it is determined, as provided in the indemnification agreement,
that indemnification is not permitted under applicable law and (ii) prompt
advancement of expenses to any indemnified party in connection with his or her
defense against any claim.
The Company also maintains directors' and officers' liability insurance.
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CERTAIN ANTI-TAKEOVER PROVISIONS
Upon completion of the Offering, the Company's Charter and the By-laws will
contain, among other things, certain provisions described below that may reduce
the likelihood of a change in the Company's Board of Directors or voting control
of the Company without the consent of the Company's Board of Directors. These
provisions could have the effect of discouraging, delaying, or preventing tender
offers or takeover attempts that some or a majority of the Company's
stockholders might consider to be in the stockholders' best interest, including
offers or attempts that might result in a premium over the market price for the
Common Stock.
CLASSIFIED BOARD. The number of directors of the Company shall be such
number as fixed from time to time by or in the manner provided in the By-laws of
the Company. Directors are divided into three classes, each consisting of
approximately one-third of the total number of directors. The term of office of
each class is three years and expires in successive years at the time of the
annual meeting of stockholders.
FILLING OF BOARD VACANCIES; REMOVAL. Any vacancy occurring in the Board of
Directors, including any vacancy created by an increase in the number of
directors, shall be filled for the unexpired term by the vote of a majority of
the directors then in office, whether or not a quorum, or by a sole remaining
director, and any director so chosen shall hold office for the remainder of the
full term of the class in which the new directorship was created or the vacancy
occurred and until such director's successor shall have been elected and
qualified. No director may be removed except for cause and then only by the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of stock of the Company entitled to vote thereon at a duly constituted meeting
of stockholders called for such purpose. At least 30 days prior to such meeting
of stockholders, written notice shall be sent to the director or directors whose
removal shall be considered at such meeting.
STOCKHOLDER APPROVAL OF MERGERS. Any merger or consolidation to which the
Company is a constituent party for purposes of the Delaware General Corporation
Law (except for a merger of the Company with or into any corporation or
corporations in which at least 90 percent of the outstanding shares of each
class of stock is owned by the Company, which merger shall be governed by the
provisions of Section 253 of the Delaware General Corporation Law or any
successor provision thereto) shall, as a condition to its effectiveness, be
approved by the affirmative vote of the holders of at least two-thirds of the
outstanding shares of stock of the Company entitled to vote thereon.
OTHER CONSTITUENCIES. The Board of Directors of the Company, when
evaluating any offer, bid, proposal, or similar communication of another party
to (a) make a tender or exchange offer for any equity security of the Company,
(b) merge or consolidate the Company with or into another corporation or
corporations, or (c) purchase or otherwise acquire all or substantially all of
the properties and assets of the Company, shall, in connection with the exercise
of its judgment in determining what is in the best interests of the Company and
its stockholders, give due consideration to all relevant factors, including,
without limitation, the social, economic and regulatory effects on the Company,
on employees, providers and payors of the Company and its subsidiaries, on
patients and families served by the Company and its subsidiaries, on operations
of the Company's subsidiaries and on the communities in which the Company and
its subsidiaries operate or are located.
STOCKHOLDER ACTION BY UNANIMOUS CONSENT. Any action required or permitted
to be taken by the stockholders of the Company must be effected at a duly called
annual or special meeting of such holders and may not be effected by any consent
in writing by such stockholders, unless such consent is unanimous.
AMENDMENT OF BY-LAWS. The Board of Directors or the stockholders may from
time to time adopt, amend or repeal the By-laws of the Company. Such action by
the Board of Directors shall require the affirmative vote of at least two-thirds
of the directors then in office at a duly constituted meeting of the Board of
Directors called for such purpose. Such action by the stockholders shall require
the affirmative vote of the holders of at least two-thirds of the outstanding
shares of stock of the Company entitled to vote thereon at a duly constituted
meeting of stockholders called for such purpose.
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CALL OF SPECIAL MEETINGS. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the Board of Directors, the Chairman of the Board or the Chief Executive Officer
of the Company, and shall be called by the Chairman of the Board, Chief
Executive Officer or the Secretary of the Company at the request in writing of
stockholders possessing at least 25 percent of the voting power of the issued
and outstanding voting stock of the Company entitled to vote generally for the
election of directors. Such request shall include a statement of the purpose or
purposes of the proposed meeting.
CHARTER AMENDMENTS. Except as set forth in the Charter or as otherwise
specifically required by law, no amendment of any provision of the Charter shall
be made unless such amendment has been first proposed by the Board of Directors
for the Company upon the affirmative vote of at least two-thirds of the
directors then in office at a duly constituted meeting of the Board of Directors
called for such purpose and thereafter approved by stockholders of the Company
by the affirmative vote of the holders of at least a majority of the outstanding
shares of stock of the Company entitled to vote thereon; provided, however, if
such amendment is to the provisions described above, such amendment must be
approved by the affirmative vote of the holders of at least two-thirds of the
outstanding shares of stock of the Company entitled to vote thereon rather than
a majority of such shares.
STOCKHOLDER NOMINATIONS AND PROPOSALS. With certain exceptions, the
Company's By-laws require that stockholders intending to present nominations for
directors or other business for consideration at a meeting of stockholders
notify the Company's Secretary by the later of 60 days before the date of the
meeting and 15 days after the date notice of the meeting is mailed or public
notice of the meeting is given.
CERTAIN STATUTORY PROVISIONS. Section 203 of the Delaware General
Corporation Law provides, in general, that a stockholder acquiring more than 15%
of the outstanding voting shares of a corporation subject to the statute (an
"Interested Stockholder") but less than 85% of such shares may not engage in
certain "Business Combinations" with the corporation for a period of three years
subsequent to the date on which the stockholder became an Interested Stockholder
unless (i) prior to such date the corporation's Board of Directors approved
either the Business Combination or the transaction in which the stockholder
became an Interested Stockholder or (ii) the Business Combination is approved by
the Corporation's Board of Directors and authorized by a vote of at least
two-thirds of the outstanding voting stock of the corporation not owned by the
Interested Stockholder.
Section 203 defines the term "Business Combination" to encompass a wide
variety of transactions with or caused by an Interested Stockholder in which the
Interested Stockholder receives or could receive a benefit on other than a pro
rata basis with other stockholders, including mergers, certain asset sales,
certain issuances of additional shares to the Interested Stockholder,
transactions with the corporation which increase the proportionate interest of
the Interested Stockholder or a transaction in which the Interested Stockholder
receives certain other benefits.
STOCKHOLDER RIGHTS AGREEMENT
The Board of Directors intends to adopt a Stockholder Rights Agreement
("Rights Agreement") and declare a dividend of one preferred share purchase
right (a "Right") for each outstanding share of Common Stock. All shares of
Common Stock issued by the Company between the date of adoption of the Rights
Agreement and the Distribution Date (as defined below), or the date, if any, on
which the Rights are redeemed will have Rights attached to them. The Rights will
expire ten years after adoption of the Rights Agreement, unless earlier redeemed
or exchanged. Each Right, when exercisable, entitles the holder to purchase one
one-thousandth of a share of Series A Junior Participating Preferred Stock at a
price of $ (the "Purchase Price"). Until a Right is exercised, the
holder thereof, as such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends.
The Rights Agreement will provide that the Rights initially attach to all
certificates representing shares of Common Stock then outstanding. The Rights
will separate from the Common Stock and a
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distribution of Rights certificates will occur (a "Distribution Date") upon the
earlier to occur of (i) 10 days following a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, beneficial ownership of or more of the
outstanding shares of Common Stock (the "Stock Acquisition Date") or (ii) 10
business days (or such later date as the Board of Directors may determine)
following the commencement of a tender offer or exchange offer, the consummation
of which would result in the beneficial ownership by a person of or more of
the outstanding shares of Common Stock.
If a Person becomes the beneficial owner of or more of the then
outstanding shares of Common Stock (except pursuant to an offer for all
outstanding shares of Common Stock which the Outside Directors determine to be
fair to and otherwise in the best interests of the Company and its
stockholders), each holder of a Right will, after the end of a redemption
period, have the right to exercise the Right by purchasing Common Stock (or, in
certain circumstances, cash, property or other securities of the Company) having
a value equal to two times such amount.
If at any time following the Stock Acquisition Date, (i) the Company is
acquired in a merger or other business combination transaction in which it is
not the surviving corporation (other than a merger which follows an offer
described in the preceding paragraph), or (ii) 50% or more of the Company's
assets or earning power is sold or transferred, each holder of a Right shall
have the right to receive, upon exercise, common stock of the acquiring company
having a value equal to two times the purchase price of the Right.
In general, the Board of Directors of the Company may redeem the Rights at a
price of $ per Right at any time until ten days after an Acquiring
Person has been identified as such. Under certain circumstances, the decision to
redeem the Rights will require the concurrence of a majority of the Continuing
Directors, defined as any member of the Board of Directors who was a member of
the Board of Directors prior to the date of the Rights Agreement, and any person
who is subsequently elected to the Board if such person is recommended or
approved by a majority of the Continuing Directors. The term "Outside Directors"
means "Continuing Directors" who are not officers of the Company.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company.
The Rights, however, will not interfere with any merger or other business
combination approved by the Board of Directors since the Board may, at its
option, at any time prior to any person becoming an Acquiring Person, redeem all
rights or amend the Rights Agreement to exempt the person from the Rights
Agreement.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is .
LISTING
The Company has applied to have its Common Stock listed on the Nasdaq
National Market under the trading symbol "VTAS".
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DESCRIPTION OF INDEBTEDNESS
CREDIT AGREEMENT
On February 17, 1995, the Company entered into the Credit Agreement with the
Bank. The Credit Agreement has been amended, from time to time, and currently
provides for a revolving credit facility, subject to a borrowing base and other
conditions, of up to $18 million (with a $2.5 million sublimit for letters of
credit), and a term loan, in the current principal amount of approximately $14
million. The Company intends to use a portion of the net proceeds from the
Offering, together with other funds from a new credit facility, to repay in full
the term loan and all outstanding advances under the revolving credit facility.
See "Use of Proceeds." As of September 15, 1997 the Company has current advances
in the aggregate amount of $30.4 million under the revolving credit facility and
term loan. The term loan and the revolving credit facility mature and terminate,
respectively, on the earlier of October 1, 1998 or a Significant Reorganization
Event (as defined in the Credit Agreement).
The obligations of the Company under the Credit Agreement are secured by
substantially all of the Company's inventory, accounts receivable and other
assets. All of the operating subsidiaries of the Company have guaranteed such
obligations, and such guarantees are secured by substantially all of the assets
of such subsidiaries.
The term loan bears interest at the rate of 11.5% through November 29, 1997
and 12% from November 30, 1997 thereafter until maturity. Borrowings under the
revolving credit facility bear interest at the option of the Company at (i) a
rate (the "Floating Rate") which is the higher of the Federal Funds Effective
Rate as published by the Federal Reserve Bank of New York plus one-half of one
percent or the prime commercial lending rate of the Bank, or (ii) an adjusted
LIBOR plus the Applicable Interest Addition (as hereinafter defined), payable
quarterly in arrears. In addition, upon the occurrence and during the
continuance of any payment default, a 2% per annum penalty in excess of the rate
otherwise applicable is payable upon demand. As used herein, the "Applicable
Interest Addition" means, with respect to borrowings under the revolving credit
facility that bear interest at a LIBOR rate, either 2.5%, 2.25% or 2% above
LIBOR, based on Consolidated EBITDA (as defined in the Credit Agreement) for the
two-, three- or four-quarter period ending, September 30, 1997, December 31,
1997, or March 31, 1998, as well as the four quarters ending June 30, 1998 and
September 30, 1998, respectively.
The Credit Agreement includes customary covenants which impose obligations
or limitations on the Company with respect to, among other things: (i) delivery
of financial and other information; (ii) dispositions of the Company's assets;
(iii) investments, acquisitions, and mergers; (iv) dividends, stock repurchases,
redemption and prepayment of other outstanding Indebtedness; (v) Indebtedness
(including guarantees and other contingent obligations); (vi) loans and
investments; (vii) liens; (viii) transactions with affiliates; (ix) certain
financial covenants including, without limitation, covenants with respect to
maintenance of minimum consolidated shareholders' equity and consolidated
earnings; (x) maintenance of adequate insurance coverage; and (xi) compliance
with all applicable laws and regulations, including, without limitation,
environmental, tax and ERISA compliance. Certain of these covenants, obligations
and limitations have been waived, and in certain circumstances, modified from
time to time throughout the course of the various amendments to the credit
agreement discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Credit Agreement contains customary default provisions, including
without limitation, defaults for nonpayment, misrepresentation, breach of
covenants, material adverse change, cross-defaults to other indebtedness,
bankruptcy, ERISA liability events, judgments, change of control and change in
the security granted to the Bank. In addition, any redemption of the Preferred
Stock of the Company prior to October 1, 1998 constitutes an event of default.
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The Company is negotiating a new credit facility which it expects would be
in place upon consummation of this Offering. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
ESOP GUARANTY
Pursuant to an Amended and Restated Guaranty and Contingent Purchase
Agreement entered into by the Company dated as of February 17, 1995, which
agreement has been subsequently amended (together with such amendments, the
"ESOP Guaranty"), the Company has guaranteed the obligations of the ESOP and the
trust related thereto with respect to the ESOP Loan from the Bank in the
original principal amount of $2,386,670. As of June 30, 1997, $959,000 remains
outstanding under the ESOP Loan. The ESOP Loan matures on June 30, 1999. The
ESOP Guaranty contains substantially the same covenants as are described above
with respect to the credit agreement with the Bank, and is cross-defaulted and
collateralized with the credit agreement.
CHC NOTES
At the closing of the CHC Acquisition, Vitas-California issued to CHC, as
part of the purchase price, the CHC Notes. CHC Note A was issued in the amount
of $6.0 million, and CHC Note B was issued in the amount of $5.4 million. Under
the original terms of CHC Note A, payments, including interest, totaled $100,000
per month through March 31, 1997, with the remaining principal balance of $4.6
million due on March 31, 1997. On June 16, 1997, CHC Note A was modified to
provide for monthly payments of $135,000, with the remaining balance to be due
on May 31, 1998 (the "Modification"). In connection with the Modification and
extension of maturity, the Company paid $900,000 in principal and accrued
interest on CHC Note A, and $100,000 to the holders of CHC Note A as an
extension fee. In addition, in order to obtain the Bank's consent to the CHC
Note A payment required in connection with the Modification, the Bank required
that the Company repay approximately $1.8 million of the revolving credit
facility. See "Credit Agreement." Payments on CHC Note B, including interest,
were $75,000 per month through February 1996 and $50,000 per month thereafter
through February 1998, with the remaining principal balance of $4.7 million due
on March 31, 1998.
Payment of the CHC Notes is guaranteed by the Company. Either Note may be
prepaid, in whole or in part, without premium or penalty unless the prepayment
is made within the last ninety (90) days of any calendar year and no more than
50% of the original principal amount is prepaid in any calendar year; provided,
that these prepayment restrictions do not apply if such prepayment is made in
connection with (i) a refinancing of the borrowings under the Credit Agreement
and any outstanding letter of credit obligations with the Bank and/or (ii) a
refinancing of the redeemable preferred stock of the Company. Further, repayment
of CHC Note A is required (without penalty) under the Modification in the event
of such a refinancing of the Credit Agreement debt or other Significant
Reorganization Event, as defined in the Modification. The CHC Notes bear
interest at an annual rate of 9%. As of June 30, 1997, the Company owed
approximately $4.8 million and $3.8 million in principal and accrued interest on
CHC Note A and CHC Note B, respectively. The Company plans to use a portion of
the proceeds from the Offering to repay all outstanding amounts due under the
CHC Notes. See "Use of Proceeds."
82
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have outstanding
7,832,769 shares of Common Stock (8,402,769 shares if the Underwriters'
over-allotment option is exercised in full), of which 4,463,287 shares (or a
maximum of 5,033,287 shares in the event the Underwriters exercise the
over-allotment option in full) will be freely tradable without restriction or
further registration under the Securities Act, unless held by "affiliates" of
the Company as that term is defined in Rule 144 under the Securities Act. In
addition, the Company, all directors, executive officers, certain senior and
other employees and certain other stockholders and warrantholders of the Company
have agreed, at the request of the Underwriters, that they will not offer, sell
or grant any option to purchase, sell or otherwise dispose of an aggregate of
4,518,473 shares of Common Stock (including 1,198,071 shares of Common Stock
which they might acquire through the exercise of stock options or warrants),
without the prior consent of Furman Selz LLC, the representative of the
Underwriters (the "Representative of the Underwriters"), for a period of 180
days after the date of this Prospectus. After such 180-day period (or earlier if
the consent of the Representative of the Underwriters is obtained), 2,966,732
shares of Common Stock currently outstanding will be eligible for sale in the
public market subject, in most cases, to compliance with restrictions of Rule
144. The Company is unable to estimate the amount of restricted securities that
will be sold under Rule 144 because this will depend in part on the market price
for the Common Stock, the personal circumstances of the sellers and other
factors.
The remaining 353,670 shares outstanding are "restricted securities" as that
term is defined under Rule 144 and were issued by the Company in private
transactions in reliance upon one or more exemptions under the Securities Act.
Such restricted securities may be resold in a public distribution only if
registered under the Securities Act or pursuant to an exemption therefrom,
including Rule 144.
In general, under Rule 144 a person (or persons whose shares are
aggregated), including an affiliate of the Company, who has beneficially owned
restricted securities for at least one year is entitled to sell within any
three-month period commencing 90 days after the closing of this Offering a
number of shares that does not exceed the greater of the average weekly trading
volume during the four calendar weeks preceding such sale and 1% of the then
outstanding shares of the Common Stock (78,328 shares immediately after this
Offering or 84,028 shares of the Underwriters' over-allotment option is
exercised in full). A person who is deemed not to have been an "affiliate" of
the Company at any time during the 90 days preceding a sale by such person, and
who has beneficially owned such shares for at least two years, would be entitled
to sell such shares without regard to the volume limitations described above.
Such restricted shares will also be eligible for sale to "qualified
institutional buyers" pursuant to Rule 144A under the Securities Act, without
regard to the volume limitations contained in Rule 144.
In addition to the outstanding shares of Common Stock, the Company has
reserved for issuance 1,817,098 shares of Common Stock for the exercise of
options which have been granted, 1,695,755 of which are exercisable within 60
days of the date of this Prospectus.
Upon the completion of this Offering, 4,512,367 shares of Common Stock and
options which could be exercised for the purchase of 619,027 shares of Common
Stock (after the passage of applicable time vesting periods) will not be subject
to the lock-up restrictions discussed above. Of such 619,027 shares of Common
Stock issuable upon the exercise of such options, 521,059 options are or will
become exercisable within 60 days of the completion of this Offering and 4,148
additional options will become exercisable within 180 days of the completion of
this Offering.
After this Offering, the holders of 3,759,226 shares of Common Stock and
options which could be exercised for the purchase of 1,095,405 shares of Common
Stock (after the passage of applicable time vesting periods) or their permitted
transferees will be entitled to certain rights with respect to the registration
of such shares for sale under the Securities Act. See "Description of Capital
Stock-- Registration Rights." All of the 1,095,405 option shares subject to
registration rights will be vested and exercisable upon the expiration of the
above described lock-up agreements.
83
<PAGE>
The Company intends to file a registration statement under the Securities
Act to register for offer and sale the shares of Common Stock reserved for
issuance pursuant to the exercise of stock options that have been and may be
granted under and outside of the Company's stock option plans. Such registration
statements will become effective automatically upon filing. See
"Management--Management Equity Incentive Plans," and "--Non-Plan Stock Option
Grants." Shares issued after the effective date of such registration statement
upon exercise of stock options issued under the Company's stock option plans
generally will be eligible for sale in the public market, subject to the lock-up
agreements discussed above.
Prior to the Offering there has been no public trading market for the Common
Stock and no accurate predictions can be made as to the effect, if any, that
sales of restricted shares or shares issued pursuant to the exercise of options
granted by the Company may have on the prevailing market price of the Common
Stock from time to time. See "Principal Stockholders," "Management--Management
Equity Incentive Plans" and "--Non-Plan Stock Option Grants." Sales of
significant numbers of restricted shares or shares issued pursuant to the
exercise of options granted by the Company or the "overhang" resulting from the
eligibility of such shares for sale into the public trading markets could
adversely affect prevailing market prices and could impair the ability of the
Company to raise additional capital in the future through an offering of its
equity securities at a price acceptable to the Company or use its equity
securities as consideration in future acquisitions.
84
<PAGE>
UNDERWRITING
The underwriters named below (the "Underwriters"), for which Furman Selz LLC
is acting as the Representative of the Underwriters, have severally agreed,
subject to the terms and conditions set forth in the Underwriting Agreement, to
purchase from the Company the number of shares of Common Stock indicated below
opposite their respective names:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------------------------------------------------------------------------------------------- ----------
<S> <C>
Furman Selz LLC................................................................................
Total........................................................................................ 3,800,000
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to purchase the shares of Common Stock listed above are subject to the approval
of certain legal matters by counsel and various other conditions. The
Underwriting Agreement also provides that the Underwriters are committed to
purchase all of the shares of Common Stock offered hereby, if any are purchased
(except for any shares that may be purchased through exercise of the
Underwriters' over-allotment option which may be exercised by the Underwriters
in whole or in part).
The Representative of the Underwriters has advised the Company that the
Underwriters propose to offer the shares of Common Stock to the public at the
initial public offering price set forth on the cover of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per
share. After the Offering, the public offering price and other selling terms may
be changed by the Representative of the Underwriters. The Common Stock is
offered subject to receipt and acceptance by the Underwriters, and to certain
other conditions, including the right to reject orders in whole or in part.
Prior to this Offering, there has been no public market for the Common
Stock. Accordingly, the initial public offering price has been determined by
negotiation between the Company and the Representative of the Underwriters.
Among the factors considered in determining the initial public offering price
were the Company's present and historical results of operations, the Company's
current financial condition, estimates of the business potential and prospects
of the Company, the condition of the Company's target market, the experience of
the Company's management, the economics of the industry in general, the general
condition of the equities market at the time of the Offering and other relevant
factors. There can be no assurance that any active trading market will develop
for the Common Stock or as to the price at which the Common Stock may trade in
the public market from time to time subsequent to the Offering.
Certain persons participating in this Offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids or effecting syndicate covering
transactions. A stabilizing bid means the placing of any bid or the effecting of
any purchase, for the purpose of pegging, fixing or maintaining the price of the
Common Stock. A syndicate covering transaction means the placing of any bid on
behalf of the underwriting syndicate or the effecting of any purchase to reduce
a short position created in connection with the Offering. Such transactions may
be effected on the Nasdaq National Market, in the over-the-counter market, or
otherwise. Such stabilizing, if commenced, may be discontinued at any time.
In general, the rules of the Commission will prohibit the Underwriters from
making a market in the Common Stock during a "restricted period" extending until
completion of the Offering. The Commission has, however, adopted exceptions from
these rules that permit passive market making under certain conditions. These
rules permit an underwriter to make a market subject to the conditions, among
others,
85
<PAGE>
that its bid not exceed the highest bid by a market maker not connected with the
Offering and that its net purchases on any one trading day not exceed prescribed
limits. Pursuant to these exemptions, the Underwriters may engage in passive
market making in the Common Stock during the restricted period.
The Company has granted the Underwriters an option, exercisable during the
30-day period after the date of this Prospectus, to purchase up to 570,000
additional shares of Common Stock at the initial public offering price set forth
on the cover page of this Prospectus, less underwriting discounts and
commissions. To the extent the Underwriters exercise the option, each
Underwriter will have a firm commitment, subject to certain conditions, to
purchase such number of additional shares of Common Stock as is proportionate to
such Underwriter's initial commitment to purchase shares from the Company. The
Underwriters may exercise such option solely to cover over-allotments, if any,
incurred in connection with the sale of shares of Common Stock offered hereby.
The Underwriting Agreement provides that the Company has agreed to indemnify
the Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.
The Company, its officers, directors and certain other stockholders and
warrantholders of the Company, owning in the aggregate 4,854,631 shares of
Common Stock and 1,198,071 options to purchase shares of Common Stock, have
agreed not to offer, sell, grant any option to purchase or otherwise dispose of
any shares of Common Stock or any options or warrants to purchase such shares
for a period of 180 days from the date of this Prospectus without the prior
consent of the Representative of the Underwriters, except that certain transfers
are permitted to persons who agree to become subject to the foregoing
restrictions. Following the expiration of the 180-day lock-up period, 4,032,769
shares of Common Stock will become eligible for sale, subject to the provisions
of Rule 144 under the Securities Act, and holders of outstanding options to
purchase 1,198,071 shares (1,174,697 of such options would be vested and
exercisable following the expiration of the 180-day lock-up period) would be
entitled to exercise such options and sell such shares. See "Shares Eligible for
Future Sale."
The Representative of the Underwriters has advised the Company that the
Underwriters do not intend to confirm sales of Common Stock offered by this
Prospectus made to any accounts over which they exercise discretionary
authority.
The Company has applied to have the Common Stock approved for quotation on
the Nasdaq National Market under the symbol "VTAS."
The foregoing contains, among other things, a brief summary of the
provisions of the Underwriting Agreement and does not purport to be a complete
statement of its terms and conditions. A copy of the form of Underwriting
Agreement has been filed as an exhibit to the Registration Statement.
Furman Selz LLC has served as the Company's financial advisor since 1991 and
has rendered fairness opinions in connection with the Company's issuance and
sale of the 9% Preferred Stock, the Series B Preferred Stock, various purchases
by the Company of outstanding Common Stock and the closing of the CHC
Acquisition. A venture capital fund affiliated with Furman Selz LLC owns 53,166
shares of the Common Stock.
86
<PAGE>
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon by the Company
by Hogan & Hartson L.L.P., Washington, D.C. Willkie Farr & Gallagher, New York,
New York, is acting as counsel for the Underwriters in connection with certain
legal matters relating to the sale of Common Stock offered hereby. Reed Smith
Shaw & McClay, Washington, D.C., is acting as healthcare regulatory counsel for
the Company in connection with this Offering.
EXPERTS
The consolidated financial statements and schedules for Vitas Healthcare
Corporation and Subsidiaries at September 30, 1995 and 1996, and for each of the
three years in the period ended September 30, 1996, appearing in this Prospectus
and Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
The combined statements of income, stockholders' equity and cash flows of
Community Hospice Care, Inc., Community Hospice Care of Orange County, Community
Hospice Care of San Diego, Community Hospice Care--Coastal Cities, Community
Hospice Care--Inland Cities, Community Hospice Care--San Gabriel Cities and
Community Hospice Care of San Fernando and Riverside for the year ended December
31, 1994, appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission the Registration Statement under
the Securities Act, of which this Prospectus is a part, with respect to the
shares of Common Stock offered hereby. This Prospectus omits certain information
contained in the Registration Statement and the exhibits and schedules thereto,
and reference is made to the Registration Statement and the exhibits and
schedules thereto for further information with respect to the Company and the
Common Stock offered hereby. Statements contained herein concerning the
provisions of any documents are not necessarily complete, and in each instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety by such
reference. The Registration Statement, including exhibits and schedules filed
therewith, may be inspected without charge at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
located at 7 World Trade Center, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials may
be obtained from the Public Reference Section of the Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 upon payment of
the prescribed fees. The Registration Statement, including all exhibits and
schedules and such reports and other information, may also be accessed
electronically by means of the Commission's site on the World Wide Web, at
http:// www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by independent certified
public accountants. The Company also intends to furnish its stockholders with
quarterly reports for the first three quarters of each fiscal year containing
unaudited consolidated financial information.
87
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants................................... F-2
Consolidated Balance Sheets at September 30, 1995 and 1996........................... F-3
Consolidated Statements of Operations for the years ended September 30, 1994, 1995
and 1996........................................................................... F-4
Consolidated Statements of Changes in Redeemable Preferred Stock and Stockholders'
Deficit for the years ended September 30, 1994, 1995 and 1996...................... F-5
Consolidated Statements of Cash Flows for the years ended September 30, 1994, 1995
and 1996........................................................................... F-6
Notes to Consolidated Financial Statements........................................... F-7
Unaudited Condensed Consolidated Balance Sheet at June 30, 1997...................... F-22
Unaudited Condensed Consolidated Statements of Operations for the Nine Months Ended
June 30, 1996 and 1997............................................................. F-23
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
June 30, 1996 and 1997............................................................. F-24
Notes to Unaudited Condensed Consolidated Financial Statements....................... F-25
</TABLE>
COMMUNITY HOSPICE CARE, INC. ET AL
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants................................... F-29
Combined Statement of Income for the year ended December 31, 1994.................... F-30
Combined Statement of Stockholders' Equity for the year ended December 31, 1994...... F-31
Combined Statement of Cash Flows for the year ended December 31, 1994................ F-32
Notes to Combined Financial Statements............................................... F-33
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Vitas Healthcare Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of Vitas
Healthcare Corporation and Subsidiaries as of September 30, 1995 and 1996, and
the related consolidated statements of operations, changes in redeemable
preferred stock and stockholders' deficit and cash flows for each of the three
years in the period ended September 30, 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 consolidated financial position of
Vitas Healthcare Corporation and Subsidiaries at September 30, 1995 and 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended September 30, 1996, in conformity with generally
accepted accounting principles.
<TABLE>
<C> <S>
/s/ ERNST & YOUNG LLP
</TABLE>
Miami, Florida
January 24, 1997, except for the third paragraph of
Note 1 as to which the date is September 15, 1997,
the second paragraph of Note 4 as to which the date is
September 18, 1997 and Note 7 as to which the date is
September 1, 1997
F-2
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30
--------------------
<S> <C> <C>
1995 1996
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents................................................................... $ 4,545 $ 5,351
Accounts receivable from patient services, net of allowance for uncollectible accounts of
$5,300 in 1995 and $6,000 in 1996......................................................... 30,576 16,872
Income tax receivable....................................................................... 1,322 3,108
Deferred taxes--current..................................................................... 1,997 543
Other current assets........................................................................ 2,295 3,349
--------- ---------
Total current assets.......................................................................... 40,735 29,223
Property and equipment, net................................................................... 15,104 15,087
Notes receivable from stockholders and employees.............................................. 121 84
Goodwill, net................................................................................. 39,405 46,799
Other assets.................................................................................. 1,696 1,083
Deferred taxes................................................................................ 946 --
--------- ---------
Total assets.................................................................................. $ 98,007 $ 92,276
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable............................................................................ $ 18,877 $ 14,993
Accrued compensation........................................................................ 5,168 8,206
Accrued health insurance.................................................................... 768 51
Other accrued expenses...................................................................... 5,763 6,870
Current portion of long-term debt and capital lease obligations............................. 2,536 8,857
--------- ---------
Total current liabilities..................................................................... 33,112 38,977
Long-term debt and revolving credit facility.................................................. 39,294 4,729
Short-term debt expected to be refinanced..................................................... -- 33,756
Capital lease obligations..................................................................... 2,190 1,002
Other long-term liabilities................................................................... 563 480
Guarantee of Employee Stock Ownership Plan loan............................................... 1,792 1,316
Commitments and contingencies
Redeemable preferred stock, $100 stated value, $1 par value:
Authorized shares--4,500,000
Issued and outstanding shares:
9% Preferred Stock, cumulative, nonconvertible, redeemable--270,000 shares; liquidation
preference equal to stated value per share plus all accrued and unpaid dividends......... 27,257 27,325
Series B--convertible, redeemable--262,500 shares; liquidation preference equal to stated
value per share plus a dividend preference amount of 8% per annum from date of issuance
less any dividends paid.................................................................. 31,066 33,166
Stockholders' deficit:
Common stock, $.01 par value:
Authorized shares--40,000,000
Issued and outstanding shares--1,613,993 in 1995 and 1,616,559 in 1996...................... 16 16
Additional paid-in capital.................................................................. (29,059) (31,200)
Indebtedness of Employee Stock Ownership Plan............................................... (1,792) (1,316)
Accumulated deficit........................................................................... (6,432) (15,975)
--------- ---------
Total stockholders' deficit................................................................... (37,267) (48,475)
--------- ---------
Total liabilities and stockholders' deficit................................................... $ 98,007 $ 92,276
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
F-3
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
----------------------------------
<S> <C> <C> <C>
1994 1995 1996
---------- ---------- ----------
Net revenue.................................................................. $ 148,535 $ 193,275 $ 213,856
Operating expenses:
Hospice program expenses................................................... 110,251 155,570 175,495
Central support services................................................... 22,036 25,241 23,790
Provision for bad debts.................................................... 3,973 6,828 7,958
Depreciation............................................................... 2,931 4,197 5,438
Amortization of goodwill................................................... 654 1,089 1,527
Expenses associated with terminated offering............................... 798 -- --
Restructuring costs........................................................ -- 2,020 2,345
---------- ---------- ----------
140,643 194,945 216,553
---------- ---------- ----------
Income (loss) from operations................................................ 7,892 (1,670) (2,697)
Interest and other income.................................................... 715 329 279
Interest expense............................................................. (316) (3,092) (4,674)
---------- ---------- ----------
Income (loss) before income taxes............................................ 8,291 (4,433) (7,092)
Provision (benefit) for income taxes......................................... 3,150 (1,588) --
---------- ---------- ----------
Net income (loss)............................................................ $ 5,141 $ (2,845) $ (7,092)
---------- ---------- ----------
---------- ---------- ----------
Net income (loss) attributable to common stockholders........................ $ 543 $ (7,443) $ (11,690)
---------- ---------- ----------
---------- ---------- ----------
Supplemental net loss attributable to common stockholders.................... $ (9,590)
----------
----------
Supplemental loss per share.................................................. $ (2.56)
----------
----------
Supplemental weighted average number of common and common stock
equivalents................................................................ 3,749,888
----------
----------
</TABLE>
See accompanying notes
F-4
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
9% SERIES B
PREFERRED PREFERRED COMMON
STOCK STOCK STOCK
---------------------- ---------------------- ------------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
----------- --------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 1, 1993............................. 270 $ 27,121 263 $ 26,866 1,596 $ 16
Net reduction of ESOP indebtedness................... -- -- -- -- -- --
9% Preferred Stock dividends paid.................... -- -- -- -- -- --
Accretion of Preferred Stock......................... -- 68 -- 2,100 -- --
Exercise of stock options and related income tax
benefits........................................... -- -- -- -- 18 --
Net income........................................... -- -- -- -- -- --
--- --------- --- --------- ----- ---
Balance at September 30, 1994.......................... 270 27,189 263 28,966 1,614 16
Net reduction of ESOP indebtedness................... -- -- -- -- -- --
9% Preferred Stock dividends paid.................... -- -- -- -- -- --
Accretion of Preferred Stock......................... -- 68 -- 2,100 -- --
Exercise of stock options and related income tax
benefits........................................... -- -- -- -- 1 1
Common Stock purchased by the Company and retired.... -- -- -- -- (1) (1)
Net loss............................................. -- -- -- -- -- --
--- --------- --- --------- ----- ---
Balance at September 30, 1995.......................... 270 27,257 263 31,066 1,614 16
Net reduction of ESOP indebtedness................... -- -- -- -- -- --
9% Preferred Stock dividends paid.................... -- -- -- -- -- --
Accretion of Preferred Stock......................... -- 68 -- 2,100 -- --
Exercise of stock options and related income tax
benefits........................................... -- -- -- -- 4 --
Common Stock purchased by the Company and retired.... -- -- -- -- (1) --
Net loss............................................. -- -- -- -- -- --
--- --------- --- --------- ----- ---
Balance at September 30, 1996.......................... 270 $ 27,325 263 $ 33,166 1,617 $ 16
--- --------- --- --------- ----- ---
--- --------- --- --------- ----- ---
<CAPTION>
ADDITIONAL TOTAL
PAID-IN INDEBTEDNESS ACCUMULATED STOCKHOLDERS'
CAPITAL OF ESOP DEFICIT DEFICIT
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at October 1, 1993............................. $ (24,852) $ (2,529) $ (3,839) $ (31,204)
Net reduction of ESOP indebtedness................... -- 262 -- 262
9% Preferred Stock dividends paid.................... -- -- (2,430) (2,430)
Accretion of Preferred Stock......................... (2,168) -- -- (2,168)
Exercise of stock options and related income tax
benefits........................................... 116 -- -- 116
Net income........................................... -- -- 5,141 5,141
----------- ------------ ------------ ------------
Balance at September 30, 1994.......................... (26,904) (2,267) (1,128) (30,283)
Net reduction of ESOP indebtedness................... -- 475 -- 475
9% Preferred Stock dividends paid.................... -- -- (2,430) (2,430)
Accretion of Preferred Stock......................... (2,168) -- -- (2,168)
Exercise of stock options and related income tax
benefits........................................... 13 -- -- 14
Common Stock purchased by the Company and retired.... -- -- (29) (30)
Net loss............................................. -- -- (2,845) (2,845)
----------- ------------ ------------ ------------
Balance at September 30, 1995.......................... (29,059) (1,792) (6,432) (37,267)
Net reduction of ESOP indebtedness................... -- 476 -- 476
9% Preferred Stock dividends paid.................... -- -- (2,430) (2,430)
Accretion of Preferred Stock......................... (2,168) -- -- (2,168)
Exercise of stock options and related income tax
benefits........................................... 27 -- -- 27
Common Stock purchased by the Company and retired.... -- -- (21) (21)
Net loss............................................. -- -- (7,092) (7,092)
----------- ------------ ------------ ------------
Balance at September 30, 1996.......................... $ (31,200) $ (1,316) $ (15,975) $ (48,475)
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
</TABLE>
See accompanying notes.
F-5
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
OPERATING ACTIVITIES
Net income (loss).................................................................... $ 5,141 $ (2,845) $ (7,092)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation..................................................................... 2,931 4,197 5,438
Amortization of goodwill and deferred financing costs............................ 654 1,656 2,410
Deferred income taxes............................................................ (379) (2,200) --
Provision for losses on accounts receivable...................................... 3,973 6,828 7,958
(Increase) decrease in assets:
Accounts receivable from patient services...................................... (8,398) (17,817) 5,746
Income tax receivable.......................................................... -- (1,322) 614
Other current assets........................................................... (799) 666 (1,054)
(Decrease) increase in liabilities:
Accounts payable and accrued expenses.......................................... (630) 9,128 (1,396)
Income taxes payable........................................................... 656 (220) --
Other long-term liabilities.................................................... (47) (414) (85)
--------- --------- ---------
Net cash provided by (used in) operating activities.................................. 3,102 (2,343) 12,539
INVESTING ACTIVITIES
Purchase of property and equipment, net.............................................. (4,230) (3,932) (5,264)
Cash paid for net assets of business acquired........................................ -- (27,466) (6,306)
(Purchase) sale of investments....................................................... (8,077) 8,077 --
Increase in intangible assets........................................................ (219) (567) (2,739)
Decrease in notes receivable......................................................... 178 273 38
(Increase) decrease in other assets.................................................. (795) (416) 614
Decrease in indebtedness of Employee Stock Ownership Plan............................ 262 475 476
--------- --------- ---------
Net cash used in investing activities................................................ (12,881) (23,556) (13,181)
FINANCING ACTIVITIES
Proceeds from long-term debt and revolving credit facility........................... $ -- $ 36,000 $ 6,750
Principal payments on long-term debt and capital lease obligations................... (1,706) (8,350) (2,403)
Dividends on 9% Preferred Stock...................................................... (2,430) (2,430) (2,430)
Purchase of Common Stock............................................................. -- (30) (21)
Proceeds from exercise of stock options and related income tax benefits.............. 116 14 28
Proceeds from repayment of ESOP loan (ESOP contribution)............................. 2,267 (475) (476)
--------- --------- ---------
Net cash (used in) provided by financing activities.................................. (1,753) 24,729 1,448
--------- --------- ---------
Net (decrease) increase in cash...................................................... (11,532) (1,170) 806
Cash and cash equivalents, beginning of period....................................... 17,247 5,715 4,545
--------- --------- ---------
Cash and cash equivalents, end of period............................................. $ 5,715 $ 4,545 $ 5,351
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash interest paid................................................................... $ 316 $ 1,464 $ 3,153
--------- --------- ---------
--------- --------- ---------
Cash income taxes paid............................................................... $ 2,753 $ 1,962 $ --
--------- --------- ---------
--------- --------- ---------
Property and equipment financed by capital leases.................................... $ 2,460 $ 1,325 $ --
--------- --------- ---------
--------- --------- ---------
Noncash aspects of the acquisitions of Hospice of the Miami Valley, Inc. and Hospice
of Central Florida, Inc. in 1996 and Community Hospice Care, Inc. in 1995 are as
follows:
Fair value of assets acquired (including goodwill of $38,881 and $7,065 in 1995
and 1996, respectively)......................................................... $ 39,795 $ 7,223
Liabilities assumed.............................................................. (929) (917)
Notes issued in connection with acquisition...................................... (11,400) --
--------- ---------
Cash paid at acquisition......................................................... $ 27,466 $ 6,306
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
F-6
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMPANY
Vitas Healthcare Corporation and its subsidiaries (collectively Vitas or the
Company) provides palliative medical care and related services to terminally ill
patients through state-licensed and federally-certified hospice programs.
Palliative medical care is care that focuses primarily on improving the quality
of life of terminally ill patients and their families, as opposed to attempting
to "cure" the underlying or end-stage disease. Services provided by the Company
include nursing care, physician services, home health aide services, social
work, counseling services and pastoral care, short-term inpatient care, drugs
for symptom management and pain control, medical equipment and supplies, and
ancillary services, such as respiratory, physical, speech and occupational
therapy. In addition, the Company provides various support and psychosocial
services and bereavement care to the families of its patients.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Vitas
Healthcare Corporation and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
PROPOSED REVERSE STOCK SPLIT
On September 15, 1997, the Company's Board of Directors approved a
1-for-2.7273 reverse stock split, subject to stockholder approval and
consummation of the Company's proposed initial public offering (the Offering).
As a result, all references in the financial statements to number of shares, per
share amounts and stock option and warrant data have been restated to give
retroactive recognition to such reverse stock split. Also on that date, the
Company's Board of Directors approved an increase, subject to stockholder
approval, in the authorized shares of common stock from 40 million shares to 50
million shares, changed the par value of common stock to $.01 per share and
increased the authorized shares of preferred stock from 4.5 million shares to
10.27 million shares.
CONCENTRATIONS OF CREDIT RISK
Deposits in banks may exceed the amount of insurance provided on such
deposits. The Company performs reviews of the credit worthiness of its
depository banks. The Company has not experienced any losses on its deposits of
cash.
The Company grants credit without collateral to its patients, most of whom
are residents of Florida, Illinois, Texas and California and are insured under
third-party payor agreements. The mix of receivables from patients and
third-party payors at September 30, 1995 and 1996 was as follows:
<TABLE>
<CAPTION>
1995 1996
----- -----
<S> <C> <C>
Medicare..................................................................... 41% 49%
Medicaid..................................................................... 45% 37%
Commercial insurors.......................................................... 13% 13%
Patients..................................................................... 1% 1%
--- ---
100% 100%
--- ---
--- ---
</TABLE>
F-7
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of these consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include currency, checks on hand and overnight
repurchase agreements of government securities.
FINANCIAL INSTRUMENTS
The carrying amount of financial instruments including cash and cash
equivalents, accounts receivable from patient services, notes receivable from
stockholders and employees and accounts payable approximate fair value as of
September 30, 1996. The carrying amounts of the Company's borrowings, as
amended, approximate their fair value due to the recent modification which
represents current market value. It is not practicable to estimate the fair
value of the Company's preferred stock because of the lack of a quoted market
price and the inability to estimate fair value without incurring excessive
costs.
CHARITY CARE
The Company has a policy of providing charity care to patients who are
unable to pay and maintains records to identify and monitor the level of charity
care it provides. These records include the amount of charges for services
provided which are computed using established rates. Because the Company does
not pursue collection of amounts determined to qualify as charity care, they are
not reported as revenue.
Charity care amounted to $2.9 million, $3.4 million and $4.0 million for the
years ended September 30, 1994, 1995 and 1996, respectively.
NET REVENUE
Net revenue is reported at the estimated net realizable amounts from
patients, third-party payors (primarily Medicare and Medicaid), and others for
services rendered. Payors may determine that the services provided are not
covered and do not qualify for reimbursement. Management has provided an
estimate for such adjustments. Changes in the estimate will be adjusted in
future periods as final settlements are determined. There were no material
changes to net revenue as a result of final settlements in 1994, 1995 or 1996.
The percentage of net revenue derived under the Medicare and Medicaid programs
was 95% in 1994, 93% in 1995, and 94% in 1996.
START-UP COSTS
The Company expenses costs incident to the start-up of hospice operations in
new locations as incurred.
F-8
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL
Goodwill represents costs in excess of net tangible assets acquired and is
being amortized on a straight-line basis over thirty years. Accumulated
amortization on intangible assets is $5.3 million at September 30, 1995 and $6.8
million at September 30, 1996.
The carrying value of costs in excess of net tangible assets acquired will
be reviewed if the facts and circumstances suggest that it may be impaired. If
this review indicates that these costs will not be recoverable, as determined
based on the undiscounted cash flows of the entity acquired over the remaining
amortization period, the Company's carrying value will be reduced by the
estimated shortfall of cash flows, such shortfall to be calculated using
discounted cash flows.
PROPERTY AND EQUIPMENT
Property and equipment, including improvements to existing facilities, are
recorded at cost. Amortization of assets recorded under capital lease
obligations is included in depreciation expense. Certain software development
costs are capitalized. Capitalization of software development costs begins upon
the establishment of technological feasibility. Amortization of capitalized
software costs begins when the software is placed into service and is included
in amortization expense.
Depreciation and amortization are calculated principally using the
straight-line method over the estimated useful lives of the assets. Estimated
useful lives for major asset categories are 4 to 5 years for leasehold
improvements, 3 to 5 years for equipment, 5 years for software development
costs, and 5 years for office furniture.
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement No. 121 is effective for fiscal
years beginning after December 15, 1995. The Company believes that the effect of
adopting Statement No. 121, based on current circumstances, will not be
material.
SUPPLEMENTAL NET LOSS PER SHARE (UNAUDITED)
Supplemental net loss per share is computed by dividing the supplemental net
loss, after reduction for dividends on the 9% Preferred Stock by the
supplemental weighted average number of common shares outstanding. Supplemental
net loss used in the calculation gives effect to the elimination of the
dividends which would have been payable under the mandatory redemption features
of the Series B Preferred Stock. Common stock equivalents are excluded from the
calculation of supplemental weighted average common shares outstanding since
their effect is antidilutive, except that, pursuant to the Securities and
Exchange Commission's Staff Accounting Bulletins, such computations include all
common and common stock equivalents issued within the 12 months preceding the
Offering as if they were outstanding for all periods presented. In addition, all
outstanding preferred stock that converts in connection with the Offering is
included in the computation as common equivalent shares even when the effect is
antidilutive.
F-9
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS
Advertising costs, included in Hospice Program Expenses and Central Support
Services, are expensed as incurred and totaled $281,000, $298,000 and $260,000
for 1994, 1995 and 1996, respectively.
CAPITAL LEASES
Assets and related obligations for equipment under capital leases are
initially recorded at an amount equal to the present value of the future minimum
lease payments using interest rates implicit within the leases. Equipment under
capital leases is amortized over the estimated useful lives of the assets.
INCOME TAXES
The Company accounts for income taxes using the liability method in
accordance with the provisions of Statement of Financial Accounting Standards
No. 109, ACCOUNTING FOR INCOME TAXES.
STOCK BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company plans to adopt Statement of Financial Accounting Standards
No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, in 1997, and will continue to
account for stock option grants in accordance with APB Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and, accordingly, recognizes no
compensation expense for the stock option grants.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial
statements to conform with the 1996 presentation.
2. TERMINATED MERGER
On June 6, 1996, the Company signed a letter of intent to merge with a
subsidiary of Apria Healthcare Group Inc. (Apria) and entered into a merger
agreement with Apria and one of Apria's subsidiaries dated as of June 28, 1996.
On November 12, 1996, Apria announced its intention to terminate the merger
agreement. Between the date the letter of intent was executed and the
announcement of the termination, the Company incurred costs of approximately
$2.4 million related to the terminated merger transaction of which $1.5 million
were incurred through September 30, 1996.
On November 26, 1996, the Company entered into a settlement agreement
whereby Apria agreed to pay the Company $4 million to settle and discharge any
and all disputes and controversies between the companies arising from or
relating to the merger or related activities. The Company received payment on
November 27, 1996. Consequently, the $1.5 million of deferred costs incurred
through September 30, 1996 are classified as other current assets in the
accompanying consolidated balance sheet and were offset against the settlement
received on November 27, 1996.
3. ACQUISITIONS
On February 17, 1995, Vitas Healthcare Corporation of California
(Vitas-California), a wholly owned subsidiary of the Company, acquired
substantially all of the assets and assumed certain liabilities of
F-10
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS (CONTINUED)
Community Hospice Care, Inc. and its affiliated limited partnerships (CHC) which
offered hospice and other related healthcare and support services through
hospice programs in several communities in Southern California. The acquisition
was accounted for as a purchase and the results of operations of CHC have been
included in the consolidated financial statements since the date of acquisition.
The cost of the acquisition totaled approximately $38.9 million, including
expenses associated with the acquisitions of approximately $3.6 million. The
purchase price was paid with $27.5 million in cash and the issuance of $11.4
million in subordinated notes payable due in monthly installments through 1998.
Cost in excess of net assets acquired was approximately $38.9 million and is
being amortized over thirty years.
Included in the costs associated with the acquisitions were $800,000 related
to lease termination costs of an inpatient hospice unit assumed in connection
with the acquisition and approximately $665,000 to involuntarily terminate
employees of the acquired company. During 1996, the involuntary termination
costs were paid and charged against the accrual. In addition, the accrual to
terminate the inpatient hospice unit lease was increased by $200,000. This
amount is included in restructuring charges in the 1996 consolidated statement
of operations. As of September 30, 1996, the Company has been unable to
negotiate a sublease of the inpatient hospice unit.
Effective November 3, 1995, the Company acquired substantially all of the
assets and assumed certain liabilities of the Hospice of the Miami Valley, Inc.
(HMV) for approximately $3.0 million, including associated expenses of
approximately $355,000. Cost in excess of net assets acquired were approximately
$3.0 million and are being amortized over thirty years. The acquisition was
accounted for as a purchase and the results of operations of HMV have been
included in the consolidated financial statements since the date of acquisition.
On August 8, 1996, the Company acquired substantially all of the assets and
assumed certain liabilities of Hospice of Central Florida, Inc. (HCF) for
approximately $5.2 million, including associated expenses of approximately
$659,000. The acquisition was accounted for as a purchase and the results of
operations of HCF have been included in the consolidated financial statements
since the date of acquisition. Cost in excess of net assets acquired were
approximately $5.2 million and are being amortized over thirty years.
The following unaudited pro forma information presents a summary of the
consolidated results of operations of the Company, CHC and HCF, assuming the
acquisitions occurred on October 1, 1994 after giving effect to certain pro
forma adjustments, including, among others, adjustments to owner's compensation
and amortization of goodwill, together with the related income tax effects. Pro
forma results of operations of HMV have not been presented because the effects
are not significant. This pro forma financial information is presented for
informational purposes only and may not be indicative of the results of
operations as they would have been if the Company, CHC and HCF had been a single
entity during 1995
F-11
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS (CONTINUED)
and 1996, nor is it necessarily indicative of the results of operations which
may occur in the future (in thousands except per share data):
<TABLE>
<CAPTION>
SEPTEMBER 30
----------------------
<S> <C> <C>
1995 1996
---------- ----------
Net revenue........................................................... $ 204,127 $ 220,894
Net loss.............................................................. (2,531) (6,485)
Net loss attributable to common
stockholders--historical............................................ (7,129) (11,083)
Net loss per common share and common
stock equivalent outstanding--historical............................ (4.42) (6.78)
</TABLE>
4. REDEEMABLE PREFERRED STOCK
The 9% Preferred Stock has a stated value of $100 per share, accrues
cumulative dividends, is nonvoting and mandatorily redeemable. In connection
with the issuance of the 9% Preferred Stock, the Company initially issued to the
preferred stockholder two Common Stock purchase warrants covering a total of
937,247 (Series A) and 512,156 (Series B) shares of Common Stock, respectively.
The holder of the warrants is entitled to purchase each share of Common Stock
thereunder at an exercise price of approximately $12.41 (approximately $11.6
million total purchase price) and $12.44 per share (approximately $6.4 million
total purchase price), respectively, subject to various anti-dilution
adjustments. The warrants may be exercised at any time, unless previously
repurchased, through December 16, 1999. The warrant for 937,247 shares would
expire earlier upon the completion of a public offering of the Company's Common
Stock which meets certain minimum requirements.
The Company and the preferred stockholder have, over time, agreed to defer
the redemption date of the 9% Preferred Stock. On September 18, 1997 the Company
and the preferred stockholder again agreed to defer the mandatory redemption
date of the 9% Preferred Stock. The amended redemption schedule is as follows:
<TABLE>
<CAPTION>
NUMBER OF REDEMPTION
SHARES TO BE PRICE PER
MANDATORY REDEMPTION DATE REDEEMED SHARE
- ------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
October 1, 1998.................................................... 81,000 $ 102
October 1, 1998.................................................... 81,000 101
October 1, 1998.................................................... 54,000 100
December 31, 1998.................................................. 54,000 100
</TABLE>
As a part of the agreement to extend the redemption dates of the 9% Preferred
Stock, contemporaneously with the Offering the preferred stockholder agreed to
exercise at least $3 million (but no more than $5 million) of Series A warrants.
The issuance of warrants in connection with the amendment to the revolving
credit facility (see Note 7), results in an adjustment to the number of shares
of common stock which can be acquired and the related exercise price to 955,789
shares at $12.16 per share for Series A and 522,289 shares at $12.19 per share
for Series B. The Company has agreed to repurchase Series B for the difference
between the Offering price and the exercise price, but not less than $700,000.
If the 9% Preferred Stock is not redeemed on or prior to March 31, 1998, the
expiration date of both Series A and Series B will be extended by that number of
days equal to the number of days beyond March 31, 1998 that any portion of
F-12
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. REDEEMABLE PREFERRED STOCK (CONTINUED)
the 9% Preferred Stock is outstanding but not later than December 16, 2005. The
Company also agreed to extend through December 31, 1998 the payment of the
redemption price of $101 per share for the 9% Preferred Stock if redeemed at the
Company's option.
Cumulative unpaid dividends on the 9% Preferred Stock totaled approximately
$608,000 at September 30, 1995 and 1996, respectively.
The Series B Preferred Stock, which is subject to redemption at the option
of the holders in certain circumstances, has a stated value of $100 per share, a
par value of $1 per share and a cumulative dividend preference of 8%. Dividends
may not be paid on the Company's Common Stock prior to the payment of dividends
on the Series B Preferred Stock from the original issue date. However, unless
dividends are paid on the Company's Common Stock, no dividends are payable on
the Series B Preferred Stock unless the Series B Preferred Stock is redeemed.
The carrying amount of the Series B Preferred Stock has been increased for
amounts representing dividends not currently declared or paid, but which would
be payable upon redemption. Costs related to the issuance of the Series B
Preferred Stock totaled approximately $2.1 million and were charged to
additional paid in capital.
Shares of Series B Preferred Stock are redeemable (including dividends from
the original issue date not previously paid) at the option of the holder at the
earlier of six months after the redemption in full of the Company's 9% Preferred
Stock or June 30, 1999. The Company has certain rights to effect the redemption
of the Series B Preferred Stock in three annual installment payments. The Series
B Preferred Stock is convertible into 2,026,293 shares of the Company's Common
Stock, or approximately 28% of the Company's Common Stock on a fully diluted
basis, subject to adjustment under certain circumstances. Such conversion may be
made at the election of the holder of the Series B Preferred Stock and will be
mandatory and automatic should the Company complete a public offering of its
Common Stock which meets certain minimum requirements.
The Series B Preferred Stock has certain voting rights along with the
holders of the Company's Common Stock. As a result, the holders of the Series B
Preferred Stock are currently entitled to cast that number of votes equal to
approximately 28% of the total shares of Common Stock entitled to vote at a
meeting of stockholders. Holders of the Series B Preferred Stock also have the
right to elect two directors of the Company's Board of Directors. Registration
rights were also granted to the purchasers of the Series B Preferred Stock which
rights allow registration of the Common Stock obtained through the conversion of
the Series B Preferred Stock under certain circumstances.
5. STOCK OPTIONS AND WARRANTS
The Company has granted nonqualified stock options (NQSOs) to purchase the
Company's Common Stock to various employees, officers, directors and consultants
in conjunction with their employment or service with the Company. All NQSOs
expire between five and ten years after the initial grant and are
nontransferable. Proceeds from the issuance of shares under these plans are
included in stockholders' equity.
On June 29, 1992 and January 25, 1994, the Company adopted the 1992
Management Equity Incentive Plan (MEIP) and the 1994 MEIP, respectively. MEIP
options are issued at prices not less than market value at date of grant and
generally become nonforfeitable at 25% per year beginning the year subsequent to
the grant, but currently are not exercisable. At September 30, 1995 and 1996,
1,494,372 and 1,895,284 options, respectively, are vested under these plans.
F-13
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. STOCK OPTIONS AND WARRANTS (CONTINUED)
Transactions under the option plans and certain other option grants are as
follows:
<TABLE>
<CAPTION>
1992 1994 OPTION PRICE
MEIP MEIP OTHER TOTAL PER SHARE
--------- --------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Outstanding at October 1, 1994................... 465,845 218,898 1,491,271 2,176,014 $0.25-$16.36
Granted........................................ -- 138,965 -- 138,965 $16.36-$19.09
Exercised...................................... -- -- (1,833) (1,833) $0.27
Canceled....................................... (54,625) (64,349) (54,999) (173,973) $10.64-$19.09
--------- --------- ---------- ----------
Outstanding at September 30, 1995................ 411,220 293,514 1,434,439 2,139,173 $0.25-$19.09
Granted........................................ -- 52,616 -- 52,616 $19.09
Exercised...................................... -- -- (3,667) (3,667) $0.25
Canceled....................................... (13,933) (29,883) -- (43,816) $10.64-$19.09
--------- --------- ---------- ----------
Outstanding at September 30, 1996................ 397,287 316,247 1,430,772 2,144,306 $0.25-$19.09
--------- --------- ---------- ----------
--------- --------- ---------- ----------
</TABLE>
At September 30, 1996, the Company had reserved Common Stock for future
issuance under warrant and option agreements and upon conversion of the Series B
Preferred Stock as follows:
<TABLE>
<S> <C>
Stock option plans and other option grants....................... 2,144,306
Ungranted options under 1992 MEIP and 1994 MEIP.................. 120,258
Common Stock purchase warrants................................... 1,449,403
Conversion of Series B Preferred Stock........................... 2,026,293
---------
Total............................................................ 5,740,260
---------
---------
</TABLE>
6. PROPERTY AND EQUIPMENT
Property and equipment, net consisted of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30
----------------------
<S> <C> <C>
1995 1996
---------- ----------
Leasehold improvements................................................ $ 2,146 $ 2,507
Equipment (including equipment under capital lease)................... 15,906 16,122
Software development costs............................................ 4,191 8,536
Office furniture...................................................... 3,148 3,623
---------- ----------
25,391 30,788
Less accumulated depreciation and amortization........................ (10,287) (15,701)
---------- ----------
$ 15,104 $ 15,087
---------- ----------
---------- ----------
</TABLE>
7. DEBT
On August 11, 1994, the Company obtained a revolving credit facility of up
to $15.0 million, including a revolving letter of credit sub-facility of up to
$2.5 million. In connection with the CHC acquisition described in Note 3,
effective February 17, 1995, the credit agreement was amended and restated to
increase the revolving credit facility from $15 million to $20 million and to
provide for a $25 million term
F-14
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. DEBT (CONTINUED)
loan facility secured by substantially all of the assets of the Company. The
credit agreement requires, among other things, payment of a fee of 0.5% annually
on the unused portion of the revolving credit facility commitment. Interest is
payable quarterly. Both the term loan and revolving credit facility bore
interest at a rate of 8.32% and 8.44% at September 30, 1995 and 1996,
respectively.
The Company has entered into a number of amendments to the revolving credit
agreement, with the latest amendment dated as of September 1, 1997. As a result
of these amendments, the maturity date of the credit facilities has been
extended to the earlier of a significant recapitalization event, as defined by
the agreement, or October 1, 1998. Also, approximately $11.0 million of the term
loan was reallocated to the revolving credit facility, creating a new total
revolving credit facility amount of $18.0 million and leaving a term loan
balance of $14.0 million.
The revolving credit facility bears interest at LIBOR plus 2.5% (8.13% at
September 1, 1997) with the additional interest component adjustable based on
EBITDA levels, as defined by the agreement. The remaining $14 million due under
the term loan bears interest at 11% from March 24, 1997 through August 30, 1997;
11.5% from August 31, 1997 through November 29, 1997 and 12% thereafter until
maturity. Finally, under the amended credit facilities, the Company is
prohibited from making dividend payments on its common stock, and is required
to, among other things, maintain a minimum net worth, meet quarterly EBITDA
requirements and maintain a minimum liquidity, defined as cash or cash
equivalents and amounts available under the revolving credit facility of $4
million.
Also, in connection with the last two extensions of the revolving credit
agreement, dated as of March 24, 1997 and September 1, 1997, the Company issued
two warrants to the lender to purchase up to an aggregate of 285,429 shares of
the Company's Common Stock at an exercise price of $.03 per share. The warrants
are exercisable at certain dates if amounts due under the revolving credit
facility or term loan are still outstanding at those dates. The issue dates and
the number of shares which may be acquired are as follows:
<TABLE>
<CAPTION>
DATE EXERCISABLE AMOUNT
- ------------------------------------------------------------------------------------- ---------
<S> <C>
July 18, 1997........................................................................ 71,358
August 31, 1997...................................................................... 35,678
November 30, 1997.................................................................... 35,679
January 31, 1998..................................................................... 35,678
April 30, 1998....................................................................... 35,679
July 31, 1998........................................................................ 35,678
September 30, 1998................................................................... 35,679
</TABLE>
The warrants are valued at the date they become exercisable. The warrant to
purchase 71,358 shares of the Company's Common Stock had a value of
approximately $712,000 on July 18, 1997, the date it became exercisable, and the
warrant to purchase 35,678 shares of the Company's common stock had a value of
approximately $534,000 on August 31, 1997. These amounts are being amortized
over the period from the date of exercisability to the next date of
exercisability. The amount of amortization is being charged to interest expense.
On June 16, 1997, the terms of the 9% subordinated note payable, with a
balance of $4.9 million at September 30, 1996, were modified to provide for
monthly payments of $135,000, with the remaining balance to be paid at the
earlier of May 31, 1998 or a significant recapitalization event, as defined in
the
F-15
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. DEBT (CONTINUED)
agreement. In connection with the modification, the Company made a $900,000
payment of principal and accrued interest on the note and also paid an extension
fee of $100,000. The fee is being amortized using the interest method.
As a result of the amendments, the amounts due under the revolving credit
facility, term loan and the long-term portion of the 9% subordinated note
payable that have been extended have been excluded from current liabilities
since these extensions result in the amounts under these agreements being
outstanding for an uninterrupted period extending beyond one year from the
balance sheet date. Including the effects of these amendments, debt is as
follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Term loan, payments of principal and interest are due as described above.................... $ 25,000 $ 25,000
Revolving credit facility................................................................... 4,500 11,250
Subordinated note payable, bearing interest at 9% per annum. Principal and interest payable
commencing on March 31, 1995 as follows: twenty-four monthly installments of $135,000 each
with the unpaid principal balance plus all accrued and unpaid interest due on May 31,
1998...................................................................................... 5,623 4,900
Subordinated note payable, bearing interest at 9% per annum. Principal and interest payable
commencing on March 31, 1995 as follows: twelve monthly installments of $75,000 each,
followed by twenty-four monthly installments of $50,000 each with the unpaid principal
balance plus all accrued and unpaid interest due on March 31, 1998........................ 5,169 4,894
Other debt.................................................................................. 105 54
--------- ---------
40,397 46,098
Less current portion........................................................................ (1,103) (7,613)
--------- ---------
$ 39,294 $ 38,485
--------- ---------
--------- ---------
</TABLE>
Scheduled maturities of long-term debt outstanding at September 30, 1996,
after giving effect to the above amendments, are: 1997--$7.6 million;
1998--$38.5 million.
At September 30, 1996, the Company has outstanding a standby letter of
credit under the revolving credit facility of $1.6 million, in favor of the
Company's workers compensation program administrator, which is maintained as
security for the obligation for unpaid claims.
F-16
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. CAPITAL LEASE OBLIGATIONS
The Company leases certain of its equipment under capital leases.
Obligations under capital lease agreements are payable as follows (in
thousands):
<TABLE>
<S> <C>
Year ended September 30:
1997............................................................. $ 1,244
1998............................................................. 722
1999............................................................. 405
---------
2,371
Less amounts representing interest............................... (125)
---------
2,246
Current portion.................................................. (1,244)
---------
Long-term capitalized lease obligations.......................... $ 1,002
---------
---------
</TABLE>
9. HISTORICAL EARNINGS (LOSS) PER SHARE
The historical earnings (loss) per share amounts, as required by Generally
Accepted Accounting Principles, are as follows (in thousands, except per share
data):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
----------------------------------------
<S> <C> <C> <C>
1994 1995 1996
------------ ------------ ------------
Historical net income (loss)............................................ $5,141 $(2,845) $ (7,092)
Historical net income (loss) attributable to common
stockholders.......................................................... 543 (7,443) (11,690)
Earnings (loss) per share............................................... $ .40 $ (4.61) $ (6.78)
Weighted average number of common
and common stock equivalents.......................................... 4,587,185 1,613,993 1,723,595
</TABLE>
Earnings (loss) per share is computed by dividing net income (loss), after
reduction for dividends on the 9% Preferred Stock and dividends which would have
been payable under the mandatory redemption features of the Series B Preferred
Stock by the weighted average number of common and common equivalent shares
outstanding. Common equivalent shares included in the computation represent
shares issuable upon assumed exercise of stock options and warrants (calculated
using the modified treasury stock method) in years where the assumed exercise
has a dilutive effect. Common stock equivalents are antidilutive in 1994 and
1996. Fully diluted earnings per share are antidilutive for all periods
presented.
10. DEFERRED RENT
The Company entered into lease agreements for office space in which monthly
rental payments are deferred for a specific period of time. The resulting
liability for deferred rent of $688,000 and $645,000 at September 30, 1995 and
1996, respectively, represents the difference between the monthly expense
accrued on a straight-line basis from the date of occupancy through the
expiration of the lease terms and the actual payments in accordance with the
lease agreement.
F-17
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. INCOME TAXES
Significant components of the provision (benefit) for income taxes are as
follows (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal...................................................... $ 3,050 $ 522 $ (1,500)
State........................................................ 479 90 --
Deferred:
Federal...................................................... (326) (1,894) 1,206
State........................................................ (53) (306) 294
--------- --------- ---------
$ 3,150 $ (1,588) $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Deferred tax liabilities:
Tax over book depreciation.............................................. $ 374 $ 507
Prepaid insurance....................................................... 9 24
--------- ---------
Total deferred tax liabilities............................................ 383 531
Deferred tax assets:
Book over tax amortization.............................................. 50 276
Deferred compensation amortization...................................... 515 491
Accrued expenses........................................................ 1,045 1,446
Bad debt reserves....................................................... 610 --
Restructuring reserves.................................................. 1,061 765
Other................................................................... 45 278
Valuation allowance..................................................... -- (2,182)
--------- ---------
Total deferred tax assets............................................... 3,326 1,074
--------- ---------
Net deferred tax assets................................................... $ 2,943 $ 543
--------- ---------
--------- ---------
</TABLE>
F-18
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. INCOME TAXES (CONTINUED)
The reconciliation of income tax attributable to continuing operations
computed at the U.S. federal statutory tax rates to income tax expense (benefit)
is (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Tax at U.S. statutory rate..................................... $ 2,819 $ (1,507) $ (2,411)
State income tax--net of federal tax benefit................... 278 (160) (257)
Permanent differences.......................................... 33 166 190
Other items, net............................................... 20 (87) 296
Change in valuation allowance.................................. -- -- 2,182
--------- --------- ---------
$ 3,150 $ (1,588) $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
12. EMPLOYEE BENEFIT PLANS
Effective October 1, 1989, the Company formed an Employee Stock Ownership
Plan (ESOP) covering all employees who meet service period requirements.
Effective October 1, 1992, the Company amended the ESOP to exclude certain
management employees from participation. The Company, at its option, may make
annual contributions to the ESOP in the form of Common Stock or cash.
The ESOP initially obtained a loan for approximately $2.9 million from the
Company to acquire its shares. On August 11, 1994, the Company refinanced the
ESOP loan. Under the terms of the new agreement, the ESOP trust is directly
liable for principal and interest payments, with the Company serving as
guarantor. The Company will make contributions to the ESOP equal to the required
principal and interest payments on the note. Interest accrues at the prime rate
or certain LIBOR rates plus 2%. Contribution expense related to the ESOP was
approximately $396,000 in 1994, $669,000 in 1995 and $655,000 in 1996. The
outstanding balance of the ESOP loan was approximately $1.8 million and $1.3
million at September 30, 1995 and 1996, respectively.
The Company also has a voluntary 401(k) savings plan covering all eligible
employees. Contributions made by the Company to the 401(k) plan are based on a
specified percentage of employee contributions. The Company's contributions to
the plan totaled approximately $180,000, $234,000 and $294,000 in 1994, 1995 and
1996, respectively.
During 1993, the Company entered into agreements with certain officers
pursuant to which the Company will provide annual supplemental retirement
benefits for life upon retirement, or for ten years upon death. The projected
benefit obligation accrued at September 30, 1994 was $309,000. During 1995, this
program was terminated and the related life insurance policies were thereafter
distributed to the participants. As a result of the termination, the Company
realized a reduction of benefit costs of approximately $120,000 in 1995.
13. RELATED PARTY TRANSACTIONS
The Company has engaged in the following transactions with related parties:
- At September 30, 1994, 1995 and 1996, notes receivable from stockholders,
employees and officers were approximately $394,000, $121,500 and $84,000,
respectively. The notes bear interest ranging from five to nine percent
and are due through October 1997.
F-19
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. RELATED PARTY TRANSACTIONS (CONTINUED)
- The Company has noncompete agreements with two principal stockholders,
executive officers and directors providing for aggregate future payments
of $270,000. The agreements expire in June 1998. Payments made under the
noncompete agreements totaled $375,000 in 1994, $135,000 in 1995 and
$160,000 in 1996. At September 30, 1995 and 1996, $520,000 and $447,000,
respectively, of previously paid noncompete payments are being deferred
over future periods.
- The Company has employment agreements with certain key employees totaling
approximately $1,100,000 annually.
14. RESTRUCTURING COSTS
During the third quarter of 1995, as a result of the Company's review of its
operating strategies and in order to improve competitiveness and future
profitability, the Company recorded a restructuring charge of $2.0 million in
connection with the establishment of a severance reserve for the involuntary
termination of 15 home office employees. During 1996, employees were terminated
under the plan at a total cost of $2.0 million.
During the fiscal year ended 1996, the Company recorded a $2.1 million
restructuring charge related to the reorganization of its regional and corporate
operations. The charge was for the establishment of a severance reserve for
approximately 13 employees terminated during the reorganization. During 1996,
the Company paid approximately $600,000 of severance costs. The remaining amount
will be paid out during the first half of fiscal 1997.
15. COMMITMENTS AND CONTINGENCIES
The Company contracts with various health care providers for inpatient
services for its patients. In most cases, the Company is charged for inpatient
services at negotiated rates determined on a per diem basis. In some instances,
the Company leases or makes arrangements for the use of the space and operates
inpatient units using its own employees. These lease costs are included in
hospice program expenses in the accompanying consolidated financial statements.
The Company also leases office space at its various locations.
Total rental expense was approximately $4.1 million, $5.7 million and $6.9
million for the years ended September 30, 1994, 1995 and 1996, respectively.
Future minimum rental commitments under noncancelable operating leases for
the years subsequent to September 30, 1996 through July 31, 2001 (expiration)
are as follows (in thousands):
<TABLE>
<S> <C>
1997............................................................... $ 5,015
1998............................................................... 4,069
1999............................................................... 3,631
2000............................................................... 2,233
2001............................................................... 1,296
---------
$ 16,244
---------
---------
</TABLE>
F-20
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company is self-insured for workers compensation insurance coverages.
The Company records an accrual for the self-insured portion of these costs and
maintains certain per occurrence and aggregate stop-loss insurance for this
self-insured program.
In May 1995, President Clinton announced a coordinated effort by federal and
state agencies, named Operation Restore Trust (ORT), to review industry
practices and regulatory compliance of home health agencies, nursing homes, and
certain durable medical equipment suppliers. This initiative was targeted to
California, Florida, Illinois, Texas, and New York, the five states in which
Medicare spending is the highest. In June 1995, federal officials announced the
expansion of ORT in these five states to hospice issues.
As a part of its review of hospices under ORT, the OIG has conducted on-site
reviews at various of the Company's hospice programs and at the Company's
corporate office. The OIG has reviewed the charts on a total of 1,150 patients
at six of the Company's locations. The sample selected by the auditors was
comprised of patients whose participation in the hospice program exceeded 210
days. Based on discussions with the OIG, the Company understands that as of
September 1995 the auditors had formed a preliminary view that of the 215, 211,
and 106 medical records of patients reviewed in the three programs, they
considered 164, 141 and 85, respectively, not to be eligible for Medicare
hospice services. With respect to the first two of these programs, they
considered the charts for 30 and 16 (and none with respect to the third program)
to be inconclusive as to whether the beneficiaries were terminally ill. No
formal reports have been issued by the OIG on the outcome of the audits at the
Company locations.
The Company strongly disagrees with the OIG's apparent interpretation and
application of the Medicare hospice eligibility requirements, and believes that
it met applicable Medicare eligibility documentation requirements in all
material respects. The Company understands that the activities of the OIG Office
of Audit Services and Office of Investigations involving the Company are
ongoing. The scope and ultimate disposition of the ORT and OIG activities, and
the possible impact on the Company of such activities cannot currently be
predicted.
The Company is also involved in various disputes and litigation arising in
the ordinary course of business. After consultation with legal counsel,
management estimates that these matters will be resolved without material
adverse effect on the Company's future financial position or results from
operations.
16. FOURTH QUARTER ADJUSTMENTS
In the fourth quarter of 1996, the Company increased the allowance for
uncollectible accounts receivable by $2,500,000 in addition to the normal
monthly charge. Also during the fourth quarter of 1996, the Company recorded a
restructuring charge of $2,345,000 (see Note 14).
F-21
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(AMOUNTS IN THOUSANDS)
JUNE 30, 1997
<TABLE>
<CAPTION>
(UNAUDITED)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................................................... $ 9,225
Accounts receivable from patient services, net..................................................... 14,484
Income tax receivable.............................................................................. 306
Deferred taxes--current............................................................................ 543
Other current assets............................................................................... 1,216
-----------
Total current assets................................................................................. 25,774
Property and equipment, net.......................................................................... 13,206
Notes receivable from stockholders and employees..................................................... 62
Intangible assets, net............................................................................... 45,783
Other assets......................................................................................... 1,034
-----------
Total assets......................................................................................... $ 85,859
-----------
-----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable................................................................................... $ 15,220
Accrued compensation............................................................................... 8,096
Accrued health insurance........................................................................... 494
Other accrued expenses............................................................................. 8,084
Current portion of long-term debt and capital lease obligations.................................... 9,533
-----------
Total current liabilities............................................................................ 41,427
Short-term debt and revolving credit facility expected to be refinanced.............................. 30,400
Capital lease obligations............................................................................ 827
Other long-term liabilities.......................................................................... 373
Guarantee of Employee Stock Ownership Plan loan...................................................... 959
Commitments and contingencies
9% preferred stock................................................................................... 27,376
Series B preferred stock............................................................................. 34,741
Stockholders' deficit:
Common Stock....................................................................................... 17
Additional paid-in capital......................................................................... (32,403)
Indebtedness of Employee Stock Ownership Plan...................................................... (959)
Accumulated deficit.................................................................................. (16,899)
-----------
Total stockholders' deficit.......................................................................... (50,244)
-----------
Total liabilities and stockholders' deficit.......................................................... $ 85,859
-----------
-----------
</TABLE>
See accompanying notes.
F-22
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30
------------------------
<S> <C> <C>
1996 1997
------------ ----------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
Net revenue............................................................................ $ 161,657 $ 150,323
Operating expenses:
Hospice program expenses............................................................. 131,319 121,604
Central support services............................................................. 17,290 16,120
Provision for bad debts.............................................................. 4,035 3,283
Depreciation......................................................................... 3,993 4,308
Amortization of goodwill............................................................. 1,123 1,248
Restructuring costs.................................................................. -- 3,480
------------ ----------
157,760 150,043
------------ ----------
Income from operations................................................................. 3,897 280
Gain on terminated merger.............................................................. -- 1,600
Gain on sale of assets................................................................. -- 484
Interest and other income.............................................................. 222 364
Interest expense....................................................................... (3,391) (3,652)
------------ ----------
Income (loss) before income taxes...................................................... 728 (924)
Provision for income taxes............................................................. 248 --
------------ ----------
Net income (loss)...................................................................... $ 480 $ (924)
------------ ----------
------------ ----------
Net loss attributable to common stockholders........................................... $ (2,968) $ (4,372)
------------ ----------
------------ ----------
Supplemental net loss attributable to common stockholders.............................. $ (1,393) $ (2,797)
------------ ----------
------------ ----------
Supplemental net loss per share........................................................ $ (0.37) $ (0.74)
------------ ----------
------------ ----------
Supplemental weighted average number of common and common stock equivalents............ 3,748,888 3,759,526
------------ ----------
------------ ----------
</TABLE>
See accompanying notes.
F-23
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30
--------------------
<S> <C> <C>
1996 1997
--------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............................................................................ $ 480 $ (924)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation............................................................................. 3,993 4,308
Amortization of goodwill and deferred financing costs.................................... 1,784 1,273
Deferred income taxes.................................................................... 493 --
Provision for losses on accounts receivable.............................................. 4,035 3,283
Gain on sale of assets................................................................... -- (484)
(Increase) decrease in assets:
Accounts receivable from patient services.............................................. (71) (895)
Income tax receivable.................................................................. 832 2,802
Other current assets................................................................... (1,795) 2,108
Increase (decrease) in liabilities:
Accounts payable and accrued expenses.................................................. (2,886) 1,773
Other long-term liabilities............................................................ (9) (106)
--------- ---------
Net cash provided by operating activities.................................................... 6,856 13,138
INVESTING ACTIVITIES
Purchase of property and equipment, net...................................................... (4,359) (2,498)
Cash paid for net assets of business acquired................................................ (1,770) --
Proceeds from sale of assets................................................................. -- 555
Increase in intangible assets................................................................ (1,982) (232)
Decrease in notes receivable................................................................. -- 22
Decrease in other assets..................................................................... 101 50
Decrease in indebtedness of Employee Stock Ownership Plan.................................... 357 357
--------- ---------
Net cash used in investing activities........................................................ (7,653) (1,746)
FINANCING ACTIVITIES
Proceeds from long-term debt and line of credit.............................................. 2,751 --
Principal payments on long-term debt and capital lease obligations........................... (2,538) (7,586)
Dividends on 9% preferred stock.............................................................. (1,215) --
Purchase of common stock..................................................................... (21) --
Proceeds from exercise of stock options and related income tax benefits...................... 28 801
Warrants granted............................................................................. -- (376)
Proceeds from repayment of ESOP loan (ESOP contribution)..................................... (357) (357)
--------- ---------
Net cash used in financing activities........................................................ (1,352) (7,518)
--------- ---------
Net (decrease) increase in cash.............................................................. (2,149) 3,874
Cash and cash equivalents, beginning of period............................................... 4,545 5,351
--------- ---------
Cash and cash equivalents, end of period..................................................... $ 2,396 $ 9,225
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
F-24
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine month period ended June 30, 1997
are not necessarily indicative of the result that may be expected for the year
ended September 30, 1997. For further information, refer to the Company's
consolidated financial statements and footnotes thereto for the year ended
September 30, 1996.
The condensed consolidated financial statements include the accounts of
Vitas Healthcare Corporation and its subsidiaries (the Company). All significant
intercompany accounts and transactions have been eliminated in consolidation.
On September 15, 1997, the Company's Board of Directors approved a 1 for
2.7273 reverse stock split, subject to stockholders approval and the Company's
proposed initial public offering (the Offering). As a result, all references in
the financial statements to number of shares, per share amounts and stock
options and warrant data have been restated to give retroactive recognition to
such reverse stock split.
Supplemental net loss per share is computed by dividing the supplemental net
loss, after reduction for dividends on the 9% Preferred Stock, by the
supplemental weighted average number of common shares outstanding. Supplemental
net loss used in the calculation gives effect to the elimination of the
dividends which would have been payable under the mandatory redemption features
of the Series B Preferred Stock. Common stock equivalents are excluded from the
calculation of supplemental weighted average shares outstanding and, pursuant to
the Securities and Exchange Commission's Staff Accounting Bulletins, such
computations include all common and common stock equivalents issued within the
12 months preceding the Offering as if they were outstanding for all periods
presented. In addition, all outstanding preferred stock that converts in
connection with the Offering are included in the computation as common
equivalent shares even when the effect is antidilutive.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share (FASB No. 128).
FASB No. 128, which applies to entities with publicly held common stock,
simplifies the standards for computing earnings per share previously found in
Accounting Principles Board Opinion No. 15, Earnings per Share, and makes such
computation comparable to international earnings per share standards. FASB No.
128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods, earlier adoption is not permitted.
The statement requires restatement of all prior period earnings per share data
presented in the period of adoption. Management is currently reviewing the
provision of FASB No. 128; however, it does not believe that adoption of this
new accounting pronouncement will have a material impact on the calculation and
presentation of earnings per share.
2. TERMINATED MERGER
On June 6, 1996, the Company signed a letter of intent to merge with a
subsidiary of Apria Healthcare Group, Inc. (Apria) and entered into a merger
agreement with Apria and one of Apria's subsidiaries dated as of June 28, 1996.
On November 12, 1996, Apria announced its intention to terminate the merger
agreement. Between the date the letter of intent was executed and the
announcement of termination, the
F-25
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 1997
2. TERMINATED MERGER (CONTINUED)
Company incurred costs of approximately $2.4 million related to the terminated
merger transaction, of which $1.5 million were incurred through September 30,
1996.
On November 26, 1996, the Company entered into a settlement agreement
whereby Apria agreed to pay the Company $4 million to settle and discharge any
and all disputes and controversies between the companies arising from or
relating to the merger or related activities. The Company received payment on
November 27, 1996. Consequently, the settlement amount, net of costs incurred,
has been recorded as a gain on terminated merger.
3. INCOME TAXES
Income taxes have been provided at the effective tax rate expected for the
year. The Company's effective tax rate differs from statutory rates primarily as
a result of certain costs which are not deductible for income tax purposes and
state income taxes, net of federal benefit.
4. CONTINGENCIES
The Company contracts with various health care providers for inpatient
services for its patients. In most cases, the Company is charged for inpatient
services at negotiated rates determined on a per diem basis. In some instances,
the Company leases or makes arrangements for the use of the space and operates
inpatient units using its own employees. These lease costs are included in
hospice program expenses in the accompanying condensed consolidated financial
statements. The Company also leases office space at its various locations.
The Company is self-insured for workers compensation insurance coverages.
The Company records an accrual for the self-insured portion of these costs and
maintains certain per occurrence and aggregate stop-loss insurance for this
self-insured program.
In May 1995, President Clinton announced a coordinated effort by federal and
state agencies, named Operation Restore Trust (ORT), to review industry
practices and regulatory compliance of home health agencies, nursing homes, and
certain durable medical equipment suppliers. This initiative initially was
targeted to California, Florida, Illinois, Texas, and New York, the five states
in which Medicare spending is the highest. In June 1995, federal officials
announced the expansion of ORT in these five states to hospice issues
In May, 1997, HHS announced the expansion of ORT during the next two years
to include 12 additional states. As a result, the Company operates in six of the
seventeen ORT states. As a part of its review of hospices under ORT, the OIG has
conducted on-site reviews at various of the Company's hospice programs and at
the Company's corporate office. The OIG has reviewed the charts on a total of
1,150 patients at six of the Company's locations. The sample selected by the
auditors was comprised of patients whose participation in the hospice program
exceeded 210 days. Based on discussions with the OIG, the Company understands
that as of September 1995, the auditors had formed a preliminary view that of
the 215, 211, and 106 medical records of patients reviewed in the three
programs, they considered 164, 141 and 85, respectively, not to be eligible for
Medicare hospice services. With respect to the first two of these programs, they
considered the charts for 30 and 16 (and none with respect to the third program)
to be inconclusive as to whether the beneficiaries were terminally ill. No
formal reports have been issued by the OIG on the outcome of the audits at the
Company locations.
The Company strongly disagrees with the apparent interpretation and
application of the Medicare hospice eligibility requirements, and believes that
it met applicable Medicare eligibility documentation
F-26
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 1997
4. CONTINGENCIES (CONTINUED)
requirements in all material respects. The Company understands that the
activities of the OIG Office of Audit Services and Office of Investigations
involving the Company are ongoing. The scope and ultimate disposition of the ORT
and OIG activities, and the possible impact on the Company of such activities
cannot currently be predicted.
The Company is also involved in various disputes and litigation arising in
the ordinary course of business. After consultation with legal counsel,
management estimates that these matters will be resolved without material
adverse effect on the Company's future financial position or results from
operations.
5. DEBT
The Company has entered into a number of amendments to the revolving credit
agreement with the latest amendment dated as of September 1, 1997. As a result
of these amendments, the maturity date of the credit facilities was extended to
the earlier of a significant recapitalization event, as defined by the
agreement, or October 1, 1998. The amended credit facilities prohibit the
Company from making dividend payments on its common stock, and requires, among
other things, that the Company maintain a minimum net worth, meet quarterly
EBITDA requirements and maintain a minimum liquidity, defined as cash or cash
equivalents and amounts available under the revolving credit facility of $4
million.
Also, in connection with the last two extensions of the revolving credit
agreement, dated as of March 24, 1997 and September 1, 1997, the Company issued
two warrants to the lender purchase up to an aggregate of 285,429 shares of the
Company's Common Stock at an exercise price of $.03 per share. The warrants are
exercisable at certain dates if amounts due under the revolving credit facility
or term loan are still outstanding at those dates. The issue dates and the
number of shares which may be acquired with each warrant are as follows:
<TABLE>
<CAPTION>
DATE EXERCISABLE AMOUNT
- ----------------------------------------------------------------------------------------------- ---------
<S> <C>
July 18, 1997.................................................................................. 71,358
August 31, 1997................................................................................ 35,678
November 30, 1997.............................................................................. 35,679
January 31, 1998............................................................................... 35,678
April 30, 1998................................................................................. 35,679
July 31, 1998.................................................................................. 35,678
September 30, 1998............................................................................. 35,679
</TABLE>
The warrants are valued at the date they become exercisable. The warrant to
purchase 71,358 shares of the Company's Common Stock had a value of
approximately $712,000 at July 18, 1997, the date it became exercisable, and the
warrant to purchase 35,678 shares of the Company's common stock had a value of
approximately $534,000 on August 31, 1997. These amounts are being amortized
over the period from the date of exercisability to the next date of
exercisability. The amount of amortization is being charged to interest expense.
On June 16, 1997, the terms of a 9% subordinated note payable were modified
to provide for monthly payments of $135,000, with the remaining balance to be
paid at the earlier of May 31, 1998 or a significant recapitalization event, as
defined in the agreement. In connection with the modification, the Company made
a $900,000 payment of principal and accrued interest on the note and also paid
an extension fee of $100,000. The fee is being amortized using the interest
method.
F-27
<PAGE>
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 1997
6. REDEEMABLE PREFERRED STOCK
The Company and the preferred stockholder have, over time, agreed to defer
the redemption date of the 9% Preferred Stock. On September 18, 1997 the Company
and the preferred stockholder again agreed to defer the mandatory redemption
date of the 9% Preferred Stock. The amended redemption schedule is as follows:
<TABLE>
<CAPTION>
MANDATORY NUMBER OF REDEMPTION
REDEMPTION SHARES TO BE PRICE PER
DATE REDEEMED SHARE
- ----------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
October 1, 1998.............................................................. 81,000 $ 102
October 1, 1998.............................................................. 81,000 101
October 1, 1998.............................................................. 54,000 100
December 31, 1998............................................................ 54,000 100
</TABLE>
As a part of the agreement to extend the redemption dates of the 9% Preferred
Stock, contemporaneously with the Offering the preferred stockholder agreed to
exercise at least $3 million (but no more than $5 million) of Series A warrants.
The issuance of warrants in connection with the amendment to the revolving
credit facility (see Note 7), results in an adjustment to the number of shares
of common stock which can be acquired and the related exercise price to 955,789
shares at $12.16 per share for Series A and 522,289 shares at $12.19 per share
for Series B. The Company has agreed to repurchase Series B for the difference
between the Offering price and the exercise price, but not less than $700,000.
If the 9% Preferred Stock is not redeemed on or prior to March 31, 1998, the
expiration date of both Series A and Series B will be extended by that number of
days equal to the number of days beyond March 31, 1998 that any portion of the
9% Preferred Stock is outstanding but not later than December 16, 2005. The
Company also agreed to extend through December 31, 1998 the payment of the
redemption price of $101 per share for the 9% Preferred Stock if redeemed at the
Company's option.
In August 1997, the Company made cash dividend payment on the 9% Preferred
Stock amounting to approximately $600,000.
7. RESTRUCTURING COSTS
During the first quarter of 1997, management approved a plan to restructure
its local program's patient care teams and eliminate certain regional positions.
The charge of approximately $3.5 million relates to the establishment of a
severance reserve for approximately 300 employees to be involuntarily terminated
during the restructuring. As of June 30, 1997, the Company has paid out
approximately $1.5 million of severance costs.
F-28
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Community Hospice Care, Inc.
Anaheim Hills, California
We have audited the accompanying combined statements of income,
stockholders' equity and cash flows of Community Hospice Care, Inc., Community
Hospice Care of Orange County, Community Hospice Care of San Diego, Community
Hospice Care--Coastal Cities, Community Hospice Care--Inland Cities, Community
Hospice Care--San Gabriel Cities and Community Hospice Care of San Fernando and
Riverside (the Partnership) for the year ended December 31, 1994. These
financial statements are the responsibility of management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined results of operations and cash flows of
Community Hospice Care, Community Hospice Care of Orange County, Community
Hospice Care of San Diego, Community Hospice Care--Coastal Cities, Community
Hospice Care--Inland Cities, Community Hospice Care--San Gabriel Cities and
Community Hospice Care of San Fernando and Riverside Inc. for the year ended
December 31, 1994, in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
/s/ ERNST & YOUNG, LLP
</TABLE>
Miami, Florida
February 20, 1995
F-29
<PAGE>
COMMUNITY HOSPICE CARE, INC. ET AL.
COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C>
Net revenue.................................................................... $55,090,562
Operating expenses:
Hospice program expenses..................................................... 47,284,968
Central support services..................................................... 3,713,992
Provision for bad debts...................................................... 534,196
Depreciation and amortization................................................ 279,897
----------
51,813,053
Income from operations......................................................... 3,277,509
Interest and other income...................................................... 105,039
Interest expense............................................................... (341,157)
----------
Income before income taxes..................................................... 3,041,391
Provision for income taxes..................................................... (6,400)
----------
Net income..................................................................... $3,034,991
----------
----------
</TABLE>
See accompanying notes.
F-30
<PAGE>
COMMUNITY HOSPICE CARE, INC. ET AL.
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
GENERAL LIMITED TOTAL
COMMON ACCUMULATED PARTNERS' PARTNERS' EQUITY
STOCK DEFICIT EQUITY EQUITY ELIMINATION (DEFICIT)
----------- ------------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994.......... $ 1,000 $ (4,821,406) $ 457,543 $ 2,592,749 $ (457,543) $ (2,227,657)
Net (loss) income for the year...... -- (2,642,301) 1,001,875 5,677,292 (1,001,875) 3,034,991
----------- ------------- ----------- ------------ ------------- -------------
Balance at December 31, 1994........ $ 1,000 $ (7,463,707) $ 1,459,418 $ 8,270,041 $ (1,459,418) $ 807,334
----------- ------------- ----------- ------------ ------------- -------------
----------- ------------- ----------- ------------ ------------- -------------
</TABLE>
See accompanying notes.
F-31
<PAGE>
COMMUNITY HOSPICE CARE, INC. ET AL.
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income...................................................................... $ 3,034,991
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization................................................. 279,897
Provision for losses on accounts receivable................................... 534,196
(Increase) decrease in assets:
Accounts receivable from patient services................................... (5,195,010)
Amounts due from affiliates................................................. 11,538
Other current assets........................................................ (217,557)
Other assets................................................................ (147,471)
Increase in liabilities:
Accounts payable and accrued expenses....................................... 3,210,735
-----------
Net cash provided by operating activities....................................... 1,511,319
INVESTING ACTIVITIES
Purchase of property and equipment, net......................................... (214,700)
-----------
Net cash used in investing activities........................................... (214,700)
FINANCING ACTIVITIES
Proceeds from line of credit.................................................... 947,548
Proceeds from short-term debt................................................... 1,400,000
Proceeds from stockholder loan.................................................. 100,000
Principal payments on line of credit............................................ (1,135,527)
Principal payments on note payable.............................................. (50,000)
Principal payments on stockholder loan.......................................... (100,000)
Amounts due from stockholders................................................... (1,900,000)
-----------
Net cash used in financing activities........................................... (737,979)
Net increase in cash............................................................ 558,640
Cash, beginning of period....................................................... 468,291
-----------
Cash, end of period............................................................. 1,026,931
-----------
-----------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash interest paid.............................................................. $ 266,587
-----------
-----------
Cash income taxes paid.......................................................... $ 6,400
-----------
-----------
</TABLE>
See accompanying notes.
F-32
<PAGE>
COMMUNITY HOSPICE CARE, INC. ET AL.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying combined financial statements include the accounts of
Community Hospice Care, Inc. (the "Company"), a California S corporation, and
the accounts of Community Hospice Care of Orange County, Community Hospice Care
of San Diego, Community Hospice Care--Coastal Cities, Community Hospice
Care--Inland Cities, Community Hospice Care--San Gabriel Cities and Community
Hospice Care of San Fernando and Riverside, a 31-bed inpatient facility, all of
which are California Limited Partnerships (the "Partnerships"). The Company is
the sole general partner holding a 15% interest in each of the Partnerships and
exercises exclusive control over their operations. The stockholders of the
Company hold the remaining 85% limited partnership interest. All significant
intercompany transactions and balances have been eliminated.
SALE OF COMPANY OPERATIONS
On February 17, 1995, the Company sold their combined hospice operations, in
an asset sale, to Vitas Healthcare Corporation of California (Vitas-California),
a newly formed wholly-owned subsidiary of Vitas Healthcare Corporation located
in Miami, Florida. Certain assets and their operations were purchased for a
total of $36 million, of which $24.6 million was cash and $11.4 million was
subordinated notes receivable due in various monthly installments through 1998,
plus the assumption of certain liabilities. Amounts due from stockholders and
affiliates were settled on the purchase date using the proceeds from the sale.
Assets sold included all of the combined tangible and intangible assets of
the Company and the Partnerships, except for their cash, accounts receivable,
certain refundable deposits and accounts payable. Liabilities of approximately
$929,000 assumed by Vitas-California in connection with the sale included
accrued compensation for vacation and sick time, building and equipment lease
obligations and health insurance obligations.
As of February 18, 1995, the Company and the Partnerships ceased operations
and are liquidating their accounts receivable and retained obligations.
COMPANY
The Partnerships provides palliative medical care and related services to
terminally ill patients through state-licensed and federally-certified hospice
programs. Palliative medical care is care that focuses primarily on improving
the quality of life of terminally ill patients and their families, as opposed to
attempting to "cure" the underlying or end stage disease. Services provided by
the Partnerships include physician services, nursing care, social services,
counseling services and pastoral care, short-term inpatient and respite care,
drugs for symptom management and pain control, medical equipment and supplies,
home health aide and homemaker services, bereavement counseling and ancillary
services, such as physical, speech and occupational therapy. In addition, the
Partnerships provides various support and psychosocial services and bereavement
care to families of its patients.
The Company provides administrative support and management services to the
Partnerships.
NET REVENUE
Net revenue is reported at the estimated net realizable amounts from
patients, third-party payors (primarily Medicare and Medi-Cal), and others for
services rendered. Payors may determine that the
F-33
<PAGE>
COMMUNITY HOSPICE CARE, INC. ET AL.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
services provided are not covered and do not qualify for reimbursement.
Management has provided an estimate for such adjustments. Changes in the
estimate will be adjusted in future periods as final settlements are determined.
The percentage of net revenue derived under the Medicare and Medi-Cal programs
was 95% in 1994.
START-UP COSTS
The Company expenses costs incident to the start-up of hospice operations in
new locations as incurred.
PROPERTY AND EQUIPMENT
Property and equipment, including improvements to existing facilities, are
recorded at cost. Depreciation and amortization are calculated principally using
the straight-line method over the estimated useful lives of the assets.
Estimated useful lives for major asset categories are 10 years for leasehold
improvements and 5 to 7 years for furniture and equipment.
2. INCOME TAXES
The Company and the Partnerships file separate federal and California income
tax returns.
In January 1993, the Company elected by consent of its stockholders to be
taxed under the provisions of Subchapter S of the Internal Revenue Code. Under
those provisions, the Company will not pay federal corporate income taxes.
Instead, the stockholders will be responsible for individual federal income
taxes on the Company's taxable income. Subchapter S is recognized in the state
of California; however, California still taxes corporate income. Therefore, the
Company will continue to be responsible for state income taxes on the Company's
taxable income.
3. EMPLOYEE BENEFIT PLAN
The Company and the Partnerships have a profit sharing plan (the "Plan")
qualifying under Section 401(k) of the Internal Revenue Code. The Plan covers
substantially all employees. Employees become eligible to participate in the
Plan upon ninety days after employment.
The Plan allows participants to make voluntary contributions to the Plan on
a pre-tax basis. The voluntary contributions must not be less than 1% or more
than 15% of the participants' compensation.
The Company and the Partnerships match 50% of employee contributions to the
Plan up to $500 per participant annually. Additionally, the Company and the
Partnerships may make discretionary contributions to the Plan for the benefit of
the participants. Total contributions charged to operations for the year ended
December 31, 1994 approximated $120,000.
4. RELATED PARTY TRANSACTIONS
During the year ended December 31, 1994, the Company paid management fees to
its stockholders totaling $642,937. The above fees are included in central
support services in the combined statement of income.
F-34
<PAGE>
COMMUNITY HOSPICE CARE, INC. ET AL.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
4. RELATED PARTY TRANSACTIONS (CONTINUED)
During 1994, the Partnerships paid approximately $199,000, included in
hospice program expenses, to nursing homes owned by a shareholder.
5. COMMITMENTS AND CONTINGENCIES
The Company and the Partnerships lease their principal offices and the
31-bed inpatient facility under noncancellable operating lease agreements
expiring at various dates through 2001. Certain of the lease agreements provide
for renewal options of up to six additional years. Two of the stockholders have
personally guaranteed these operating leases.
Future minimum rental commitments under noncancelable operating leases for
the years subsequent to December 31, 1994 are as follows:
<TABLE>
<S> <C>
1995............................................................. 1,538,257
1996............................................................. 1,417,585
1997............................................................. 1,219,851
1998............................................................. 788,939
1999............................................................. 449,509
Thereafter....................................................... 280,542
---------
5,694,683
---------
---------
</TABLE>
Future minimum rental payments required for equipment leased under
noncancellable lease agreements are not significant. Total rental expense for
the year ended December 31, 1994 approximated $1,684,000.
The Company and the Partnerships maintain a $1,000,000 per occurrence,
$3,000,000 aggregate malpractice insurance policy. Occurrence basis insurance
covers claims that occur during the policy term regardless of when the claim was
reported.
As of December 31, 1994, the Company and the Partnerships have no
malpractice loss accrual and there is no deductible liability for claims made.
Additionally, neither management nor the insurance carrier are aware of any
claims made against the Company or Partnerships.
F-35
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES
OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT
RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER
IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 10
Use of Proceeds........................................................... 19
Dividend Policy........................................................... 19
Capitalization............................................................ 20
Dilution.................................................................. 21
Selected Consolidated Financial Data...................................... 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 24
Business.................................................................. 36
Management................................................................ 59
Principal Stockholders.................................................... 70
Certain Transactions...................................................... 73
Description of Capital Stock.............................................. 74
Description of Indebtedness............................................... 81
Shares Eligible for Future Sale........................................... 83
Underwriting.............................................................. 85
Legal Matters............................................................. 87
Experts................................................................... 87
Additional Information.................................................... 87
Index to Consolidated Financial Statements................................ F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THE PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, 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
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
3,800,000 SHARES
[LOGO]
[LOGO]
VITAS HEALTHCARE
CORPORATION
COMMON STOCK
---------------------
PROSPECTUS
---------------------
FURMAN SELZ
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered hereby, other than
underwriting discounts and commissions. All amounts are estimated except for the
Securities and Exchange Commission registration fee and the National Association
of Securities Dealers, Inc. ("NASD") filing fee.
<TABLE>
<CAPTION>
PAYABLE BY
REGISTRANT
-----------
<S> <C>
SEC registration fee.............................................................. $ 21,188
NASD filing fee................................................................... 7,492
Nasdaq National Market entry fee.................................................. 26,850
Blue Sky fees and expenses........................................................ *
Accounting fees and expenses...................................................... *
Legal fees and expenses........................................................... *
Printing and engraving expenses................................................... *
Registrar and transfer agent's fees............................................... *
Miscellaneous fees and expenses................................................... *
-----------
Total........................................................................... $ *
-----------
-----------
</TABLE>
- ------------------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law (the "Delaware
Law"), a corporation may indemnify its directors, officers, employees and agents
and its former directors, officers, employees and agents and those who serve, at
the corporation's request, in such capacities with another enterprise, against
expenses (including attorneys' fees), as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding in which they or
any of them were or are made parties or are threatened to be made parties by
reason of their serving or having served in such capacity. The Delaware Law
provides, however, that such person must have acted in good faith and in a
manner he or she reasonably believed to be in (or not opposed to) the best
interests of the corporation and, in the case of a criminal action, such person
must have had no reasonable cause to believe his or her conduct was unlawful. In
addition, the Delaware Law does not permit indemnification in an action or suit
by or in the right of the corporation, where such person has been adjudged
liable to the corporation, unless, and only to the extent that, a court
determines that such person fairly and reasonably is entitled to indemnity for
expenses the court deems proper in light of liability adjudication. With respect
to present or former directors and officers, indemnity is mandatory to the
extent a claim, issue or matter has been successfully defended.
The Company's Amended and Restated By-laws (the "By-laws") provide for
mandatory indemnification of directors and officers generally to the same extent
authorized by the Delaware Law. Under the By-laws, the Company shall advance
expenses incurred by an officer or director in defending any such action if the
director or officer undertakes to repay such amount if it is determined that he
or she is not entitled to indemnification. Insofar as indemnification for
liabilities under the Securities Act may be permitted to directors, officers or
controlling persons of the Company pursuant to the Charter and Bylaws, as
amended, of the Company and the Delaware Law, the Company has been informed that
in the opinion of the
II-1
<PAGE>
Securities and Exchange Commission such indemnification is against public policy
as expressed in such Securities Act and is, therefore, unenforceable.
The Charter limits the personal liability of the Company's directors to the
fullest extent permitted by the Delaware Law. Therefore, the directors of the
Company are not 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) under
Section 174 of the Delaware Law, relating to prohibited dividends or
distributions or the repurchase or redemption of stock; or (iv) for any
transaction from which the director derives an improper personal benefit. As a
result of this provision, the Company and its stockholders may be unable to
obtain monetary damages from a director for breach of his or her duty of care.
Additionally, the Company has entered into indemnification agreements, in
the form attached hereto as Exhibit 10.37 with certain of its directors,
officers and other key personnel, which may, in certain cases, be broader than
the specific indemnification provisions contained under applicable law. The
indemnification agreement may require the Company, among other things, to
indemnify such officers, directors and key personnel against certain liabilities
that may arise by reason of their status or service as directors, officers or
employees of the Company, to advance the expenses incurred by such parties as a
result of any threatened claims or proceedings brought against them as to which
they could be indemnified and to cover such officers, directors and key
employees under the Company's directors' and officers' liability insurance
policies to the maximum extent that insurance coverage is maintained. The
Company maintains an insurance policy, providing an aggregate of $5 million in
coverage, insuring all of its directors and officers against certain liabilities
arising from actions taken in their official capacities as directors and
officers.
The Underwriting Agreement provides for indemnification by the Underwriters
of the directors, officers and controlling persons of the Company against
certain liabilities, including liabilities under the Securities Act, under
certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In March 1997, the Company issued and sold 54,999 shares of Common Stock to
Earl Collier, Jr. and received gross proceeds from such sale of $105,000
(resulting from the exercise price of $1.91 per share) pursuant to a Stock
Option Agreement, dated as of October 28, 1991, between the Company and Mr.
Collier. The Common Stock was issued in reliance upon an exemption from
registration pursuant to Section 4(2) of the Securities Act.
In April 1997, the Company issued and sold 11,000 shares of Common Stock to
Mark Ohlendorf and received gross proceeds from such sale of $21,000 (resulting
from the exercise price of $1.91 per share) pursuant to a Stock Option
Agreement, dated as of October 16, 1990, between the Company and Mr. Ohlendorf.
The Common Stock was issued in reliance upon an exemption from registration
pursuant to Section 4(2) of the Securities Act.
The above references to numbers of shares of Common Stock (and per share
purchase prices of warrants and exercise price of options) are adjusted to give
effect to a 1-for-2.7273 reverse stock split intended to be effective prior to
the date the Registration Statement is declared effective.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
* 1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of Vitas Healthcare Corporation ("Vitas") (formerly
known as Hospice Care Incorporated ("HCI")), as amended.
3.2 Amended and Restated By-laws of Vitas.
* 3.3 Form of Certificate of Amendment to Amended and Restated Certificate of Incorporation of Vitas.
* 3.4 Form of Amended and Restated By-laws of Vitas.
* 4.1 Form of Common Stock certificate.
4.2 Registration Rights Agreement, dated as of June 4, 1993, among Vitas, certain stockholders of Vitas
identified therein, Chemed and certain investors identified therein.
4.3 Amendment to Registration Rights Agreement, dated as of July 20, 1997, among Vitas, Chemed Corporation,
the Investors identified therein, and NationsBank.
4.4 Investor Agreement, dated as of December 17, 1991, between HCI, Chemed and OCR.
4.5 Stockholders Agreement, dated as of June 4, 1993, among Vitas, Hugh A. Westbrook, Carole S. Westbrook,
and certain investors identified therein.
* 5.1 Opinion of Hogan & Hartson, L.L.P., regarding legality of shares being registered.
* 10.1 Preferred Stock Purchase Agreement, dated as of December 17, 1991, by and among HCI, Chemed Corporation
("Chemed") and OCR Holding Company ("OCR").
* 10.2 Warrant A, dated December 17, 1991, issued by HCI to OCR.
* 10.3 Warrant B, dated December 17, 1991, issued by HCI to OCR.
* 10.4 Agreement of Waiver and Stock Restriction, dated as of December 17, 1991, between HCI and Hugh A.
Westbrook.
* 10.5 Agreement of Stock Restriction, dated as of December 17, 1991, between HCI and Esther T. Colliflower.
* 10.6 OCR and Chemed Acknowledgment, Stipulation and Waiver, dated as of July 18, 1997.
10.7 Agreement, dated September 18, 1997, among Vitas, Chemed and OCR.
* 10.8 Preferred Stock Purchase Agreement, dated as of June 4, 1993, by and among Vitas and certain investors
(identified therein).
* 10.9 Amended and Restated Employment Agreement, dated September 12, 1994, between Vitas and Hugh A.
Westbrook.
* 10.10 Employment Agreement, dated as of October 1, 1990, between HCI and J. Richard Williams, Jr.
* 10.11 Employment Agreement, dated as of June 7, 1990, between HCI and Thomas E. Combs.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
* 10.12 Employment Agreement, dated as of October 9, 1989, between Hospice, Incorporated ("HI") and Deirdre
Lawe.
* 10.13 Confirmation of employment letter, dated June 17, 1993, between Vitas and Mark A. Sterling.
* 10.13.1 Supplemental employment letter, dated June 29 1993, from Vitas to Mark A. Sterling.
* 10.14 Confirmation of employment letter, dated July 16, 1997, accepted August 15, 1997, between Vitas and
David Wester.
* 10.15 Consulting Agreement, dated as of January 1, 1997, between Vitas and Esther Colliflower.
* 10.16 Stockholder--Founder Agreement, dated as of October 14, 1983, between HCI and Hugh A. Westbrook.
* 10.17 Stockholder--Founder Agreement, dated as of October 14, 1983, between HCI and Donald J. Gaetz.
* 10.18 Supplementary Shareholder Founder Agreement, dated as of January 30, 1984, among HCI, Hugh A. Westbrook
and Donald J. Gaetz.
* 10.19 Amendment No. 1 to Supplementary Shareholder Founder Agreement, dated as of December 17, 1991, among
HCI, Hugh A. Westbrook and Donald J. Gaetz.
* 10.20 Stockholder--Employee Agreement, dated as of April 11, 1984, between HCI and Esther T. Colliflower.
* 10.21 Stockholder--Employee Agreement, dated as of January 15, 1985, between HCI and Jonathan R. Williams,
M.D.
* 10.22 Call Agreement, dated as of December 17, 1991, among Esther T. Colliflower, Hugh A. Westbrook and
Donald J. Gaetz.
* 10.23 Non-incentive Stock Option Agreement, dated as of October 1, 1989, between HCI and William P. Ferretti.
* 10.24 Non-incentive Stock Option Agreement, dated as of October 1, 1990, between HCI and J.R. Williams.
* 10.25 Non-incentive Stock Option Agreement, dated as of October 14, 1991, between HCI and J.R. Williams.
* 10.26 Non-incentive Stock Option Agreement, dated as of December 17, 1991, between HCI and J.R. Williams.
* 10.27 Waiver of Limitation on Exercise of Option, dated as of September 28, 1993, between the Company and
J.R. Williams.
* 10.28 Non-incentive Stock Option Agreement, dated as of December 17, 1991, between HCI and Hugh A. Westbrook.
* 10.29 Non--incentive Stock Option Agreement, dated as of December 17, 1991, between HCI and Esther T.
Colliflower.
* 10.30 Non-incentive Stock Option Agreement, dated as of June 30, 1992, between Vitas and Timothy S. O'Toole.
10.31 Management Equity Incentive Plan ("1992 MEIP"), adopted June 30, 1992.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.32 Form of 1992 MEIP Stock Option Agreement.
10.33 1994 Management Equity Incentive Plan ("1994 MEIP"), adopted January 25, 1994.
10.34 Form of 1994 MEIP Non-Incentive Stock Option Agreement (Performance Vesting).
10.35 Form of 1994 MEIP Non-Incentive Stock Option Agreement (Time Vesting).
* 10.36 Form of Special Severance Agreement used by Vitas for certain officers and directors, including Hugh A.
Westbrook, J.R. Williams, M.D., Thomas E. Combs, Deirdre Lawe, Mark A. Sterling and David A. Wester.
* 10.37 Form of Indemnification Agreement used by Vitas for officers and directors, including Hugh A.
Westbrook, Esther T. Colliflower., J.R. Williams, M.D., Thomas E. Combs, Deirdre Lawe, Mark A.
Sterling, David A. Wester, Bruce F. Wesson, Patrick T. Hackett, Timothy O'Toole, Donald Gaetz and
William Ferretti.
10.38 Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement, dated as of February 17,
1995, between Vitas and NationsBank of Florida, National Association ("NationsBank").
10.39 Amended and Restated Revolving Credit Note, dated February 17, 1995, by Vitas to the order of
NationsBank.
10.40 Term Note, dated February 17, 1995, by Vitas to the order of NationsBank.
10.41 Amended and Restated LC Account Agreement, dated as of February 17, 1995, between Vitas and
NationsBank.
10.42 Amendment No. 1 to Amended and Restated Revolving Credit and Reimbursement Agreement between Vitas and
NationsBank, dated as of June 30, 1995.
10.43 Amendment No. 2 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement between
Vitas and NationsBank, dated as of March 28, 1996.
10.44 Amendment No. 3 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement by and
between Vitas and NationsBank, dated September 30, 1996.
10.45 Amendment No. 4 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement and
Related Documents between Vitas and NationsBank, dated as of November 1, 1996.
10.46 Amendment No. 5 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement and
Related Documents between Vitas and NationsBank, dated as of February 15, 1997.
10.47 Amendment No. 6 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement and
Related Documents between Vitas and NationsBank, dated as of March 24, 1997.
10.48 Amendment No. 7 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement and
Related Documents between Vitas and NationsBank, dated as of September 1, 1997.
10.49 Amended and Restated Pledge and Security Agreement, dated February 17, 1995, between Vitas, as
Borrower, and NationsBank.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.50 Pledge and Security Agreement between Vitas Healthcare Corporation of California ("Vitas-California")
and NationsBank, dated February 17, 1995.
10.51 Amended and Restated Pledge and Security Agreement between Vitas Healthcare Corporation of Florida
("Vitas-Florida") and NationsBank, dated February 17, 1995.
10.52 Amended and Restated Pledge and Security Agreement between Vitas Healthcare Corporation of Ohio
("Vitas-Ohio") and NationsBank, dated February 17, 1995.
10.53 Amended and Restated Pledge and Security Agreement between Vitas Healthcare Corporation of Pennsylvania
("Vitas-Pennsylvania") and NationsBank, dated February 17, 1995.
* 10.54 Amended and Restated Pledge and Security Agreement between Vitas Healthcare Corporation of Central
Florida ("Vitas-Central Florida") and NationsBank.
10.55 Guaranty and Suretyship Agreement, dated as of February 17, 1995, by Vitas-California.
10.56 Amended and Restated Guaranty and Suretyship Agreement, dated as of February 17, 1995, by
Vitas-Florida.
10.57 Amended and Restated Guaranty and Suretyship Agreement, dated as of February 17, 1995, by Vitas-Ohio.
10.58 Amended and Restated Guaranty and Suretyship Agreement, dated as of February 17, 1995, by
Vitas-Pennsylvania.
* 10.59 Guaranty and Suretyship Agreement by Vitas-Central Florida.
10.60 Amended and Restated Guaranty and Contingent Purchase Agreement, dated as of February 17, 1995, between
Vitas and NationsBank related to a term loan to Vitas Employee Stock Ownership Trust.
10.61 Warrant Agreement between NationsBank and Vitas, dated as of July 18, 1997.
10.62 Warrant Certificate issued by Vitas to NationsBank, dated July 18, 1997.
10.63 Letter Agreement between NationsBank and Vitas, dated July 18, 1997, relating to a warrant to purchase
shares of Vitas Common Stock.
10.64 Warrant Agreement, dated as of September 1, 1997, between Vitas and NationsBank.
10.65 Warrant Certificate issued by Vitas to NationsBank, dated September 1, 1997
* 10.66 Asset Purchase Agreement, dated as of December 27, 1994, among Vitas, Vitas-California, CHC and its
Affiliated Partnerships, Connie A. Black and Dennis Rezendez.
* 10.67 Promissory Note (Note A), dated February 17, 1995, made by Vitas-California payable to the order of
CHC.
* 10.68 Order of U.S. Bankruptcy Court for the District of Arizona, dated June 16, 1997, authorizing
Modification of Promissory Note A made by and between Thomas E. Arnold, Jr., as Chapter 11 Trustee for
the bankruptcy estate of Wilcare Corporation, Vitas-California, and Vitas.
* 10.69 Modification of Promissory Note A, dated June 16, 1997, made by and between Thomas E. Arnold, Jr., as
Chapter 11 Trustee for the bankruptcy estate of Wilcare Corporation, Vitas-California, and Vitas.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
* 10.70 Promissory Note (Note B), dated February 17, 1995, made by Vitas-California payable to the order of
CHC.
* 10.71 Subordination Agreement-A, dated as of February 17, 1995, among Community Hospice Care, Inc. ("CHC"),
certain partnerships identified therein ("CHC Affiliated Partnerships"), and NationsBank, including
Acknowledgment and Agreement, dated February 17, 1995, by Vitas, Vitas-California and Wilcare
Corporation and Vernon R. Will.
* 10.72 Letter Agreement, dated May 21, 1997, between Vitas, Vitas-California, Wilcare Corporation and
NationsBank modifying Subordination Agreement-A .
* 10.73 Subordination Agreement-B, dated as of February 17, 1995, among CHC, the CHC Affiliated Partnerships
and NationsBank, including Acknowledgment and Agreement, dated February 17, 1995, by Vitas,
Vitas-California and Connie A. Black.
* 10.74 Guaranty, dated as of February 17, 1995, made by Vitas in favor of CHC and the CHC Affiliated
Partnerships.
* 10.75 Noncompetition Agreement, dated February 17, 1995, among CHC and CHC Affiliated Partnerships, Vitas,
Vitas-California, Connie A. Black and Dennis Rezendez.
* 10.76 Asset Purchase Agreement, dated as of July 20, 1995, among Vitas, Vitas-Ohio, and Hospice of the Miami
Valley, Inc. ("HMV").
* 10.77 Amendment to Asset Purchase Agreement, dated as of November 2, 1995, among Vitas, Vitas-Ohio and HMV.
* 10.78 Asset Purchase Agreement dated as of June 12, 1996, between Vitas, Vitas--Central Florida, Hospice of
Central Florida, Inc. ("HCF") and Hospice of Central Florida Foundation, Inc.
* 10.79 Lease and sublease for Beverly Manor of Riverside, dated as of July 1, 1993, among Dart-L ("Dart-L"),
Jacob Friedman ("Friedman") and Community Hospice Care-InLand Cities ("CHC--Inland Cities").
* 10.80 Assignment and Assumption of Lease, Consent and Estoppel Agreement, dated as of February 14, 1995,
among Consolidated Industries, Inc. ("Consolidated"), Beverly Health and Rehabilitation Services, Inc.
("Beverly Health"), CHC-Inland cities, Vitas-California and Vitas.
* 10.81 First Amendment to Lease, dated as of February 14, 1995, among Dart-L, Jacob Friedman, Consolidated,
Beverly Health, Vitas-California and Vitas.
* 10.82 Lease Agreement, dated as of August 21, 1989, between Florida East Coast Properties, Inc., ("Florida
East") and HCI.
* 10.83 First Amendment to Lease, dated August 21, 1989, between Florida East and HCI.
* 10.84 Second Amendment to Lease, dated July 10, 1991, between Northwestern Capital Corporation
("Northwestern"), as successor to Florida East, and HCI.
* 10.85 Third Amendment to Lease, dated April 1, 1994, between Northwestern and Vitas.
* 10.86 Business Lease, dated as of August 23, 1995, between Vitas-Florida and Sunbeam Properties, Inc.,
together with Guaranty, dated as of September 5, 1995, by Vitas for the benefit of Sunbeam Properties,
Inc.
* 10.87 Lease, dated as of October 31, 1995, between Vitas and LaSalle National Trust, N.A.
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
11.1 Computation of Per Share Earnings.
21.1 Subsidiaries of Vitas.
23.1 Consent of Ernst & Young LLP.
* 23.2 Consent of Hogan & Hartson, L.L.P. (included in Exhibit 5.1).
24.1 Power of attorney (included on the signature page).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
(b) Financial Statement Schedules.
The following financial statement schedule is filed herewith:
II Valuation and Qualifying Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company 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 Company of expenses
incurred or paid by a director, officer or controlling person of the Company 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 Company 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 Company hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Miami, State of Florida,
on the 23nd day of September, 1997.
VITAS HEALTHCARE CORPORATION
BY /S/ HUGH A. WESTBROOK
-----------------------------------------
Hugh A. Westbrook
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitute and appoint Hugh A. Westbrook and J. R. Williams, M. D.,
their true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for them and in their name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, or any registration statement
relating to this Registration Statement under Rule 462 and to file the same,
with the Securities and Exchange Commission, granting unto said attorneys-
in-fact and agents 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 they might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agent, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ HUGH A. WESTBROOK September 23, 1997
- ------------------------------
Hugh A. Westbrook Director, Chairman Of the
Board Of Directors and
Chief Executive Officer
(Principal Executive
Officer)
/s/ ESTHER T. COLLIFLOWER September 23, 1997
- ------------------------------
Esther T. Colliflower Director
/s/ J. R. WILLIAMS, M. D. September 23, 1997
- ------------------------------
J. R. Williams, M. D. Director
II-9
<PAGE>
SIGNATURES TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ DAVID A. WESTER September 23, 1997
- ------------------------------
David A. Wester Vice President, Chief
Financial Officer,
Treasurer and Assistant
Secretary (Principal
Financial Officer and
Principal Accounting
Officer)
/s/ DONALD J. GAETZ September 23, 1997
- ------------------------------
Donald J. Gaetz Director
/s/ WILLIAM P. FERRETTI September 23, 1997
- ------------------------------
William P. Ferretti Director
/s/ PATRICK T. HACKETT September 23, 1997
- ------------------------------
Patrick T. Hackett Director
/s/ TIMOTHY S. O'TOOLE September 23, 1997
- ------------------------------
Timothy S. O'Toole Director
/s/ BRUCE F. WESSON September 23, 1997
- ------------------------------
Bruce F. Wesson Director
II-10
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the consolidated financial statements of Vitas Healthcare
Corporation and Subsidiaries as of September 30, 1996 and 1995, and for each of
the three years in the period ended September 30, 1996, and have issued our
report thereon dated January 24, 1997, except for the third paragraph of Note 1
as to which the date is September 15, 1997, the second paragraph of Note 4 as to
which the date is September 1, 1997 and Note 7 as to which the date is September
1, 1997, (included elsewhere in this Registration Statement). Our audits also
included the financial statement schedules listed in Item 16(b) of this
Registration Statement. These schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Ernst & Young LLP
Miami, Florida
September 19, 1997
S-1
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
VITAS HEALTHCARE CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED BALANCE AT
BEGINNING OF COSTS AND TO OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ------------------------------ ------------ ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1994
Reserves and allowances
deducted from asset
accounts:
Allowance for uncollectible
accounts.................... $ 2,474,000 $ 3,973,000 $2,931,000(1) $3,516,000
------------ ----------- ---------- ----------
------------ ----------- ---------- ----------
YEAR ENDED SEPTEMBER 30, 1995
Reserves and allowances
deducted from asset
accounts:
Allowance for uncollectible
accounts.................... $ 3,516,000 $ 6,828,000 $5,044,000(1) $5,300,000
------------ ----------- ---------- ----------
------------ ----------- ---------- ----------
YEAR ENDED SEPTEMBER 30, 1996
Reserves and allowances
deducted from asset
accounts:
Allowance for uncollectible
accounts.................... $ 5,300,000 $ 7,958,000 $7,258,000(1) $6,000,000
Tax valuation allowance....... -- 2,182,000 -- 2,182,000
------------ ----------- ---------- ----------
$ 5,300,000 $10,140,000 $7,258,000 $8,182,000
------------ ----------- ---------- ----------
------------ ----------- ---------- ----------
</TABLE>
- ------------------------
(1) Uncollectible accounts written off, net of recoveries.
S-2
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- --------------- -------------------------------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of Vitas Healthcare Corporation ("Vitas")
(formerly known as Hospice Care Incorporated ("HCI")), as amended.
3.2 Amended and Restated By-laws of Vitas.
*3.3 Form of Certificate of Amendment to Amended and Restated Certificate of Incorporation of Vitas.
*3.4 Form of Amended and Restated By-laws of Vitas.
*4.1 Form of Common Stock certificate.
4.2 Registration Rights Agreement, dated as of June 4, 1993, among Vitas, certain stockholders of
Vitas identified therein, Chemed and certain investors identified therein.
4.3 Amendment to Registration Rights Agreement, dated as of July 20, 1997, among Vitas, Chemed
Corporation, the Investors identified therein, and NationsBank.
4.4 Investor Agreement, dated as of December 17, 1991, between HCI, Chemed and OCR.
4.5 Stockholders Agreement, dated as of June 4, 1993, among Vitas, Hugh A. Westbrook, Carole S.
Westbrook, and certain investors identified therein.
*5.1 Opinion of Hogan & Hartson, L.L.P., regarding legality of shares being registered.
*10.1 Preferred Stock Purchase Agreement, dated as of December 17, 1991, by and among HCI, Chemed
Corporation ("Chemed") and OCR Holding Company ("OCR").
*10.2 Warrant A, dated December 17, 1991, issued by HCI to OCR.
*10.3 Warrant B, dated December 17, 1991, issued by HCI to OCR.
*10.4 Agreement of Waiver and Stock Restriction, dated as of December 17, 1991, between HCI and Hugh A.
Westbrook.
*10.5 Agreement of Stock Restriction, dated as of December 17, 1991, between HCI and Esther T.
Colliflower.
*10.6 OCR and Chemed Acknowledgment, Stipulation and Waiver, dated as of July 18, 1997.
10.7 Agreement, dated September 18, 1997, among Vitas, Chemed and OCR.
*10.8 Preferred Stock Purchase Agreement, dated as of June 4, 1993, by and among Vitas and certain
investors (identified therein).
*10.9 Amended and Restated Employment Agreement, dated September 12, 1994, between Vitas and Hugh A.
Westbrook.
*10.10 Employment Agreement, dated as of October 1, 1990, between HCI and J. Richard Williams, Jr.
*10.11 Employment Agreement, dated as of June 7, 1990, between HCI and Thomas E. Combs.
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- --------------- -------------------------------------------------------------------------------------------------
<C> <S>
*10.12 Employment Agreement, dated as of October 9, 1989, between Hospice, Incorporated ("HI") and
Deirdre Lawe.
*10.13 Confirmation of employment letter, dated June 17, 1993, between Vitas and Mark A. Sterling.
*10.13.1 Supplemental employment letter, dated June 29, 1993, from Vitas to Mark A. Sterling.
*10.14 Confirmation of employment letter, dated July 16, 1997, accepted August 15, 1997, between Vitas
and David Wester.
*10.15 Consulting Agreement, dated as of January 1, 1997, between Vitas and Esther Colliflower.
*10.16 Stockholder--Founder Agreement, dated as of October 14, 1983, between HCI and Hugh A. Westbrook.
*10.17 Stockholder--Founder Agreement, dated as of October 14, 1983, between HCI and Donald J. Gaetz.
*10.18 Supplementary Shareholder Founder Agreement, dated as of January 30, 1984, among HCI, Hugh A.
Westbrook and Donald J. Gaetz.
*10.19 Amendment No. 1 to Supplementary Shareholder Founder Agreement, dated as of December 17, 1991,
among HCI, Hugh A. Westbrook and Donald J. Gaetz.
*10.20 Stockholder--Employee Agreement, dated as of April 11, 1984, between HCI and Esther T.
Colliflower.
*10.21 Stockholder--Employee Agreement, dated as of January 15, 1985, between HCI and Jonathan R.
Williams, M.D.
*10.22 Call Agreement, dated as of December 17, 1991, among Esther T. Colliflower, Hugh A. Westbrook and
Donald J. Gaetz.
*10.23 Non-incentive Stock Option Agreement, dated as of October 1, 1989, between HCI and William P.
Ferretti.
*10.24 Non-incentive Stock Option Agreement, dated as of October 1, 1990, between HCI and J.R. Williams.
*10.25 Non-incentive Stock Option Agreement, dated as of October 14, 1991, between HCI and J.R.
Williams.
*10.26 Non-incentive Stock Option Agreement, dated as of December 17, 1991, between HCI and J.R.
Williams.
*10.27 Waiver of Limitation on Exercise of Option, dated as of September 28, 1993, between the Company
and J.R. Williams.
*10.28 Non-incentive Stock Option Agreement, dated as of December 17, 1991, between HCI and Hugh A.
Westbrook.
*10.29 Non--incentive Stock Option Agreement, dated as of December 17, 1991, between HCI and Esther T.
Colliflower.
*10.30 Non-incentive Stock Option Agreement, dated as of June 30, 1992, between Vitas and Timothy S.
O'Toole.
10.31 Management Equity Incentive Plan ("1992 MEIP"), adopted June 30, 1992.
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- --------------- -------------------------------------------------------------------------------------------------
<C> <S>
10.32 Form of 1992 MEIP Stock Option Agreement.
10.33 1994 Management Equity Incentive Plan ("1994 MEIP"), adopted January 25, 1994.
10.34 Form of 1994 MEIP Non-Incentive Stock Option Agreement (Performance Vesting).
10.35 Form of 1994 MEIP Non-Incentive Stock Option Agreement (Time Vesting).
*10.36 Form of Special Severance Agreement used by Vitas for certain officers and directors, including
Hugh A. Westbrook, J.R. Williams, M.D., Thomas E. Combs, Deirdre Lawe, Mark A. Sterling and David
A. Wester.
*10.37 Form of Indemnification Agreement used by Vitas for officers and directors, including Hugh A.
Westbrook, Esther T. Colliflower., J.R. Williams, M.D., Thomas E. Combs, Deirdre Lawe, Mark A.
Sterling, David A. Wester, Bruce F. Wesson, Patrick T. Hackett, Timothy O'Toole, Donald Gaetz and
William Ferretti.
10.38 Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement, dated as of
February 17, 1995, between Vitas and NationsBank of Florida, National Association
("NationsBank").
10.39 Amended and Restated Revolving Credit Note, dated February 17, 1995, by Vitas to the order of
NationsBank.
10.40 Term Note, dated February 17, 1995, by Vitas to the order of NationsBank.
10.41 Amended and Restated LC Account Agreement, dated as of February 17, 1995, between Vitas and
NationsBank.
10.42 Amendment No. 1 to Amended and Restated Revolving Credit and Reimbursement Agreement between
Vitas and NationsBank, dated as of June 30, 1995.
10.43 Amendment No. 2 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement
between Vitas and NationsBank, dated as of March 28, 1996.
10.44 Amendment No. 3 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement
by and between Vitas and NationsBank, dated September 30, 1996.
10.45 Amendment No. 4 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement
and Related Documents between Vitas and NationsBank, dated as of November 1, 1996.
10.46 Amendment No. 5 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement
and Related Documents between Vitas and NationsBank, dated as of February 15, 1997.
10.47 Amendment No. 6 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement
and Related Documents between Vitas and NationsBank, dated as of March 24, 1997.
10.48 Amendment No. 7 to Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement
and Related Documents between Vitas and NationsBank, dated as of September 1, 1997.
10.49 Amended and Restated Pledge and Security Agreement, dated February 17, 1995, between Vitas, as
Borrower, and NationsBank.
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- --------------- -------------------------------------------------------------------------------------------------
<C> <S>
10.50 Pledge and Security Agreement between Vitas Healthcare Corporation of California
("Vitas-California") and NationsBank, dated February 17, 1995.
10.51 Amended and Restated Pledge and Security Agreement between Vitas Healthcare Corporation of
Florida ("Vitas-Florida") and NationsBank, dated February 17, 1995.
10.52 Amended and Restated Pledge and Security Agreement between Vitas Healthcare Corporation of Ohio
("Vitas-Ohio") and NationsBank, dated February 17, 1995.
10.53 Amended and Restated Pledge and Security Agreement between Vitas Healthcare Corporation of
Pennsylvania ("Vitas-Pennsylvania") and NationsBank, dated February 17, 1995.
*10.54 Amended and Restated Pledge and Security Agreement between Vitas Healthcare Corporation of
Central Florida ("Vitas-Central Florida") and NationsBank.
10.55 Guaranty and Suretyship Agreement, dated as of February 17, 1995, by Vitas-California.
10.56 Amended and Restated Guaranty and Suretyship Agreement, dated as of February 17, 1995, by
Vitas-Florida.
10.57 Amended and Restated Guaranty and Suretyship Agreement, dated as of February 17, 1995, by
Vitas-Ohio.
10.58 Amended and Restated Guaranty and Suretyship Agreement, dated as of February 17, 1995, by
Vitas-Pennsylvania.
*10.59 Guaranty and Suretyship Agreement by Vitas-Central Florida.
10.60 Amended and Restated Guaranty and Contingent Purchase Agreement, dated as of February 17, 1995,
between Vitas and NationsBank related to a term loan to Vitas Employee Stock Ownership Trust.
10.61 Warrant Agreement between NationsBank and Vitas, dated as of July 18, 1997.
10.62 Warrant Certificate issued by Vitas to NationsBank, dated July 18, 1997.
10.63 Letter Agreement between NationsBank and Vitas, dated July 18, 1997, relating to a warrant to
purchase shares of Vitas Common Stock.
10.64 Warrant Agreement, dated as of September 1, 1997, between Vitas and NationsBank.
10.65 Warrant Certificate issued by Vitas to NationsBank, dated September 1, 1997
*10.66 Asset Purchase Agreement, dated as of December 27, 1994, among Vitas, Vitas-California, CHC and
its Affiliated Partnerships, Connie A. Black and Dennis Rezendez.
*10.67 Promissory Note (Note A), dated February 17, 1995, made by Vitas-California payable to the order
of CHC.
*10.68 Order of U.S. Bankruptcy Court for the District of Arizona, dated June 16, 1997, authorizing
Modification of Promissory Note A made by and between Thomas E. Arnold, Jr., as Chapter 11
Trustee for the bankruptcy estate of Wilcare Corporation, Vitas-California, and Vitas.
*10.69 Modification of Promissory Note A, dated June 16, 1997, made by and between Thomas E. Arnold,
Jr., as Chapter 11 Trustee for the bankruptcy estate of Wilcare Corporation, Vitas-California,
and Vitas.
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- --------------- -------------------------------------------------------------------------------------------------
<C> <S>
*10.70 Promissory Note (Note B), dated February 17, 1995, made by Vitas-California payable to the order
of CHC.
*10.71 Subordination Agreement-A, dated as of February 17, 1995, among Community Hospice Care, Inc.
("CHC"), certain partnerships identified therein ("CHC Affiliated Partnerships"), and
NationsBank, including Acknowledgment and Agreement, dated February 17, 1995, by Vitas,
Vitas-California and Wilcare Corporation and Vernon R. Will.
*10.72 Letter Agreement, dated May 21, 1997, between Vitas, Vitas-California, Wilcare Corporation and
NationsBank modifying Subordination Agreement-A .
*10.73 Subordination Agreement-B, dated as of February 17, 1995, among CHC, the CHC Affiliated
Partnerships and NationsBank, including Acknowledgment and Agreement, dated February 17, 1995, by
Vitas, Vitas-California and Connie A. Black.
*10.74 Guaranty, dated as of February 17, 1995, made by Vitas in favor of CHC and the CHC Affiliated
Partnerships.
*10.75 Noncompetition Agreement, dated February 17, 1995, among CHC and CHC Affiliated Partnerships,
Vitas, Vitas-California, Connie A. Black and Dennis Rezendez.
*10.76 Asset Purchase Agreement, dated as of July 20, 1995, among Vitas, Vitas-Ohio, and Hospice of the
Miami Valley, Inc. ("HMV").
*10.77 Amendment to Asset Purchase Agreement, dated as of November 2, 1995, among Vitas, Vitas-Ohio and
HMV.
*10.78 Asset Purchase Agreement dated as of June 12, 1996, between Vitas, Vitas--Central Florida,
Hospice of Central Florida, Inc. ("HCF") and Hospice of Central Florida Foundation, Inc.
*10.79 Lease and sublease for Beverly Manor of Riverside, dated as of July 1, 1993, among Dart-L
("Dart-L"), Jacob Friedman ("Friedman") and Community Hospice Care-InLand Cities ("CHC--Inland
Cities").
*10.80 Assignment and Assumption of Lease, Consent and Estoppel Agreement, dated as of February 14,
1995, among Consolidated Industries, Inc. ("Consolidated"), Beverly Health and Rehabilitation
Services, Inc. ("Beverly Health"), CHC-Inland cities, Vitas-California and Vitas.
*10.81 First Amendment to Lease, dated as of February 14, 1995, among Dart-L, Jacob Friedman,
Consolidated, Beverly Health, Vitas-California and Vitas.
*10.82 Lease Agreement, dated as of August 21, 1989, between Florida East Coast Properties, Inc.,
("Florida East") and HCI.
*10.83 First Amendment to Lease, dated August 21, 1989, between Florida East and HCI.
*10.84 Second Amendment to Lease, dated July 10, 1991, between Northwestern Capital Corporation
("Northwestern"), as successor to Florida East, and HCI.
*10.85 Third Amendment to Lease, dated April 1, 1994, between Northwestern and Vitas.
*10.86 Business Lease, dated as of August 23, 1995, between Vitas-Florida and Sunbeam Properties, Inc.,
together with Guaranty, dated as of September 5, 1995, by Vitas for the benefit of Sunbeam
Properties, Inc.
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- --------------- -------------------------------------------------------------------------------------------------
<C> <S>
*10.87 Lease, dated as of October 31, 1995, between Vitas and LaSalle National Trust, N.A.
11.1 Computation of Per Share Earnings.
21.1 Subsidiaries of Vitas.
23.1 Consent of Ernst & Young LLP.
*23.2 Consent of Hogan & Hartson, L.L.P. (included in Exhibit 5.1).
24.1 Power of attorney (included on the signature page).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
vi
<PAGE>
EXHIBIT 3.1
AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION
OF
HOSPICE CARE INCORPORATED
Hospice Care Incorporated, a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. Hospice Care Incorporated was originally incorporated under the same
name, and its original Certificate of Incorporation was filed with the Secretary
of State of the State of Delaware on August 24, 1983.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Amended and Restated Certificate of Incorporation
restates and integrates and further amends the provisions of the Restated
Certificate of Incorporation of Hospice Care Incorporated previously filed with
the Secretary of State of the State of Delaware on August 20, 1984.
3. The text of the Restated Certificate of Incorporation of Hospice Care
Incorporated hereby is restated and further amended to read in its entirety as
follows:
FIRST: The name of the corporation is Hospice Care Incorporated
(hereinafter called the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801, County
<PAGE>
of New Castle. The name of the Corporation's registered agent at said
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
acts or activities for which corporations may be organized under the Delaware
General Corporation Law.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is twenty-four million five hundred
thousand (24,500,000), of which twenty million (20,000,000) shall be common
stock, par value of $.001 per share ("Common Stock"), and four million five
hundred thousand (4,500,000) shall be preferred stock, par value of $1.00 per
share ("Preferred Stock"). A description of the different classes and series of
the Corporation's stock and a statement of the designations, powers,
preferences, rights, qualifications, limitations and restrictions of the shares
of each class and series of the Corporation's stock are as follows:
(a) Common Stock. Except as provided in this Article Fourth
(or in any resolution or resolutions adopted by the Board of Directors of the
Corporation pursuant hereto), the holders of the Common Stock shall possess
exclusively all voting power. Each holder of shares of Common Stock shall be
entitled to one vote for each share held by such holder. Each share of Common
Stock shall have the same relative rights as, and be identical in all respects
with, all
-2-
<PAGE>
other shares of Common Stock. Whenever there shall have been paid, or declared
and set aside for payment, to the holders of the outstanding shares of any class
of stock having preference over the Common Stock as to the payment of dividends,
the full amount of dividends and of sinking fund or retirement fund or other
retirement payments, if any, to which such holders are entitled respectively in
preference to the Common Stock, then dividends may be paid on the Common Stock
and on any class or series of stock entitled to participate therewith as to
dividends, out of any assets legally available for the payment of dividends; but
only when and as declared by the Board of Directors of the Corporation. In the
event of any liquidation, dissolution or winding up of the Corporation, after
there shall have been paid to or set aside for the holders of any class of stock
having preference over the Common Stock in the event of liquidation, dissolution
or winding up the full amount to which such holders are entitled respectively in
preference to the Common Stock, then the holders of the Common Stock, and of any
class or series of stock entitled to participate therewith, in whole or in part,
as to the distribution of assets, shall be entitled, after payment or provision
for payment of all debts and liabilities of the Corporation, to receive the
remaining assets of the Corporation available for distribution, in cash or in
kind.
-3-
<PAGE>
(b) Preferred Stock. Except as provided in this Article
Fourth, the Board of Directors of the Corporation is authorized by resolution or
resolutions from time to time adopted and by filing a certificate pursuant to
the Delaware General Corporation Law to provide for the issuance of Preferred
Stock in series and to fix and state the voting powers, full or limited, or no
voting powers, and such designations, preferences and relative, participating,
optional or other special rights of the shares of each such series and the
qualifications, limitations and restrictions thereof. Each share of each series
of Preferred Stock shall have the same relative rights as, and be identical in
all respects with, all other shares of the same series.
FIFTH: The number of directors of the Corporation shall be such
number as from time to time shall be fixed by, or in the manner provided in, the
by-laws of the Corporation. Unless and except to the extent that the by-laws of
the Corporation shall otherwise require, the election of directors of the
Corporation need not be by written ballot.
SIXTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors of the Corporation
is expressly authorized and empowered to adopt, amend, and repeal by-laws of the
Corporation.
-4-
<PAGE>
SEVENTH: No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that nothing contained in this Article Seventh
shall eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. Any repeal or modification of this Article Seventh
shall be prospective only and shall not adversely affect any right or protection
of, or any limitation on the liability of, a director of the Corporation
existing at the time of, or arising out of facts or incidents prior to the time
of, the effectiveness of such repeal or modification.
EIGHTH: The Corporation reserves the right at any time, and from
time to time, to amend, alter, change, or repeal any provision contained in this
Restated Certificate of Incorporation, and other provisions authorized by the
laws of the State of Delaware at the time in force may be added or inserted, in
the manner now or hereafter prescribed by law; and all rights, preferences, and
privileges of any nature conferred upon stockholders, directors, or any other
persons by and
-5-
<PAGE>
pursuant to this Restated Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the rights reserved in this Article
Eighth.
4. The Board of Directors of the Corporation, at a meeting duly called and
held in accordance with the By-laws of the Corporation and Section 141 of the
Delaware General Corporation Law, duly adopted resolutions proposing and
declaring advisable the amendment to the Restated Certificate of Incorporation
of the Corporation as set forth above.
5. Holders of at least a majority of the outstanding shares of Common
Stock of the Corporation, constituting the only outstanding voting securities of
the Corporation, acting by written consent in accordance with Section 228 of the
Delaware General Corporation Law, duly approved the amendment to the Restated
Certificate of Incorporation of the Corporation as set forth above, and written
notice of the approval and adoption of said amendment without a meeting has been
given to those stockholders who did not consent in writing as provided in
Section 228(d) of the Delaware General Corporation Law.
6. This Amended and Restated Certificate of Incorporation as set forth
above was duly adopted in accordance with the requirements of Sections 242 and
245 of the Delaware General Corporation Law.
-6-
<PAGE>
IN WITNESS WHEREOF, Hospice Care Incorporated has caused this
Amended and Restated Certificate of Incorporation to be signed and attested by
its duly authorized officers, this 31st day of October, 1991.
HOSPICE CARE INCORPORATED
By /s/ Earl M. Collier, Jr.
---------------------------
Earl M. Collier, Jr. President
ATTEST:
/s/ Donald J. Gaetz
- -----------------------
Donald J. Gaetz
Secretary
The undersigned affirm and acknowledge under penalty of perjury that
they have read the foregoing Amended and Restated Certificate of Incorporation,
that the instrument is the act and deed of the Corporation, and that the facts
stated therein are true.
Executed at Miami, Florida, on October 31, 1991.
/s/ Earl M. Collier, Jr.
----------------------------
Earl M. Collier, Jr.
/s/ Donald J. Gaetz
----------------------------
Donald J. Gaetz
-7-
<PAGE>
CERTIFICATE OF DESIGNATION, PREFERENCES AND OTHER RIGHTS
OF 9.0% CUMULATIVE NONCONVERTIBLE PREFERRED STOCK
OF
HOSPICE CARE INCORPORATED
Pursuant to Section 151(g) of the
Delaware General Corporation Law
Hospice Care Incorporated, a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), hereby certifies that,
pursuant to the authority conferred upon the Board of Directors of the
Corporation (the "Board of Directors") by the Amended and Restated Certificate
of Incorporation of the Corporation and in accordance with Section 151(g) of the
Delaware General Corporation Law, the Board of Directors on December 16, 1991
duly adopted the following resolution, which resolution remains in full force
and effect as of the date hereof:
RESOLVED, that pursuant to the authority vested in the Board of Directors
and in accordance with the provisions of its Amended and Restated Certificate of
Incorporation, there is hereby created and authorized a series of Preferred
Stock of the Corporation, and the designation and amount thereof and the powers,
preferences and rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
9.0% CUMULATIVE NONCONVERTIBLE PREFERRED STOCK
1. Designation and Amount. The designation of this series of preferred
stock shall be "9.0% Cumulative Nonconvertible Preferred Stock," of the par
value of $1.00 per share (hereinafter called this "Class"). The number of shares
constituting this Class is 270,000. Shares of this Class shall have a stated
value of $100.00 per share (the "Stated Value").
2. Dividend Provisions.
2(a) The dividend rate on the shares of this Class shall be 9.0% per
annum, calculated on the Stated Value thereof.
2(b) Dividends on the shares of this Class shall accrue semiannually
with respect to the period ending on the last day of each June and December (the
"Dividend Period"), and shall cumulate (whether or not earned or paid) from the
original issue date of shares of this Class (the "Original Issue Date").
Dividends payable on shares of this Class shall
<PAGE>
be computed on the basis of a 360-day year of 30-day months and, for any period
less than a Dividend Period, the actual number of days elapsed in the period for
which a dividend is payable. Dividends on shares of this Class shall be payable
on the 15th day (or, if not a business day, the first business day thereafter)
of July and January with respect to the Dividend Period ending on the last day
of the next preceding June and December, respectively.
2(c) Dividends calculated as described in Sections 2(a) and 2(b)
shall be payable from funds legally available therefor, when, as, and if
declared by the Board of Directors or by a committee of the Board of Directors
authorized to declare such dividends, on the last day of each Dividend Period,
or if such date is not a business day, on the next succeeding day which is a
business day. Each such dividend shall be paid to the holders of record of the
shares of this Class as such holders appear in the stock register of the
Corporation on the date that is 30 days before such payment date. Any dividends
not paid on any dividend payment date shall accumulate thereafter and shall be
considered "accrued and unpaid" for all purposes hereunder until paid. Dividends
for any past Dividend Period that are accrued and unpaid may be declared and
paid at any time, without reference to any regular dividend payment date, to the
holders of record on such record date, not exceeding 30 days preceding the
payment date thereof, as may be fixed by the Board of Directors or by a
committee of the Board of Directors authorized to fix such record date. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on this Class that may be accrued and unpaid.
2(d) So long as any shares of this Class are outstanding, the
Corporation shall not (i) declare, pay, or set aside for payment any dividend
upon any Junior Securities (as defined in Section 6) (other than a dividend paid
in Common Stock or in any other stock ranking junior to this Class as to
dividends) or upon any Parity Securities (as defined in Section 6) (other than a
dividend paid in Parity Securities or Junior Securities or a dividend paid in
accordance with the requirements of Section 2(e)); (ii) make any payment on
account of, or set apart for payment money for a sinking or other similar fund
for, the repurchase, redemption, or other retirement of any Junior Securities or
Parity Securities or any warrants, rights, or options exercisable for or
convertible into any Junior Securities or Parity Securities or (iii) make any
distribution in respect of any Junior Securities or Parity Securities, either
directly or indirectly, and whether in cash, obligations or shares of the
Corporation, or other property
-2-
<PAGE>
(other than distributions in Junior Securities to the holders thereof or
distributions of Parity Securities to the holders thereof), unless, in each
case, prior to or concurrently with such declaration, payment, setting apart for
payment, repurchase, redemption, or distribution, as the case may be, (A) the
full cumulative dividends on all outstanding shares of this Class for all past
Dividend Periods shall have been or be declared and paid in cash, (B) full
dividends on all outstanding shares of this Class to the end of the then current
Dividend Period shall have been declared and paid in cash, or a sum in cash
sufficient for the payment thereof set apart for payment, and (C) the
Corporation shall have redeemed the aggregate number of shares of this Class
required under Section 3(b) to be redeemed as of the end of such Dividend
Period. Notwithstanding the provisions of this Section 2(d), the Corporation may
redeem or purchase shares of Common Stock from employees, consultants or
directors or former employees, consultants or directors of the Corporation or of
any direct or indirect subsidiary of the Corporation now or hereafter acquired,
upon or in connection with their death, disability, termination of their
employment with or service to the Corporation or any such subsidiary, or
exercise of rights of first refusal by the Corporation, or otherwise.
2(e) (i) So long as any shares of this Class are outstanding, the
Corporation shall not declare or pay or set apart for payment full cumulative
dividends (the payment of less than full cumulative dividends being treated in
Section 2(e)(ii)), including all accrued and unpaid dividends and all dividends
accruing with respect to the most recently ended Dividend Period, on any class
or series of Parity Securities unless full cumulative dividends have been or
contemporaneously are declared and paid, or declared and a sum set apart
sufficient for payment, on the shares of this Class for all Dividend Periods
ending on or before the date of payment of such full cumulative dividends on
such Parity Securities.
2(e) (ii) So long as any shares of this Class are outstanding, if
any dividends are not declared in full, as provided in Section 2(e)(i), upon the
shares of this Class and any class or series of Parity Securities, but the
Corporation determines to declare or pay or set aside for payment dividends that
are less than full cumulative dividends on such Parity Securities, then as a
condition precedent thereto the Corporation shall declare and pay, or declare
and set apart for payment, cash dividends on shares of this Class in such
amounts that (A) the sum of the aggregate amount of such cash dividends to be so
paid or set apart for payment on the shares of this
-3-
<PAGE>
Class bears the same ratio to (B) the sum of the aggregate amount of accrued and
unpaid dividends on the shares of this Class then outstanding plus the aggregate
amount of dividends accruing on the shares of this Class then outstanding for
the Dividend Period ending on or before the date of payment of such dividends as
(C) the aggregate amount of dividends to be so declared or paid or set apart for
payment on such class or series of Parity Securities bears to (D) the sum of the
aggregate amount of accrued and unpaid dividends on the shares of such class or
series then outstanding plus the aggregate amount of dividends accruing on such
class or series of Parity Security for the most recent dividend period ending on
or before before the payment date for such dividends.
2(f) The holders of shares of this Class shall not be entitled to
any dividends or distributions, whether payable in cash, property, or stock, in
excess of full cumulative dividends, as provided in this Section 2, on this
Class. Any dividend payment made on shares of this Class shall first be credited
against the earliest accrued but unpaid dividend due with respect to shares of
this Class.
3. Redemption Provisions.
3(a) Redemption at the Corporation's Option. At any time and from
time to time, the Corporation may redeem at its option all or any portion of the
shares of this Class at the price per share set forth below (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations affecting such shares) plus an amount equal to all accrued and
unpaid dividends thereon to the date fixed for redemption, out of funds legally
available for such redemption.
During Years Ending Redemption Price
(After Original Issuance Date) Per Share
------------------------------ ----------------
December 31, 1992 $107.00
December 31, 1993 $106.00
December 31, 1994 $105.00
December 31, 1995 $103.00
December 31, 1996 $102.00
December 31, 1997 $101.00
December 31, 1998 $100.00
-4-
<PAGE>
3(b) Mandatory Redemption. Subject to the last sentence of this
Section 3(b), the Corporation shall redeem the shares of this Class, in the
manner hereinafter provided, at the redemption prices (subject to appropriate
adjustment for stock splits, stock dividends, combinations or other similar
recapitalizations affecting such shares) and on the redemption dates as follows:
Mandatory Number of
Redemption Shares to
Date be Redeemed Redemption Price Per Share
---------- ----------- --------------------------
June 30, 1995 13,500 $103.00
December 31, 1995 13,500 $103.00
June 30, 1996 27,000 $102.00
December 31, 1996 27,000 $102.00
June 30, 1997 40,500 $101.00
December 31, 1997 40,500 $101.00
June 30, 1998 54,000 $100.00
December 31, 1998 54,000 $100.00
All accrued and unpaid dividends with respect to such shares being
redeemed shall be paid at the time of such redemption. In the event that the
Corporation shall effect a registered public offering of any of its securities
in which gross proceeds received by the Corporation from the offering are not
less than $12 million (which registered public offering shall also be based upon
a market capitalization of the common equity of the Corporation of not less than
$60 million), the Corporation shall be obligated to redeem $9.0 million of the
shares of this Class at a price equal to Stated Value plus accrued but unpaid
dividends on or promptly following the closing of such offering. Optional
redemptions made under Section 3(a) and mandatory redemptions made pursuant to
the immediately preceding sentence shall reduce the extent to which the
Corporation is required to make any mandatory redemptions required under this
Section 3(b).
-5-
<PAGE>
3(c) All shares to be redeemed shall be redeemed pro rata from all
holders, unless otherwise required by law. If any redemption date falls on a day
which is not a business day, the redemption date shall be the next business day.
3(d) In the event that the Corporation shall redeem shares of this
Class, notice of such redemption shall be mailed, first class postage prepaid,
to each holder of record of the shares of this Class, at such holder's address
as it appears in the stock register of the Corporation, not less than 10 nor
more than 60 days prior to the date fixed for redemption. No failure to give
such notice nor any defect therein shall affect the validity of the proceeding
for the redemption of any shares of this Class to be redeemed except as to the
holder to whom the Corporation has failed to give notice or except as to the
holder whose notice was defective. Each such notice shall state the redemption
date, the aggregate number of shares of this Class to be redeemed and, if less
than all shares are to be redeemed, the number to be redeemed from such holder,
the redemption price applicable to the shares to be redeemed, the place where
certificates for such shares are to be surrendered for payment of the redemption
price, and that dividends on shares to be redeemed will cease to accrue on the
redemption date.
3(e) Notice having been mailed as provided in Section 3(d), from and
after the redemption date (unless the Corporation defaults in providing money
for the payment of the redemption price) dividends on shares of this Class so
called for redemption shall cease to accrue, such shares shall no longer be
deemed to be outstanding, and all rights of the holder of the shares so
redeemed, as such (except the right to receive the redemption price thereof),
shall terminate. Upon surrender, in accordance with such notice, of the
certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board of Directors shall so require), such shares shall be
redeemed by the Corporation at the redemption prices set forth above. If fewer
than all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares without cost to
the holder thereof.
3(f) Any shares of this Class that shall at any time have been
redeemed or repurchased shall, after such redemption or repurchase, be cancelled
by the Corporation and shall not be available for reissuance.
3(g) If the funds of the Corporation legally available for
redemption of the shares of this Class on any
-6-
<PAGE>
mandatory redemption date are insufficient to pay accrued and unpaid dividends
with respect to the shares being redeemed and to redeem the number of shares
required to be redeemed on that date, those funds that are legally available
shall be used first to pay such accrued and unpaid dividends and then to redeem
the maximum possible number of such shares, ratably on the basis of the number
of shares that would be redeemed on such date if the funds of the Corporation
legally available therefor had been sufficient to redeem all shares required to
be redeemed on that date. At any time thereafter, when additional funds of the
Corporation become legally available for the redemption of shares, such funds
shall be used, at the end of the next succeeding fiscal quarter, to pay any
remaining accrued and unpaid dividends with respect to the shares of this Class
that the Corporation was theretofore obligated to redeem and then to redeem the
balance of such shares, ratably on the basis set forth in the preceding
sentence.
4. Voting and Meetings with the Corporation.
4(a) The holders of record of the shares of this Class shall not,
except as otherwise required by law or as specified in Section 4(b), have any
right or power to vote on any question or in any proceeding or to be represented
at or to receive notice of any meeting of the Corporation's stockholders or to
express consent or dissent to any action taken without a meeting (including
without limitation, any election or removal of the directors of the
Corporation).
4(b) So long as any shares of this Class are outstanding, the
Corporation shall not, without the affirmative vote or consent of the holders of
at least a majority of the shares of this Class outstanding at the time, given
in person or by proxy, either in writing or at a meeting at which the holders of
the shares of this Class shall vote separately as a class, (i) authorize, issue
or assume the obligations under, or increase the stated or par value of, any
Senior Securities (as defined in Section 6) or any obligation or security
convertible into or evidencing the right to purchase any Senior Securities; (ii)
authorize, issue or assume the obligations under, or increase the stated or par
value of, any Parity Securities or any obligation or security convertible into
or evidencing the right to purchase any Parity Securities; (iii) amend the
Amended and Restated Certificate of Incorporation of the Corporation or the
certificate of designations relating to the shares of this Class so as to alter
or change the powers, preferences, or special rights of the shares of this Class
so as to affect them adversely or authorize additional shares of this Class or
increase or decrease the par value of the shares
-7-
<PAGE>
of this Class; or (iv) sell all or substantially all of the assets of the
Corporation in a transaction that is to be submitted to a vote of stockholders
of the Corporation.
5. Liquidation Rights.
5(a) Subject to the rights of the holders of shares of any series or
class or classes of Senior Securities upon dissolution or liquidation, upon the
liquidation, dissolution, or winding up of the Corporation, whether voluntary or
involuntary, the holders of record of the shares of this Class then outstanding
shall be entitled to receive out of the assets of the Corporation available for
distribution to its stockholders, before any distribution or payment is made
with respect to the Common Stock or any other class or series of stock ranking
junior to this Class upon liquidation, an amount per share in cash equal to the
Stated Value plus an amount in cash equal to all accrued and unpaid dividends
(whether or not earned or declared) on the shares of this Class as provided in
Section 2 to the date of final distribution.
5(b) After the payment, in cash, to the holders of the shares of
this Class of the full preferential amount provided for in this Section 5, the
holders of shares of this Class as such shall have no right or claim to any of
the remaining assets of the Corporation.
5(c) Neither the merger or consolidation of the Corporation into or
with any other corporation, nor the merger or consolidation of any other
corporation into or with the Corporation, nor a voluntary sale, transfer, lease,
or other disposition of all or any part of the assets of the Corporation, shall,
without further corporate action, be deemed to be a liquidation, dissolution, or
winding up of the Corporation within the meaning of this Section 5.
5(d) Subject to the rights of the holders of shares of any series or
class or classes of Senior Securities upon dissolution or liquidation, in the
event the remaining assets of the Corporation upon any dissolution, liquidation,
or winding up of the Corporation are not sufficient to pay in full all amounts
to which the holders of this Class are entitled pursuant to Section 5(a) and
liquidating payments on any Parity Securities, then such assets, or the proceeds
thereof, shall be distributed among the holders of shares of this Class and such
Parity Securities ratably in accordance with the respective amounts which would
be paid on such shares of this Class and such other Parity Securities if all
amounts thereon were paid in full.
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<PAGE>
5(e) Subject to the rights of the holders of shares of any series or
class or classes of Parity Securities or Senior Securities upon any dissolution
or liquidation of the Corporation, after payment shall have been made in full to
the holders of shares of this Class as provided in this Section 5, but not prior
thereto, any other series or class or classes of stock ranking junior to this
Class upon dissolution or liquidation shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the holders of this Class shall not be
entitled to share therein.
6. Ranking. The shares of this Class shall rank, both as to dividends and
upon liquidation, senior and prior to the Common Stock. Any stock of any other
class or classes or series shall be deemed to rank:
6(a) senior and prior to the shares of this Class, to be "Senior
Securities," if the holders of such stock shall be entitled to the receipt of
dividends or amounts paid in or set aside for redemption, or the receipt of
amounts distributable upon dissolution, liquidation, or winding up of the
Corporation, as the case may be, in preference or priority to the holders of
shares of this Class;
6(b) on a parity with shares of this Class, to be "Parity
Securities," whether or not the dividend rates, dividend payment dates,
redemption or liquidation prices per share, or sinking fund provisions, if any,
be different from those of this Class, if the holders of such stock shall be
entitled to the receipt of dividends or amounts paid in or set aside for
redemption, or the receipt of amounts distributable upon dissolution,
liquidation, or winding up of the Corporation, as the case may be, in proportion
to their respective dividend rates or liquidation prices, without preference or
priority, one over the other, as between the holders of such stock and the
holders of the shares of this Class; and
6(c) junior to shares of this Class, to be "Junior Securities," if
the holders of shares of this Class shall be entitled to the receipt of
dividends or of amounts paid in or set aside for redemption, or to the receipt
of amounts distributable upon dissolution, liquidation, or winding up of the
Corporation, as the case may be, in preference or priority to the holders of
such stock.
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<PAGE>
7. Restrictions on Transfer. The shares of this Class may not be
transferred without the prior written approval of the Corporation.
8. Consolidation, Merger, etc.
8(a) In the event that the Corporation shall consummate any
consolidation or merger or similar transaction, however named, pursuant to which
the outstanding shares of Common Stock are by operation of law exchanged solely
for or changed, reclassified or converted solely into shares of any successor or
resulting company and, if applicable, for a cash payment in lieu of fractional
shares, if any, then in such event, the terms of such consolidation or merger or
similar transaction shall provide that the shares of this Class shall be
substituted for and shall become preferred shares of such successor or resulting
company, having in respect of such company insofar as possible the same powers,
preferences and relative, participating, optional or other special rights
(including the redemption rights provided by Section 3 hereof) and the
qualifications, limitations or restrictions thereon, that the shares of this
Class had immediately prior to such transaction. The Corporation shall not
consummate any such merger, consolidation or similar transaction unless all the
terms of this paragraph 8(a) are complied with.
8(b) In the event the Corporation shall enter into any agreement
providing for any consolidation or merger or similar transaction described in
paragraph (a) of this Section 8, then the Corporation shall as soon as
practicable thereafter (and in any event at least twenty (20) business days
before consummation of such transaction) give notice of such agreement and the
material terms thereof to each holder of shares of this Class, and each such
holder shall have the right to elect, by written notice to the Corporation, to
receive upon consummation of such transaction (if and when such transaction is
consummated), from the Corporation or the successor of the Corporation, in
redemption and retirement of such shares, a cash payment equal to the Stated
Value plus all accrued (whether or not accumulated) and unpaid dividends. No
such notice of redemption shall be effective unless given to the Corporation
prior to the close of business on the fifth business day prior to consummation
of such transaction, unless the Corporation or the successor of the Corporation
shall waive such prior notice, but any notice of redemption so given prior to
such time may be withdrawn by notice of withdrawal given to the Corporation
prior to the close of business on the fifth business day prior to consummation
of such transaction.
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<PAGE>
IN WITNESS WHEREOF, Hospice Care Incorporated has caused this
Certificate of Designation to be executed on its behalf on December 16, 1991.
HOSPICE CARE INCORPORATED
By: /s/ Earl M. Col1ier, Jr.
----------------------------
Earl M. Col1ier, Jr.
President
Attest:
/s/ Pamela Ventura
- ----------------------
Pamela Ventura
Assistant Secretary
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<PAGE>
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
HOSPICE CARE INCORPORATED
Hospice Care Incorporated, a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. That by unanimous written consent in lieu of a meeting, the Board of
Directors of said corporation duly adopted resolutions setting forth a proposed
amendment to the Amended and Restated Certificate of Incorporation of said
corporation, declaring said amendment to be advisable and directing that it be
submitted to stockholders for approval and adoption. The resolution setting
forth the proposed amendment is as follows:
RESOLVED, that Article FIRST of the Corporation's Amended and Restated
Certificate of Incorporation is hereby amended to read as follows: "FIRST: The
name of the corporation is Vitas Healthcare Corporation (hereinafter called the
"Corporation")."
2. That thereafter holders of at least a majority of the outstanding
shares of common stock of said corporation acting by written consent in
accordance with Section 228 of the Delaware General Corporation Law, duly
approved and adopted the amendment to the Amended and Restated Certificate of
Incorporation as set forth above, and written notice of the approval and
adoption of said amendment without a meeting has been given to those
stockholders who did not consent in writing as provided in Section 228(d) of the
Delaware General Corporation Law.
3. That the aforesaid amendment was duly approved and adopted in
accordance with applicable provisions of Section 242 of the Delaware General
Corporation Law.
IN WITNESS WHEREOF, said Hospice Care Incorporated has caused this
certificate to be signed by Earl M. Collier, Jr., its President, and attested by
Mark Ohlendorf, its Secretary, this 11th day of May, 1992.
ATTEST: HOSPICE CARE INCORPORATED
By: /s/ Mark Ohlendorf By: /s/ Earl M. Collier, Jr.
---------------------- ----------------------------
Mark Ohlendorf Earl M. Collier, Jr.
Secretary President
<PAGE>
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
VITAS HEALTHCARE CORPORATION
Vitas Healthcare Corporation, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
FIRST: The Board of Directors of the Corporation, at a meeting duly called
and held in accordance with the By-Laws of the Corporation and Section 141 of
the Delaware General Corporation Law, duly adopted resolutions proposing and
declaring advisable the amendment to the Amended and Restated Certificate of
Incorporation, as amended, of the Corporation as set forth below.
SECOND: Article FOURTH of the Amended and Restated Certificate of
Incorporation, as amended, hereby is further amended by deleting in its entirety
the first sentence of the first paragraph of Article FOURTH and replacing it
with the following:
FOURTH: The total number of shares of all classes of stock
which the Corporation shall have authority to issue is
forty-four million five hundred thousand (44,500,000), of which
forty million (40,000,000) shall be common stock, par value of
$1.00 per share ("Common Stock"), and four million five hundred
thousand (4,500,000) shall be preferred stock, par value of
$1.00 per share ("Preferred Stock").
<PAGE>
THIRD: Holders of at least a majority of the outstanding shares of
Common Stock of the Corporation, constituting the only outstanding
securities of the Corporation entitled to vote in respect of the amendment
to the Amended and Restated Certificate of Incorporation of the
Corporation, as amended, as set forth above, acting by written consent in
accordance with Section 228 of the Delaware General Corporation Law, duly
approved said amendment, and written notice of the approval and adoption
of said amendment without a meeting has been given to those stockholders
who did not consent in writing as provided in Section 228(d) of the
Delaware General Corporation Law.
FOURTH: The amendment to the Amended and Restated Certificate of
Incorporation of the Corporation, as amended, set forth above was duly
adopted and approved in accordance with the requirements of Section 242 of
the Delaware General Corporation Law.
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<PAGE>
IN WITNESS WHEREOF, Vitas Healthcare Corporation has caused this
Certificate of Amendment to be signed and attested by its duly authorized
officers, as of the 27th day of May, 1993.
VITAS HEALTHCARE CORPORATION
By /s/ Earl M. Collier, Jr.
---------------------------
Earl M. Collier, Jr.
President
ATTEST:
/s/ Mark Ohlendorf
- -----------------------
Mark Ohlendorf
Secretary
The undersigned affirm and acknowledge under penalty of perjury that
they have read the foregoing Certificate of Amendment, that the instrument is
the act and deed of the Corporation, and that the facts stated therein are true.
Executed at Washington, D.C. as of May 27, 1993.
/s/ Earl M. Collier, Jr.
-----------------------------
Earl M. Collier, Jr.
/s/ Mark Ohlendorf
-----------------------------
Mark Ohlendorf
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<PAGE>
CERTIFICATE OF DESIGNATION, PREFERENCES AND OTHER RIGHTS
OF THE
SERIES B CONVERTIBLE PREFERRED STOCK OF
VITAS HEALTHCARE CORPORATION
-----------------------
Pursuant to Section 151(g) of the Delaware General
Corporation Law
-----------------------
Vitas Healthcare Corporation, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies that,
pursuant to the authority conferred upon the Board of Directors of the
Corporation (the "Board of Directors") by the Amended and Restated Certificate
of Incorporation, as amended, of the Corporation and in accordance with Section
151(g) of the Delaware General Corporation Law, the Board of Directors on June
3, 1993, duly adopted the following resolution, which resolution remains in full
force and effect as of the date hereof:
RESOLVED, that pursuant to the authority vested in the Board of Directors
and in accordance with the provisions of its Amended and Restated Certificate of
Incorporation, as amended, there is hereby created and authorized a series of
Preferred Stock of the Corporation, and the designation and amount thereof and
the powers, preferences and rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as follows:
SERIES B CONVERTIBLE PREFERRED STOCK
1. Designation and Amount. The designation of this series of preferred
stock shall be "Series B Convertible Preferred Stock," of the par value of $1.00
per share (hereinafter called this "Class"). The number of shares constituting
this Class is 262,500. Shares of this Class shall have a stated value of $100.00
per share (the "Stated Value").
2. Dividend Provisions.
2(a) Dividend Rights. The holders of shares of this Class shall not
be entitled to any dividends or distributions, whether payable in cash, property
or stock, except as otherwise provided in this Section 2.
<PAGE>
2(b) Dividend Preference. So long as any shares of this Class are
outstanding and subject to the provisions of Section 2(d) hereof, the
Corporation shall not (i) declare, pay, or set aside for payment any dividend
upon any Junior Securities (as defined in Section 7 hereof) (other than a
dividend paid in the Corporation's common stock, par value $.00l per share
("Common Stock"), or in any other stock ranking junior to this Class as to
dividends) or upon any Parity Securities (as defined in Section 7 hereof) (other
than a dividend paid in Parity Securities or Junior Securities); (ii) make any
payment on account of, or set apart for payment money for a sinking or other
similar fund for, the repurchase, redemption, or other retirement of any Junior
Securities or Parity Securities or any warrants, rights, or options exercisable
for or convertible into any Junior Securities or Parity Securities (other than
the Stock Repurchases as defined in that certain Preferred Stock Purchase
Agreement, dated as of the Original Issue Date, among the Corporation and the
holders of shares of this Class on the Original Issue Date (as hereinafter
defined) (the "Preferred Stock Purchase Agreement")); or (iii) make any
distribution in respect of any Junior Securities or Parity Securities, either
directly or indirectly, and whether in cash, obligations or shares of the
Corporation or any other person, or any other property other than cash, or any
combination thereof (other than distributions in Junior Securities to the
holders thereof or distributions in Parity Securities to the holders thereof),
unless (A) in each case, prior to or concurrently with such declaration,
payment, setting apart for payment, repurchase, redemption, or distribution, as
the case may be, dividends (including dividends previously declared and paid in
cash) on the outstanding shares of this Class equal to 8% per annum, compounded
annually (computed on the basis of a 360-day year of 30-day months and, for any
period less than a month, the actual number of days elapsed in such month),
calculated for each of the then outstanding shares of this Class on the Stated
Value from the original issue date of the shares of this Class (the "Original
Issue Date") to the payment date established for such dividend, payment or
distribution (the "Series B Dividend Preference Amount"), shall have been
declared and paid in cash, and (B) the Corporation shall have made all payments
required to be made by it (if any) pursuant to Section 3 hereof. Notwithstanding
the provisions of this Section 2(b), without declaring or paying any dividend
upon shares of this Class, the Corporation may, subject to applicable law and
the provisions of Section 5(b)(viii) hereof, redeem or purchase shares of Common
Stock (or securities exchangeable for or convertible into Common Stock) from
current or former directors, officers, employees or consultants of the
Corporation or of any direct or indirect subsidiary of the Corporation upon or
in connection with their death, disability, termination of their employment
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<PAGE>
with or service to the Corporation or any such subsidiary, or exercise of rights
of first refusal by the Corporation, or under any circumstances approved or
consented to by the holders of a majority of the outstanding shares of this
Class.
2(c) Participation in Dividends on Common Stock. So long as any
shares of this Class are outstanding, in the event the Corporation declares,
pays or sets aside for payment any dividend or distribution upon the shares of
Common Stock in accordance with Section 2(b) hereof (other than a dividend paid
in Common Stock or in any other stock ranking junior to this Class as to
dividends), the outstanding shares of this Class shall be entitled to
participate equally (as if such shares had been converted into shares of Common
Stock pursuant to Section 4 hereof) with the shares of Common Stock to the
extent that such dividend or distribution, together with all other dividends or
distributions paid upon the shares of Common Stock subsequent to the Original
Issue Date, exceeds the sum of all amounts paid with respect to the Series B
Dividend Preference Amount pursuant to Sections 2(b) and 3(a) hereof, without
giving effect to annual compounding.
2(d) Payment of Dividends on Parity Securities.
(i) So long as any shares of this Class are outstanding, the
Corporation shall not declare or pay or set apart for payment full cumulative
dividends (the payment of less than full cumulative dividends being treated in
Section 2(d)(ii) hereof), including all accrued and unpaid dividends, on any
class or series of Parity Securities unless the Series B Dividend Preference
Amount has been or contemporaneously is declared and paid.
(ii) So long as any shares of this Class are outstanding, if
any dividends are not declared in full, as provided in Section 2(d)(i) hereof,
upon any class or series of Parity Securities, but the Corporation determines to
declare or pay or set aside for payment dividends that are less than full
cumulative dividends on such Parity Securities, then as a condition precedent
thereto the Corporation shall declare and pay cash dividends on the outstanding
shares of this Class in such amounts that (A) the sum of the aggregate amount of
such cash dividends to be so paid on the shares of this Class bears the same
ratio to (B) the Series B Dividend Preference Amount for all then outstanding
shares of this Class (less any dividends declared and paid on the shares of this
Class prior to the payment date for such dividend) as of the record date for
such dividend as (A) the aggregate amount of dividends to be so declared or paid
or set apart for payment on such class or series of Parity Securities bears to
(B) the sum of the aggregate amount of accrued and unpaid dividends on the
shares
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<PAGE>
of such class or series then outstanding plus the aggregate amount of dividends
accruing on such class or series of Parity Securities for the most recent
dividend period ending on or before the payment date for such dividends.
2(e) Payment of Dividends. Dividends on the shares of this Class
calculated as described in Sections 2(b), 2(c) and 2(d) hereof shall be payable
from funds legally available therefor, only when, as, and if declared by the
Board of Directors or by a committee of the Board of Directors authorized to
declare such dividends. Each such dividend shall be paid to the holders of
record of the shares of this Class as such holders appear in the stock register
of the Corporation on the date that is thirty (30) days before the payment date
fixed by the Board of Directors or by a committee of the Board of Directors
authorized to fix such payment date. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on
this Class.
2(f) Restriction on Cash Dividends. Notwithstanding any other
provision of this Section 2 to the contrary, the Corporation shall not pay any
cash dividends on the shares of this Class or on any Junior Securities or Parity
Securities if, on the proposed payment date established for such dividend and
after giving effect to such dividend, the aggregate amount of all cash dividends
paid by the Corporation since the original Issue Date to holders of the shares
of this Class and the holders of any Junior Securities and Parity Securities
exceeds 50% of the Cumulative Consolidated Net Income of the Company. For
purposes of this Section 2(f), the term "Cumulative Consolidated Net Income"
shall mean the consolidated net income earned by the Company during the period
from March 31, 1993 through the month end immediately preceding the proposed
payment date established for such dividend. The provisions of this Section 2(f)
shall remain in full force and effect as long as at least one-third (1/3) of the
shares of this Class outstanding on the Original Issue Date continue to be
outstanding.
3. Redemption Provisions.
3(a) Redemption at the Option of the Holders. Subject to the
provisions of Section 3(d) hereof, at the earlier of June 30, 1999, or six
months following the redemption in full of the 9.0% Cumulative Nonconvertible
Preferred Stock of the Corporation, but in no event prior to June 30, 1996, any
holder of shares of this Class may, by notice to the Corporation as provided in
Section 3(c) hereof, require the Corporation to redeem all of such holder's
shares at a price per share equal to the Stated Value plus the Series B
Dividend Preference Amount as of the Redemption Date (as
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<PAGE>
hereinafter defined) (less any dividends declared and paid on the shares of this
Class prior to the Redemption Date), out of funds legally available for such
redemption (the "Redemption Price").
3(b) Involuntary Redemption. In the event that the cumulative effect
of any redemption of shares of this Class pursuant to Section 3(a) hereof causes
two-thirds (2/3) of the shares of this Class outstanding on the Original Issue
Date to have been redeemed, the Corporation shall redeem all of the remaining
outstanding shares of this Class held by all holders on the Involuntary
Redemption Date (as hereinafter defined) at the Redemption Price.
3(c) Redemption Procedures.
(i) In the case of a redemption pursuant to Section 3(a)
hereof, each holder of shares of this Class electing to redeem all of such
shares shall mail, first class postage prepaid, written notice of such election
to the Corporation not less than thirty (30) business days prior to the date on
which such holder requests that the redemption be made (the "Redemption Date").
Each such notice shall include the certificate or certificates representing the
shares to be redeemed (properly endorsed or assigned for transfer) and shall
specify the Redemption Date and the aggregate number of shares to be redeemed.
If any Redemption Date falls on a day that is not a business day, the Redemption
Date shall be the next business day.
(ii) In the case of a redemption pursuant to Section 3(b)
hereof, at least twenty (20) business days prior to the Involuntary Redemption
Date, the Corporation shall mail, first class postage prepaid, written notice
(the "Involuntary Redemption Notice") to each holder of record (at the close of
business on the business day next preceding the day on which the Involuntary
Redemption Notice is given) of this Class (A) notifying such holders that
two-thirds (2/3) of the shares of this Class outstanding on the Original Issue
Date have been redeemed and that the shares held by each such holder, unless
surrendered for conversion pursuant to Section 4 hereof prior to the Involuntary
Redemption Date, shall be redeemed pursuant to Section 3(b) hereof, and (B)
specifying the Redemption Price, the date that the Corporation has designated as
the date on which such redemption will be made (which date shall not be more
than thirty (30) business days after the Redemption Date of the redemption
triggering such involuntary redemption) (the "Involuntary Redemption Date"), the
number of shares of this Class to be redeemed and the place
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<PAGE>
where the Redemption Price shall be payable. The Involuntary Redemption Notice
shall be addressed to each holder of this Class at its address shown in the
Corporation's records.
(iii) Upon surrender of the certificate or certificates
representing the shares redeemed pursuant to this Section 3, the Corporation
shall remit the Redemption Price to the holders thereof (subject to the
provisions of Section 3(d) hereof). If fewer than all the shares represented by
any such certificate or certificates are to be redeemed, a new certificate shall
be issued representing the unredeemed shares without cost to the holder thereof.
3(d) Installment Election by Corporation. Upon receipt of the notice
of redemption provided in Section 3(c)(i) hereof or upon the occurrence of a
redemption triggering an involuntary redemption pursuant to Section 3(b) hereof,
the Corporation may elect to effect any such redemption in three annual
installments by mailing, first class postage prepaid, written notice of such
installment election to each holder of record (at the close of business on the
business day next preceding the day on which such installment election notice is
given) of this Class entitled to redemption under Section 3(a) or 3(b) hereof
not less than ten (10) business days prior to the Redemption Date or Involuntary
Redemption Date, as the case may be. Pursuant to such installment election, the
Corporation shall redeem the shares to be redeemed on such Redemption Date or
Involuntary Redemption Date in three equal installments, one-third (1/3) of such
shares to be redeemed on such Redemption Date or Involuntary Redemption Date and
one-third (1/3) of such shares to be redeemed on each of the first and second
anniversaries of such Redemption Date or Involuntary Redemption Date,
respectively; provided, however, that any shares of this Class to be redeemed
pursuant to this Section 3(d) shall not be deemed to have been redeemed until
the Redemption Price installment (which shall include the Series B Dividend
Preference Amount as of the date of each installment with respect to the shares
to be redeemed by such installment) relating to such shares has been remitted to
the holder thereof; provided, further, in the event that (i) the Corporation
fails to remit any installment of the Redemption Price within five (5) business
days after the date such payment is due, (ii) any of the events specified in
clauses (iv), (v), (vi) or (viii) of Section 5(b) hereof shall occur, (iii) (A)
there has been a filing by or against the Corporation of any case, proceeding,
or other action seeking reorganization, liquidation, dissolution, or adjustment
of the Corporation or its debts under any law relating to bankruptcy,
insolvency, or reorganization, (B) the Corporation has made any general
assignment for the benefit of creditors or (C) a receiver or trustee has been
appointed for the Corporation or for any
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<PAGE>
assets of the Corporation, or (iv) a judgment or decree has been entered against
the Corporation involving a liability in excess of $2,500,000 or more, and such
judgment or decree has not been vacated, discharged, stayed or bonded pending
appeal within forty-five (45) days following the entry thereof, then the
Corporation shall be required promptly to redeem all outstanding shares of this
Class to be redeemed pursuant to this Section 3(d) and remit the entire
remaining amount (if any) of the Redemption Price to the holders of all such
shares. Notwithstanding any provision of this Section 3(d) to the contrary, the
Corporation may redeem any shares of this Class to be redeemed pursuant to this
Section 3(d) at any time following the Redemption Date or Involuntary Redemption
Date, as the case may be, prior to the first or second anniversary thereof.
3(e) Rights After the Redemption Date. From and after the close of
business on the Redemption Date or Involuntary Redemption Date, as the case may
be, unless there shall have been a default in the payment of the Redemption
Price or any installment thereof, all rights of holders of the shares of this
Class redeemed pursuant to this Section 3 (except the right to receive the
Redemption Price and except as otherwise provided in Section 3(d) hereof) shall
cease with respect to such shares, and thereafter such shares shall not be
deemed to be outstanding for any purpose whatsoever.
3(f) Insufficient Funds. Subject to the rights of holders of shares
of any series or class or classes of Senior Securities (as defined in Section 7
hereof) with respect to redemption, if the funds of the Corporation legally
available for redemption of the shares of this Class on any Redemption Date or
the Involuntary Redemption Date, as the case may be, are insufficient to pay the
Redemption Price, those funds that are legally available shall be used first to
pay the Series B Dividend Preference Amount with respect to the shares being
redeemed and then to redeem the maximum possible number of such shares, ratably
on the basis of the number of shares that would be redeemed on such date if the
funds of the Corporation legally available therefor had been sufficient to
redeem all shares required to be redeemed on that date. Subject to the rights of
holders of shares of any series or class or classes of Senior Securities with
respect to redemption, at any time thereafter, when additional funds of the
Corporation become legally available for the redemption of shares, such funds
shall be used, at the end of the next succeeding fiscal quarter, to pay any
remaining Series B Dividend Preference Amount with respect to the shares of this
Class that the Corporation theretofore was obligated to redeem and then to
redeem the balance of such shares, ratably on the
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<PAGE>
basis set forth in the preceding sentence, until all shares of this Class
required to be redeemed have been redeemed.
3(g) Cancellation of Redeemed Shares. Any shares of this Class that
shall at any time have been redeemed or repurchased shall, after such redemption
or repurchase, be cancelled by the Corporation and shall not be available for
reissuance.
4. Conversion Provisions.
4(a) Conversion at the Option of the Holders. Subject to and upon
compliance with the provisions of this Section 4 and subject to compliance with
any required notification or expiration of any notice or waiting period under
applicable laws or regulations (including, without limitation, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended), the holder of
any shares of this Class shall have the right, at such holder's option, at any
time (and from time to time) to convert any of such shares of this Class into
that number of fully paid and nonassessable shares of Common Stock (calculated
as to each conversion to the nearest 1/100th of a share) equal to the then
applicable Conversion Rate (as defined in Section 4(e) hereof) multiplied by the
number of shares of this Class to be converted pursuant to this Section 4(a), by
surrendering the certificate or certificates representing shares to be converted
in the manner provided in Section 4(c) hereof.
4(b) Automatic Conversion. Upon the consummation of either a
Qualified Public Offering or a Qualified Demand Offering (each as hereinafter
defined), all shares of this Class shall, by virtue of and simultaneous with the
closing of such offering and without any action on the part of the holder
thereof or the Corporation, be deemed automatically converted into a number of
fully paid and nonassessable shares of Common Stock (calculated as to each
conversion to the nearest 1/100th of a share) equal to the then applicable
Conversion Rate multiplied by the number of shares of this Class then
outstanding. For purposes of this Section 4(b), (i) "Qualified Public Offering"
shall mean a public offering of Common Stock (A) at a price per share of (1)
$8.50 or more in the event such offering is consummated on or prior to June 30,
1995 or (2) $10.00 or more in the event such offering is consummated subsequent
to June 30, 1995 (in each case, and subject to adjustment from time to time as
provided in Section 4(f) hereof, the "Qualified Public Offering Price"), and (B)
with gross proceeds (before underwriting discounts and commissions, if any) to
the Corporation in excess of $25,000,000, and (ii) "Qualified Demand Offering"
shall mean a public offering of Common Stock effected pursuant to that certain
Registration
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<PAGE>
Rights Agreement among the Corporation and certain stockholders of the
Corporation dated as of the Original Issue Date (together with any prior public
offerings of Common Stock effected pursuant to such Registration Rights
Agreement) in which holders of a majority of the outstanding shares of this
Class on a cumulative basis shall have participated in requesting registration
in connection with such offering.
4(c) Conversion Procedures.
(i) In order to exercise the optional conversion privilege
pursuant to Section 4(a) hereof, the holder of each share of this Class to be
converted shall deliver to the Corporation during regular business hours, at the
principal office of the Corporation or at the office of any transfer agent of
the Corporation for this Class or at such other place as may be designated by
the Corporation, the certificate or certificates representing the shares of this
Class to be converted, duly endorsed or assigned in blank (or to the Corporation
if so requested), accompanied by written notice stating that the holder elects
to convert such shares. Unless the shares of Common Stock issuable upon
conversion are to be issued in the same name as the name in which the shares of
this Class are registered, each share surrendered for conversion shall be
accompanied by an instrument of transfer, in form satisfactory to the
Corporation, duly executed by the holder or such holder's duly authorized
attorney and by funds in an amount sufficient to pay any transfer or similar
tax.
(ii) As promptly as practicable after the surrender by a
holder of the certificate or certificates representing shares of this Class in
accordance with this Section 4(c), the Corporation shall issue and shall deliver
to the holder a certificate or certificates for the number of full shares of
Common Stock issuable upon the conversion of those shares in accordance with the
provisions of this Section 4, and a certificate representing any shares of this
Class that were represented by the certificate or certificates surrendered to
the Corporation in connection with such conversion but were not converted. Any
fractional interest in respect of a share of Common Stock arising out of such
conversion shall be settled as provided in Section 4(d) hereof. The Corporation
shall pay all expenses, taxes (other than stock transfer taxes) and other
charges required to be paid by the Corporation in order to issue the shares of
Common Stock pursuant to this Section 4(c).
(iii) Conversion shall be deemed to have been effected (A)
with respect to conversion pursuant to Section 4(a) hereof, on the date on which
all of the conditions specified in Section 4(c)(i) hereof have been satisfied,
and (B) with respect to conversion pursuant to Section 4(b) hereof,
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on the date of the closing of a Qualified Public Offering or a Qualified Demand
Offering, as the case may be (in each case, the "Conversion Date"), and the
person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of the shares of Common Stock
represented by those certificates on the Conversion Date and such conversion
shall be at the Conversion Rate in effect on the Conversion Date, unless the
stock transfer books of the Corporation shall be closed on the Conversion Date,
in which case such person or persons shall be deemed to have become such holder
or holders of record at the close of business on the next succeeding day on
which such stock transfer books are open, but such conversion shall be at the
Conversion Rate in effect on the Conversion Date. All shares of Common Stock
delivered upon conversion of the shares of this Class will upon delivery be duly
and validly issued and fully paid and nonassessable, and not subject to any
preemptive rights. Upon the surrender of certificates representing shares of
this Class to be converted, such shares no longer shall be deemed to be
outstanding and all rights of a holder with respect to the shares surrendered
for conversion shall immediately terminate except the right to receive the
Common Stock as provided herein and except as set forth in Section 4(c)(iv)
hereof.
(iv) The Corporation shall make no payment or adjustment
regarding the Series B Dividend Preference Amount with respect to any shares of
this Class converted pursuant to this Section 4 unless the shares of this Class
surrendered for conversion are surrendered subsequent to the record date
preceding a date fixed by the Board of Directors as the payment date for
dividends on the shares of this Class (a "Dividend Payment Date") but on or
prior to such Dividend Payment Date, in which case the holder of such shares at
the close of business on such record date shall be entitled to receive the
dividend payable on such shares on such Dividend Payment Date notwithstanding
the conversion thereof.
4(d) Fractional Shares. No fractional shares or securities
representing fractional shares of Common Stock shall be issued upon conversion
of the shares of this Class. Any fractional interest in a share of Common Stock
resulting from conversion of a share of this Class shall be paid in cash
(computed to the nearest cent) based upon the Fair Market Value (as defined in
Section 4(f)(vi) hereof) of a share of Common Stock on the Conversion Date.
4(e) Conversion Rate. The "Conversion Rate" per share of this Class
shall be 21.052632 shares of Common Stock
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for each share of this Class, subject to adjustment from time to time as
provided in Section 4(f) hereof.
4(f) Anti-Dilution Provisions and Adjustment of Conversion Price.
(i) Subject to the provisions of Section 4(f)(iii) hereof, in
the event the Corporation shall, at any time or from time to time while any of
the shares of this Class are outstanding, (a) pay a dividend or make a
distribution in respect of Common Stock in shares of Common Stock or (b)
subdivide or combine the outstanding shares of Common Stock into a greater or
lesser number of shares, in each case whether by reclassification of shares,
recapitalization of the Corporation, or otherwise, then, in such event, each
share of this Class will automatically, without any action on the part of the
holder thereof or the Corporation, become convertible into that number of shares
of Common Stock equal to the number of shares of Common Stock into which a share
of this Class could be converted immediately prior to such event multiplied by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event, and the denominator of which is the
number of shares of Common Stock outstanding immediately before such event. An
adjustment pursuant to this Section 4(f)(i) shall be effective upon payment of
such dividend or distribution in respect of the Common Stock and in the case of
a subdivision or combination shall become effective immediately as of the
effective date thereof. Concurrently with the automatic adjustment pursuant to
this Section 4(f)(i), the Qualified Public Offering Price and the Conversion
Price (as hereinafter defined) each shall be adjusted by multiplying the
Qualified Public Offering Price and the Conversion Price in effect immediately
before such event by a fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately before such event, and the denominator
of which is the number of shares of Common Stock outstanding immediately after
such event (rounded to the nearest whole cent).
(ii) Subject to the provisions of Section 4(f)(iii) hereof, in
the event the Corporation shall, at any time or from time to time while any of
the shares of this Class are outstanding, sell or issue shares of Common Stock
(other than in a transaction subject to Section 4(f)(i) hereof), any security
convertible into shares of Common Stock or any option, right or warrant to
purchase shares of Common Stock for no consideration or at a purchase price per
share of Common Stock, or conversion price in the case of a security convertible
into Common Stock, less than the Conversion Price in effect on the date of sale
or issuance of such Common Stock, security convertible into Common Stock,
option, right or
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warrant, then, in such event (or in the event of any change in the terms of any
security convertible into Common Stock or option, right or warrant that has a
similar effect on the date of such change), each share of this Class will
automatically, without any action on the part of the holder thereof or the
Corporation, become convertible into that number of shares of Common Stock equal
to the number of shares of Common Stock into which a share of this Class could
be converted immediately before such sale or issuance of Common Stock,
securities convertible into Common Stock, options, rights or warrants (or change
in terms) multiplied by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately before such sale or issuance of
Common Stock, securities convertible into Common Stock, options, rights or
warrants (or change in terms) plus the maximum number of shares of Common Stock
that could be acquired upon the sale or issuance of the Common Stock or upon
exercise in full of all such conversion rights, options, rights and warrants,
and the denominator of which is the number of shares of Common Stock outstanding
immediately before such sale or issuance of Common Stock, securities convertible
into Common Stock, options, rights or warrants (or change in terms) plus the
number of shares of Common Stock that could be purchased at the Conversion Price
at the time of such sale or issuance (or change in terms) for the maximum
aggregate consideration payable upon the sale or issuance of the Common Stock or
upon exercise in full of all such conversion rights, options, rights or
warrants. Concurrently with the automatic adjustment pursuant to this Section
4(f)(ii), the Qualified Public Offering Price and the Conversion Price each
shall be adjusted by multiplying the Qualified Public Offering Price and the
Conversion Price in effect immediately before such sale or issuance of Common
Stock, securities convertible into Common Stock, options, rights or warrants (or
change in terms) by a fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately before such sale or issuance of Common
Stock, securities convertible into Common Stock, options, rights or warrants (or
change in terms) plus the number of shares of Common Stock that could be
purchased at the Conversion Price at the time of such sale or issuance (or
change in terms) for the maximum aggregate consideration payable upon the sale
or issuance of the Common Stock or upon exercise in full of all such conversion
rights, options or warrants, and the denominator of which is the number of
shares of Common Stock outstanding immediately before such sale or issuance of
Common Stock, securities convertible into Common Stock, options, rights or
warrants (or change in terms) plus the maximum number of shares that could be
acquired upon the sale or issuance of the Common Stock or upon the exercise in
full of all such conversion rights, options, rights and warrants. For purposes
of this Section 4(f)(ii), all shares of
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Common Stock issuable upon the conversion of such convertible securities or
upon exercise of such options, rights or warrants shall be deemed to have
been issued for the purpose of computing the number of shares of Common Stock
into which a share of this Class could be converted and the Qualified Public
Offering Price and the Conversion Price hereunder, as of the time such
convertible securities, options, rights or warrants are issued or sold (or
the terms thereof are changed). If any rights of conversion or exercise of
such convertible securities, options, rights or warrants shall expire without
having been exercised (except in the case where the Corporation has redeemed
such convertible security, option, right or warrant or made any payment on
account of the holder thereof not converting or exercising such convertible
security, option, right or warrant), the number of shares of Common Stock
into which a share of this Class could be converted and the Qualified Public
Offering Price and the Conversion Price shall forthwith be automatically
adjusted to be the number of shares of Common Stock into which a share of
this Class could be converted and the Qualified Public Offering Price and the
Conversion Price that would have been in effect had an adjustment been made
on the basis that the only shares of Common Stock issued or sold were those
actually issued upon the conversion or exercise of such convertible
securities, options, rights or warrants. For purposes of this Section
4(f)(ii), the date of issuance of options for shares of Common Stock shall
mean the date of their grant.
(iii) Notwithstanding any other provision herein to the
contrary, the following events shall not be deemed to constitute an issuance of
Common Stock or other security of the Corporation for purposes of this Section
4(f): (A) the issuance of any shares of Common Stock pursuant to options, rights
or warrants (including the common stock purchase warrants issued in connection
with the issuance of the 9.0% Cumulative Nonconvertible Preferred Stock of the
Corporation) previously granted, outstanding or issued prior to the Original
Issue Date (whether pursuant to the Vitas Healthcare Corporation Management
Equity Incentive Plan or otherwise), (B) the issuance of any shares of Common
Stock pursuant to any plan providing for the reinvestment of dividends or
interest payable on securities of the Company and the investment of additional
optional amounts in shares of Common Stock under any such plan, and (C) the
issuance of any warrants or rights to purchase shares of Common Stock as part of
the terms of any borrowings, direct or indirect, from financial institutions or
other persons (excluding directors and officers of the Corporation (or any
direct or indirect subsidiary of the Corporation) or their affiliates), as
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approved by the Board of Directors, and the issuance of shares of Common Stock
pursuant to the exercise of any such warrants or rights.
(iv) Notwithstanding any other provisions of this Section
4(f), the Corporation shall not be required to make (A) any adjustment of the
number of shares of Common Stock into which each share of this Class can be
converted unless such adjustment would require an increase or decrease of at
least one percent (1%) in the aggregate number of shares of Common Stock into
which shares of this Class can be converted at that time, or (B) any adjustment
of the Qualified Public Offering Price or the Conversion Price unless such
adjustment would require an increase or decrease of at least one percent (1%) in
the Qualified Public Offering Price or the Conversion Price. Any lesser
adjustment shall be carried forward and shall be made no later than the time of,
and together with, the next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall amount to an increase or
decrease of at least one percent (1%) of the number of shares of Common Stock
into which shares of this Class can be converted at that time or an increase or
decrease of at least one percent (1%) of the Qualified Public Offering Price or
the Conversion Price, whichever the case may be. If any action would require
adjustment of the Qualified Public Offering Price or the Conversion Price
pursuant to more than one paragraph of this Section 4(f), only one adjustment
shall be made as determined in good faith by the Board of Directors of the
Corporation.
(v) If the Corporation shall make any dividend or distribution
on shares of Common Stock, sell or issue any Common Stock, other capital stock
or other security of the Corporation or sell or issue any rights or warrants to
purchase or acquire any such security that is not expressly addressed by the
terms of this Section 4(f) and does not result in an adjustment to the number of
shares of Common Stock into which a share of this Class can be converted or to
the Qualified Public Offering Price and the Conversion Price pursuant to this
Section 4(f), the Board of Directors may, in its sole discretion, consider
whether such dividend, distribution, sale or issuance is of a nature that some
type of equitable adjustment should be made in respect of such dividend,
distribution, sale or issuance for the protection of the holders of shares of
this Class. If in such case the Board of Directors determines that some type of
adjustment should be made, an equitable adjustment not repugnant to applicable
law and for the protection of the holders of shares of this Class shall be made
effective as of the date of such dividend, distribution, sale or issuance, as
determined in good faith by the Board of Directors in its sole discretion. The
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determination of the Board of Directors as to whether some type of adjustment
should be made pursuant to the provisions of this Section 4(f)(v), and if so, as
to what adjustment should be made and when, shall be final and binding on the
Corporation and all stockholders of the Corporation. The Corporation shall be
entitled to make such additional adjustments, in addition to those required by
the provisions of this Section 4(f)(v), as shall be necessary so that any
dividend or distribution in shares of capital stock of the Corporation shall not
be taxable to holders of Common Stock.
(vi) For purposes of this Section 4(f), the following
definitions shall apply:
(A) As used in this Section 4(f), the term "consideration"
shall mean, in the case of an issuance or sale of any security for cash, the
cash received therefor, and in the case of an issuance or sale of any security
for consideration other than cash, the Fair Market Value of such consideration.
(B) "Conversion Price" shall mean $4.75 per share of Common
Stock, subject to adjustment from time to time as provided in Section 4(f)
hereof.
(C) "Fair Market Value" shall mean, as to shares of Common
Stock or any other class of capital stock or securities of the Corporation or
any other issuer which are publicly traded, the average of the Current Market
Prices (as hereinafter defined) of such shares of securities for each day of the
Adjustment Period (as hereinafter defined). "Current Market Price" of publicly
traded shares of Common Stock or any other class of capital stock or other
security of the Corporation or any other issuer for a day shall mean the last
reported sales price, regular way, or, in case no sale takes place on such day,
the average reported closing bid and asked prices, regular way, in either case
as reported on the principal national securities exchange on which such security
is listed or admitted for trading or, if such security is not listed or admitted
to trading on any national securities exchange, on the NASDAQ National Market
System or, if such security is not quoted on such National Market System, the
average of the closing bid and asked prices on each such day in the
over-the-counter market as reported by NASDAQ, or, if bid and asked prices for
such security on each such day shall not have been reported through NASDAQ, the
average of the bid and asked prices for each such day as furnished by any New
York Stock Exchange member firm regularly making a market in such security
selected for such purpose by the Board of Directors of the Corporation on each
trading day during the Adjustment Period. "Adjustment Period" shall mean the
period during the
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twenty (20) trading days preceding, and including, the date as of which the Fair
Market Value of a security is to be determined. The "Fair Market Value" of any
security which is not publicly traded or of any other property shall mean the
fair value thereof as determined in good faith by the Board of Directors in the
exercise of its reasonable business judgment.
(vii) Whenever an adjustment to the Qualified Public Offering
Price or the Conversion Price or the number of shares of Common Stock into which
each share of this Class can be converted is required pursuant to this Section
4(f), the Corporation shall forthwith place on file with the transfer agent for
Common Stock, if any, and with the Treasurer (or Chief Financial Officer) of the
Corporation, a statement signed by the Treasurer (or Chief Financial Officer) or
Assistant Treasurer of the Corporation stating the adjusted number of shares of
Common Stock into which each share of this Class can be converted or the
Qualified Public Offering Price or the Conversion Price determined as provided
herein. Such statement shall set forth in reasonable detail such facts as shall
be necessary to show the reason and the manner of computing such adjustment,
including any determination of Fair Market Value involved in such computation.
Within forty-five (45) days after each adjustment to the number of shares of
Common Stock into which each share of this Class can be converted or the
Qualified Public Offering Price or the Conversion Price, the Company shall mail
a notice thereof and of the then prevailing number of shares of Common Stock
into which each share of this Class can be converted and the Qualified Public
Offering Price and the Conversion Price to each holder of shares of this Class.
4(g) Termination of Right to Convert in Connection With Fundamental
Corporate Changes. Notwithstanding anything herein to the contrary, and subject
to the notice requirements of this Section 4(g), if the Corporation shall be a
party to any transaction that involves any consolidation or merger of the
Corporation with or into another corporation, or any sale of all or
substantially all of the assets of the Corporation to another corporation, and
which is effected in such a way that the holders of Common Stock shall be
entitled to receive cash, stock, securities or other assets with respect to or
in exchange for Common Stock, then the right to convert the shares of this Class
shall terminate at the close of business on the date as of which the holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for cash, securities or other assets deliverable upon such consolidation,
merger or sale of all or substantially all of the assets of the Corporation. In
case the Corporation shall enter into any agreement or understanding or the
Board of Directors shall adopt any resolution authorizing or proposing
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any transaction of the type described in this Section 4(g), then in any such
event the Corporation promptly shall cause to be mailed, by registered or
certified mail, postage prepaid, to the holders of shares of this Class at each
such holder's last address appearing on the records of the Corporation, thirty
(30) days prior to the date on which the Corporation closes its books or takes a
record for determining rights to vote with respect to any consolidation, merger
or sale, a notice of such agreement, understanding or resolution stating the
expected record date for determining holders of Common Stock entitled to
exchange their shares with respect to a transaction described in this Section
4(g); provided, however, that the Corporation shall not be liable or responsible
if the actual dates of any such events shall be different from the expected
dates set forth in such notice.
4(h) Sufficient Authorized Shares of Common Stock. The Corporation
shall at all times reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of shares of
this Class, such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all then outstanding shares of this
Class. The Corporation shall, from time to time, subject to and in accordance
with applicable law, increase the authorized shares of Common Stock if at any
time the number of authorized shares of Common Stock remaining unissued shall
not be sufficient to permit the conversion at such time of all then outstanding
shares of this Class.
5. Voting Rights.
5(a) Voting with Common Stock.
(i) Except as otherwise required by law or when a class vote
is required pursuant to Section 5(b) hereof, each holder of shares of this Class
shall be entitled to vote on all matters together with the holders of shares of
Common Stock and in so voting shall be entitled to that number of votes equal to
the Total Series B Common Votes (as hereinafter defined) allocated to each
holder of shares of this Class ratably on the basis of the number of shares of
this Class held by each holder in proportion to the total number of shares of
this Class outstanding on the record date for the determination of stockholders
entitled to vote on such matters.
(ii) For purposes of this Section 5(a), the following
definitions shall apply:
(A) "Voting Percentage" shall mean a fraction, the numerator
of which is the sum of (1) the number of shares of Common Stock into which the
shares of this Class
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could be converted on such record date plus (2) the number of outstanding shares
of Common Stock issued upon conversion of the shares of this Class prior to such
record date (after giving effect to proportionate adjustments for stock splits,
subdivisions and the like), and the denominator of which is the sum of (1) the
number of shares of Common Stock outstanding on such record data plus (2) the
number of shares of Common Stock into which the shares of this Class could be
converted on such record date plus (3) the number of shares of Common Stock
issuable upon the conversion or exchange of all securities convertible into or
exchangeable for shares of Common Stock (other than the shares of this Class)
and upon the exercise of all options, rights or warrants to purchase shares of
Common Stock outstanding on such record date (the "Voting Percentage
Denominator"); provided, however, that if on such record date the Voting
Percentage Denominator is less than 18,826,634 (as adjusted for stock splits,
subdivisions and the like), the Voting Percentage shall be calculated using a
Voting Percentage Denominator equal to (1) the sum of (x) 18,826,634 (as
adjusted for stock splits, subdivisions and the like) plus (y) the number of
shares of Common Stock issued after the Original Issue Date, if any, plus (z)
the number of shares of Common Stock issuable upon the conversion or exchange of
all securities convertible into or exchangeable for shares of Common Stock
issued after the Original Issue Date, if any, and upon the exercise of all
options, rights or warrants to purchase shares of Common Stock issued after the
Original Issue Date, if any, minus (2) the sum of (w) the number of outstanding
shares of Common Stock repurchased or redeemed by the Corporation after the
Original Issue Date, if any, plus (x) the number of shares of Common Stock
issuable upon the exercise of any of the common stock purchase warrants issued
in connection with the issuance of the 9.0% Cumulative Nonconvertible Preferred
Stock of the Corporation that have expired or have been cancelled or repurchased
by the Corporation after the Original Issue Date, if any, plus (y) the number of
shares of Common Stock issuable upon the conversion or exchange of any
securities convertible into or exchangeable for shares of Common Stock issued
after the Original Issue Date that have expired or have been cancelled or
repurchased by the Corporation after the Original Issue Date, if any, and upon
the exercise of any options, rights or warrants to purchase shares of Common
Stock issued after the Original Issue Date that have expired or have been
cancelled or repurchased by the Corporation after the Original Issue Date, if
any, plus (z) the number of shares of this Class cancelled pursuant to the terms
of the Preferred Stock Purchase Agreement, if any. The Voting Percentage
calculated as of the Original Issue Date is 29.354%.
(B) "Total Common Votes" shall mean a fraction, the numerator
of which is equal to (1) the number of
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shares of Common Stock outstanding on such record date minus (2) the number of
outstanding shares of Common Stock issued upon conversion of the shares of this
Class prior to such record date (after giving effect to proportionate
adjustments for stock splits, subdivisions and the like), and the denominator of
which is equal to one (1) minus the Voting Percentage.
(C) "Total Series B Common Votes" shall mean the Total Common
Votes multiplied by the Voting Percentage.
5(b) Voting as a Class. So long as any shares of this Class are
outstanding, the Corporation shall not, without the affirmative vote or consent
of the holders of at least a majority of the shares of this Class outstanding at
the time, given in person or by proxy, either in writing or at a meeting at
which holders of the shares of this Class shall vote separately as a class, (i)
authorize, issue or assume the obligations under, or increase the stated or par
value of, any Senior Securities or any obligation or security convertible into
or evidencing the right to purchase any Senior Securities; (ii) authorize, issue
or assume the obligations under, or increase the stated or par value of, any
Parity Securities or any obligation or security convertible into or evidencing
the right to purchase any Parity Securities; (iii) amend the Amended and
Restated Certificate of Incorporation of the Corporation or the certificate of
designation relating to the shares of this Class in either case so as to alter
or change the powers, preferences, or special rights of the shares of this Class
so as to affect them adversely or authorize additional shares of this Class or
increase or decrease the par or stated value of the shares of this Class; (iv)
sell all or substantially all of the assets of the Corporation in a transaction
that is to be submitted to a vote of stockholders of the Corporation; (v) merge
or consolidate the Corporation with or into any other corporation in a
transaction that is to be submitted to a vote of stockholders of the
Corporation; (vi) acquire the assets or stock of another entity in a transaction
for consideration having a Fair Market Value in excess of $20,000,000; (vii)
issue or transfer shares of any class or series of capital stock of the
Corporation to the Corporation's Employee Stock Ownership Plan/Trust unless such
issuance or transfer has been approved or recommended by a disinterested
majority of the members of the Compensation Committee of the Board of Directors
of the Corporation; and (viii) redeem or repurchase outstanding shares of any
class or series of capital stock of the Corporation except for (A) shares
repurchased at or less than Fair Market Value from current or former directors,
officers, employees or consultants of the Corporation or of any direct or
indirect subsidiary of the Corporation up to an aggregate of $1,000,000, (B)
shares of
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this Class, (C) shares redeemed pursuant to the redemption provisions of the
9.0% Cumulative Nonconvertible Preferred Stock of the Corporation, (D) shares
purchased pursuant to a right of first refusal, call, option or similar right to
purchase granted to the Corporation and (E) the Stock Repurchases as defined in
the Preferred Stock Purchase Agreement.
5(c) Election of Certain Directors as a Class. So long as any shares
of this Class are outstanding and subject to the terms and conditions of that
Certain Stockholders' Agreement, dated as of the Original Issue Date, among the
Corporation, the holders of shares of this Class on the Original Issue Date and
certain stockholders of the Corporation (the "Stockholders' Agreement"), the
holders of shares of this Class, acting by the affirmative vote or consent of at
least a majority of the shares of this Class outstanding at the time, given in
person or by proxy, either in writing or at a meeting at which holders of the
shares of this Class shall vote separately as a class, shall be entitled to vote
for and elect as directors to the Board of Directors only those persons whom
holders are entitled to designate pursuant to and in accordance with the terms
of the Stockholders' Agreement.
6. Liquidation Rights.
6(a) Liquidation Preference. Subject to the rights of the holders of
shares of any series or class or classes of Senior Securities upon dissolution
or liquidation, upon the liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, the holders of record of the
shares of this Class then outstanding shall be entitled to receive out of the
assets of the Corporation available for distribution to its stockholders, before
any distribution or payment is made with respect to the Common Stock or any
other class or series of stock ranking junior to this Class upon liquidation, an
amount per share in cash equal to the Stated Value plus an amount in cash equal
to the Series B Dividend Preference Amount as of the date of final distribution
(less any dividends declared and paid (or sums sufficient for the payment
thereof set aside for payment) on the shares of this Class prior to the date of
final distribution) (the "Series B Liquidation Preference Amount").
6(b) Participation in Common Stock Liquidation Rights. After the
payment, in cash, to the holders of the shares of this Class of the Series B
Liquidation Preference Amount as provided in Section 6(a) hereof, the holders of
shares of Common Stock and any other class or series of capital stock (other
than the shares of this Class) entitled to participate with the Common Stock in
the event of liquidation,
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dissolution or winding up of the Corporation shall be entitled to receive, in
the aggregate, out of assets of the Corporation available for distribution to
its stockholders, cash in an amount equal to the aggregate Stated Value of the
shares of this Class on the Original Issue Date. Thereafter, the holders of
shares of this Class shall participate equally (as if the shares of this Class
had been converted into shares of Common Stock pursuant to Section 4 hereof)
with the holders of shares of Common Stock and any other class or series of
stock entitled to participate with the Common Stock in the distribution of any
remaining assets of the Corporation in the event of liquidation, dissolution or
winding up of the Corporation.
6(c) Transactions Not Deemed Liquidation. Neither the merger or
consolidation of the Corporation into or with any other corporation, nor the
merger or consolidation of any other corporation into or with the Corporation,
nor a voluntary sale, transfer, lease, or other disposition of all or any part
of the assets of the Corporation, shall, without further corporate action, be
deemed to be a liquidation, dissolution, or winding up of the Corporation within
the meaning of this Section 6.
6(d) Insufficient Assets in Liquidation. Subject to the rights of
the holders of shares of any series or class or classes of Senior Securities
upon dissolution or liquidation, in the event the remaining assets of the
Corporation upon any dissolution, liquidation, or winding up of the Corporation
are not sufficient to pay in full the Series B Preferred Liquidation Preference
Amount and liquidating payments on any Parity Securities, then such assets, or
the proceeds thereof, shall be distributed among the holders of shares of this
Class and such Parity Securities ratably in accordance with the respective
amounts which would be paid on such shares of this Class and such other Parity
Securities if all amounts thereon were paid in full.
7. Ranking. The shares of this Class shall rank, both as to dividends and
upon liquidation, senior and prior to the Common Stock. The shares of the 9.0%
Cumulative Nonconvertible Preferred Stock of the Corporation shall rank, as to
dividends, redemption and upon liquidation, senior and prior to the shares of
this Class. Any stock of any other class or classes or series shall be deemed to
rank:
7(a) senior and prior to the shares of this Class, to be "Senior
Securities," if the holders of such stock shall be entitled to the receipt of
dividends or amounts paid in or set aside for redemption, or the receipt of
amounts distributable upon dissolution, liquidation, or winding up of
-21-
<PAGE>
the Corporation, as the case may be, in preference or priority to the holders
of shares of this Class;
7(b) on a parity with shares of this Class, to be "Parity
Securities," whether or not the dividend rates, dividend payment dates,
redemption or liquidation prices per share, or sinking fund provisions, if any,
be different from those of this Class, if the holders of such stock shall be
entitled to the receipt of dividends or amounts paid in or set aside for
redemption, or the receipt of amounts distributable upon dissolution,
liquidation, or winding up of the Corporation, as the case may be, in proportion
to their respective dividend rates or liquidation prices, without preference or
priority, one over the other, as between the holders of such stock and the
holders of the shares of this Class; and
7(c) junior to shares of this Class, to be "Junior Securities," if
the holders of shares of this Class shall be entitled to the receipt of
dividends or of amounts paid in or set aside for redemption, or to the receipt
of amounts distributable upon dissolution, liquidation, or winding up of the
Corporation, as the case may be, in preference or priority to the holders of
such stock.
8. Restrictions on Transfer. The shares of this Class may not be
transferred, except in compliance with the provisions of the Stockholders'
Agreement.
9. Certificates. Upon the surrender of any certificate representing shares
of this Class at the principal office of the Corporation or at the office of any
transfer agent of the Corporation for this Class or at such other place as may
be designated by the Corporation, the Corporation will, at the request of the
record holder of such certificate, execute and deliver (at the Corporation's
expense) a new certificate or certificates in exchange therefor representing in
the aggregate the number of shares represented by the surrendered certificate.
10. Certain Other Rights. The holders of the shares of this Class shall be
entitled to certain rights to purchase newly-issued securities of the Company
as, and to the extent, set forth in Section 3.9 of the Stockholders' Agreement,
as long as the Stockholders' Agreement is in effect.
-22-
<PAGE>
IN WITNESS WHEREOF, Vitas Healthcare Corporation has caused this
Certificate of Designation to be executed on its behalf on June 3, 1993.
VITAS HEALTHCARE CORPORATION
By: /s/ Huge A. Westbrook
-------------------------
Huge A. Westbrook
Chairman and Chief
Executive Officer
Attest:
/s/ Mark Ohlendorf
- -----------------------
Mark Ohlendorf
Secretary
-23-
<PAGE>
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
VITAS HEALTHCARE CORPORATION
Vitas Healthcare Corporation, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
FIRST: The Board of Directors of the Corporation, by unanimous written
consent in lieu of a meeting in accordance with the Delaware General Corporation
Law (the "Delaware Corporation Law") and the Amended and Restated By-Laws of the
Corporation duly adopted resolutions proposing and declaring advisable the
amendment to the Amended and Restated Certificate of Incorporation of the
Corporation, as amended, as set forth below.
SECOND: The Certificate of Designation, Preferences and Other Rights of
the Series B Convertible Preferred Stock of the Corporation hereby is amended by
substituting in the fifth line of the first sentence of Section 3(a) thereof the
date "December 31, 1996" for the date "June 30, 1996."
THIRD: The amendment to the Amended and Restated Certificate of
Incorporation of the Corporation, as amended, as set forth above was duly
approved and adopted (i) by at least a majority of the total votes eligible to
be cast by the holders of the outstanding stock of the Corporation entitled to
vote thereon and (ii) by the holders of at least a majority of the Series B
Convertible Preferred Stock of the Corporation voting separately as a class, in
each case acting by written consent in accordance with Section 228 of the
Delaware Corporation Law, and written notice of the approval and adoption of
such amendment without a meeting has been given to those stockholders who did
not consent in writing as provided in Section 228(d) of the Delaware Corporation
Law.
<PAGE>
FOURTH: The amendment to the Amended and Restated Certificate of
Incorporation of the Corporation, as amended, set forth above was duly adopted
and approved in accordance with the requirements of Section 242 of the Delaware
Corporation Law.
IN WITNESS WHEREOF, Vitas Healthcare Corporation has caused this
Certificate of Amendment to be signed by its duly authorized officer, as of the
10th day of August, 1994.
VITAS HEALTHCARE CORPORATION
By: /s/ Earl M. Collier, Jr.
----------------------------
Earl M. Collier, Jr.
President
-2-
<PAGE>
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
VITAS HEALTHCARE CORPORATION
Vitas Healthcare Corporation, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
FIRST: The Board of Directors of the Corporation, by unanimous written
consent in lieu of a meeting in accordance with the Delaware General Corporation
Law (the "Delaware Corporation Law") and the Amended and Restated By-Laws of the
Corporation, duly adopted resolutions proposing and declaring advisable the
amendment to the Amended and Restated Certificate of Incorporation of the
Corporation, as amended, as set forth below.
SECOND: The Certificate of Designation. Preferences and Other Rights of
9.0% Cumulative Nonconvertible Preferred Stock of the Corporation hereby is
amended by deleting in its entirety the first paragraph of Section 3(b) thereof
and replacing it with the following:
3(b) Mandatory Redemption. Subject to the last sentence of this
Section 3(b), the Corporation shall redeem the shares of this Class, in
the manner hereinafter provided, at the redemption prices (subject to
appropriate adjustment for stock splits, stock dividends, combinations or
other similar recapitalizations affecting such shares) and on the
redemption dates as follows:
Number of Shares
Mandatory Redemption Date to be Redeemed Redemption Price Per Share
- ------------------------- ---------------- --------------------------
December 31, 1996 81,000 $102.00
June 30, 1997 40,500 $101.00
December 31, 1997 40,500 $10l.00
June 30, 1998 54,000 $100.00
December 31, 1998 54,000 $100.00
<PAGE>
THIRD: The amendment to the Amended and Restated Certificate of
Incorporation of the Corporation, as amended, as set forth above was duly
approved and adopted (i) by at least a majority of the total votes eligible to
be cast by the holders of the outstanding stack of the Corporation entitled to
vote thereon, (ii) by the holders of at least a majority of the 9.0% Cumulative
Nonconvertible Preferred Stock voting separately as a class and (iii) by the
holders of at least a majority of the Series B Convertible Preferred Stock of
the Corporation voting separately as a class, in each case acting by written
consent in accordance with Section 228 of the Delaware Corporation Law, and
written notice of the approval and adoption of such amendment without a meeting
has been given to those stockholders who did not consent in writing as provided
in Section 228(d) of the Delaware Corporation Law.
FOURTH: The amendment to the Amended and Restated Certificate of
Incorporation of the Corporation, as amended, set forth above was duly adopted
and approved in accordance with the requirements of Section 242 of the Delaware
Corporation Law.
IN WITNESS WHEREOF, Vitas Healthcare Corporation has caused this
Certificate of Amendment to be signed by its duly authorized officer, as of the
10th day of August, 1994.
VITAS HEALTHCARE CORPORATION
By: /s/ Earl M. Collier, Jr.
----------------------------
Earl M. Collier, Jr.
President
-2-
<PAGE>
CERTIFICATE OF CHANGE OF LOCATION OF REGISTERED
OFFICE AND REGISTERED AGENT
OF
VITAS HEALTHCARE CORPORATION
-----------------------------------------------
The Board of Directors of:
VITAS HEALTHCARE CORPORATION
a Corporation of the State of Delaware, on this 25th day of October, A.D. 1994,
do hereby resolve and order that the location of the Registered Office of this
Corporation within this State be, and the same hereby is: 1013 Centre Road, in
the City of Wilmington, in the County of New Castle, Delaware, 19805.
The name of the Registered Agent therein and in charge thereof upon whom
process against the Corporation may be served, is: CORPORATION SERVICE COMPANY.
VITAS HEALTHCARE CORPORATION
a Corporation of the State of Delaware, does hereby certify that the foregoing
is a true copy of a resolution adopted by the Board of Directors at a meeting
held as herein stated.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by Mark A. Sterling, Secretary this 27th day of October A.D. 1994.
/s/ Mark A. Sterling
----------------------------
Authorized Officer
Mark A. Sterling, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
VITAS HEALTHCARE CORPORATION
Vitas Healthcare Corporation, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
FIRST: The Board of Directors of the Corporation, by unanimous written
consent in lieu of a meeting in accordance with the Delaware General Corporation
Law (the "Delaware Corporation Law") and the Amended and Restated By-Laws of the
Corporation, as amended, duly adopted resolutions proposing and declaring
advisable the amendment to the Amended and Restated Certificate of Incorporation
of the Corporation, as amended, as set forth below.
SECOND: The Certificate of Designation, Preferences and Other Rights of
9.0% Cumulative Nonconvertible Preferred Stock of the Corporation hereby is
amended by deleting in its entirety the first paragraph of Section 3(b) thereof
and replacing it with the following:
3(b) Mandatory Redemption. Subject to the last sentence of
this Section 3(b), the Corporation shall redeem the shares of
this Class, in the manner hereinafter provided, at the
redemption prices (subject to appropriate adjustment for stock
splits, stock dividends, combinations or other similar
recapitalizations affecting such shares) and on the redemption
dates as follows:
Number of Shares
Mandatory Redemption Date to be Redeemed Redemption Price Per Share
- ------------------------- ---------------- --------------------------
June 30, 1997 81,000 $102.00
June 30, 1997 40,500 $101.00
December 31, 1997 40,500 $101.00
June 30, 1998 54,000 $100.00
December 31, 1998 54,000 $100.00
<PAGE>
THIRD: The amendment to the Amended and Restated Certificate of
Incorporation of the Corporation, as amended, as set forth above was duly
approved and adopted (i) by at least a majority of the total votes eligible to
be cast by the holders of the outstanding stock of the Corporation entitled to
vote thereon, (ii) by the holders of as least a majority of the 9.0% Cumulative
Nonconvertible Preferred Stock voting separately as a class and (iii) by the
holders of at least a majority of the Series B Convertible Preferred Stock of
the Corporation voting separately as a class, in each case acting by written
consent, in accordance with Section 228 of the Delaware Corporation Law.
FOURTH: The amendment to the Amended and Restated Certificate of
Incorporation of the Corporation, as amended, set forth above was duly adopted
and approved in accordance with the requirements of Section 242 of the Delaware
Corporation Law.
IN WITNESS WHEREOF, Vitas Healthcare Corporation has caused this
Certificate of Amendment to be signed by its duly authorized officer, as of the
31st day of December, 1996.
VITAS HEALTHCARE CORPORATION
By: /s/ Hugh A. Westbrook
-------------------------
Hugh A. Westbrook
Chairman of the Board and
Chief Executive Officer
-2-
<PAGE>
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
VITAS HEALTHCARE CORPORATION
Vitas Healthcare Corporation, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
FIRST: The Board of Directors of the Corporation, by unanimous written
consent in lieu of a meeting in accordance with the Delaware General Corporation
Law (the "Delaware Corporation Law") and the Amended and Restated By-Laws of the
Corporation, as amended, duly adopted resolutions proposing and declaring
advisable the amendment to the Amended and Restated Certificate of Incorporation
of the Corporation, as amended, as set forth below.
SECOND: The Certificate of Designation, Preferences and Other Rights of
9.0% Cumulative Nonconvertible Preferred Stock of the Corporation hereby is
amended by deleting in its entirety the first paragraph of Section 3(b) thereof
and replacing it with the following:
3(b) Mandatory Redemption. Subject to the last sentence of
this Section 3(b), the Corporation shall redeem the shares of
this Class, in the manner hereinafter provided, at the
redemption prices (subject to appropriate adjustment for stock
splits, stock dividends, combinations or other similar
recapitalizations affecting such shares) and on the redemption
dates as follows:
Number of Shares
Mandatory Redemption Date to be Redeemed Redemption Price Per Share
- ------------------------- ---------------- --------------------------
July 31, 1997 81,000 $102.00
July 31, 1997 40,500 $101.00
December 31, 1997 40,500 $101.00
June 30, 1998 54,000 $100.00
December 31, 1998 54,000 $100.00
<PAGE>
THIRD: The amendment to the Amended and Restated Certificate of
Incorporation of the Corporation, as amended, as set forth above was duly
approved and adopted (i) by at least a majority of the total votes eligible to
be cast by the holders of the outstanding stock of the Corporation entitled to
vote thereon, (ii) by the holders of at least a majority of the 9.0% Cumulative
Nonconvertible Preferred Stock voting separately as a class and (iii) by the
holders of at least a majority of the Series B Convertible Preferred Stock of
the Corporation voting separately as a class, in each case acting by written
consent in accordance with Section 228 of the Delaware Corporation Law.
FOURTH: The amendment to the Amended and Restated Certificate of
Incorporation of the Corporation, as amended, set forth above was duly adopted
and approved in accordance with the requirements of Section 242 of the Delaware
Corporation Law.
IN WITNESS WHEREOF, Vitas Healthcare Corporation has caused this
Certificate of Amendment to be signed by its duly authorized officer, as of the
30 day of June 1997.
VITAS HEALTHCARE CORPORATION
By: /s/ Hugh A. Westbrook
-------------------------
Hugh A. Westbrook
Chairman of the Board and
Chief Executive Officer
-2-
<PAGE>
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
VITAS HEALTHCARE CORPORATION
Vitas Healthcare Corporation, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
FIRST: The Board of Directors of the Corporation, by unanimous written
consent in lieu of a meeting in accordance with the Delaware General Corporation
Law (the "Delaware Corporation Law") and the Amended and Restated By-Laws of the
Corporation, as amended, duly adopted resolutions proposing and declaring
advisable the amendment to the Amended and Restated Certificate of Incorporation
of the Corporation, as amended, as set forth below.
SECOND: The Certificate of Designation, Preferences and Other Rights of
9.0% Cumulative Nonconvertible Preferred Stock of the Corporation hereby is
amended by deleting in its entirety the first paragraph of Section 3(b) thereof
and replacing it with the following:
3(b) Mandatory Redemption. Subject to the last sentence of
this Section 3(b), the Corporation shall redeem the shares of
this Class, in the manner hereinafter provided, at the
redemption prices (subject to appropriate adjustment for stock
splits, stock dividends, combinations or other similar
recapitalizations affecting such shares) and on the redemption
dates as follows:
Number of Shares
Mandatory Redemption Date to be Redeemed Redemption Price Per Share
- ------------------------- ---------------- --------------------------
August 31, 1997 81,000 $102.00
August 31, 1997 40,500 $101.00
December 31, 1997 40,500 $101.00
June 30, 1998 54,000 $100.00
December 31, 1998 54,000 $100.00
<PAGE>
THIRD: The amendment to the Amended and Restated Certificate of
Incorporation of the Corporation, as amended, as set forth above was duly
approved and adopted (i) by at least a majority of the total votes eligible to
be cast by the holders of the outstanding stock of the Corporation entitled to
vote thereon, (ii) by the holders of at least a majority of the 9.0% Cumulative
Nonconvertible Preferred Stock voting separately as a class and (iii) by the
holders of at least a majority of the Series B Convertible Preferred Stock of
the Corporation voting separately as a class, in each case acting by written
consent in accordance with Section 228 of the Delaware Corporation Law.
FOURTH: The amendment to the Amended and Restated Certificate of
Incorporation of the Corporation, as amended, set forth above was duly adopted
and approved in accordance with the requirements of Section 242 of the Delaware
Corporation Law.
IN WITNESS WHEREOF, Vitas Healthcare Corporation has caused this
Certificate of Amendment to be signed by its duly authorized officer, as of the
31st day of July, 1997.
VITAS HEALTHCARE CORPORATION
By: /s/ Hugh A. Westbrook
-------------------------
Hugh A. Westbrook
Chairman of the Board and
Chief Executive Officer
-2-
<PAGE>
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
VITAS HEALTHCARE CORPORATION
Vitas Healthcare Corporation, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
FIRST: The Board of Directors of the Corporation, by unanimous written
consent in lieu of a meeting in accordance with the Delaware General Corporation
Law (the "Delaware Corporation Law") and the Amended and Restated By-Laws of the
Corporation, as amended, duly adopted resolutions proposing and declaring
advisable the amendment to the Amended and Restated Certificate of Incorporation
of the Corporation, as amended, as set forth below.
SECOND: The Certificate of Designation, Preferences and Other Rights of
9.0% Cumulative Nonconvertible Preferred Stock of the Corporation hereby is
amended by deleting in its entirety the first paragraph of Section 3(b) thereof
and replacing it with the following:
3(b) Mandatory Redemption. Subject to the last sentence of
this Section 3(b), the Corporation shall redeem the shares of
this Class, in the manner hereinafter provided, at the
redemption prices (subject to appropriate adjustment for stock
splits, stock dividends, combinations or other similar
recapitalizations affecting such shares) and on the redemption
dates as follows:
Number of Shares
Mandatory Redemption Date to be Redeemed Redemption Price Per Share
- ------------------------- ---------------- --------------------------
September 30, 1997 81,000 $102.00
September 30, 1997 40,500 $101.00
December 31, 1997 40,500 $101.00
June 30, 1998 54,000 $100.00
December 31, 1998 54,000 $100.00
<PAGE>
THIRD: The amendment to the Amended and Restated Certificate of
Incorporation of the Corporation, as amended, as set forth above was duly
approved and adopted (i) by at least a majority of the total votes eligible to
be cast by the holders of the outstanding stock of the Corporation entitled to
vote thereon, (ii) by the holders of at least a majority of the 9.0% Cumulative
Nonconvertible Preferred Stock voting separately as a class and (iii) by the
holders of at least a majority of the Series B Convertible Preferred Stock of
the Corporation voting separately as a class, in each case acting by written
consent in accordance with Section 228 of the Delaware Corporation Law.
FOURTH: The amendment to the Amended and Restated Certificate of
Incorporation of the Corporation, as amended, set forth above was duly adopted
and approved in accordance with the requirements of Section 242 of the Delaware
Corporation Law.
IN WITNESS WHEREOF, Vitas Healthcare Corporation has caused this
Certificate of Amendment to be signed by its duly authorized officer, as of the
29th day of August, 1997.
VITAS HEALTHCARE CORPORATION
By: /s/ Hugh A. Westbrook
---------------------
Hugh A. Westbrook
Chairman of the Board and
Chief Executive Officer
-2-
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS
OF
VITAS HEALTHCARE CORPORATION
1. Offices.
1.1 Registered Office. The registered office of the
corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware, and the registered agent in charge thereof shall be the Corporation
Service Company, 1013 Centre Road, Wilmington, Delaware 19805.
1.2 Other Offices. The corporation may also have offices at
such other places, both within and without the State of Delaware, as the board
of directors may from time to time determine or the business of the corporation
may require.
2. Meetings of Stockholders.
2.1 Place of Meetings. All meetings of the stockholders for
the election of directors shall be held in the City of Miami, State of Florida,
at such place as may be fixed from time to time by the board of directors, or at
such other place, within or without the State of Delaware, as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting or in a duly executed waiver of notice thereof. Meetings of
stockholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
2.2 Annual Meetings. Annual meetings of stockholders shall be
held at such date and time as shall be designated from time to time by the board
of directors and stated in the notice of the meeting or in a duly executed
<PAGE>
waiver of notice thereof, at which stockholders shall elect a board of directors
and transact such other business as may properly be brought before the meeting.
2.3 Special Meetings. Special meetings of the stockholders,
for any purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the board of directors, by the
chairman of the board or by the president, and shall be called by the president
or secretary at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote generally for the election of directors. Such request shall
include a statement of the purpose or purposes of the proposed meeting.
2.4 Notice of Meetings. Written notice of the annual meeting,
stating the place, date and hour of the meeting, shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting. Written notice of a special meeting
of stockholders, stating the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called, shall be given to each stockholder
entitled to vote at such meeting not less than ten nor more than sixty days
before the date of the meeting.
2.5 Business at Special Meetings. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice.
2.6 List of Stockholders. The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose
-2-
<PAGE>
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote in person or by proxy at any
meeting of stockholders.
2.7 Quorum at Meetings. Except as otherwise provided by
statute or by the certificate of incorporation, the holders of a majority of the
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any such meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time to another time
and place, without notice other than announcement at the meeting of such other
time and place. At the adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the original meeting. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
2.8 Voting and Proxies. Unless otherwise provided in the
certificate of incorporation, and subject to the provisions of Section 6.4 of
these by-laws, each stockholder shall be entitled to one vote on each matter, in
person or by
-3-
<PAGE>
proxy, for each share of the corporation's capital stock having voting power
which is held by such stockholder. No proxy shall be voted or acted upon after
three years from its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and if,
and only as long as, it is coupled with an interest sufficient in law to support
an irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally.
2.9 Required Vote. When a quorum is present at any meeting of
stockholders, all matters shall be determined, adopted and approved by the vote
(which need not be by ballot) of a majority of the votes cast with respect to
the matter, unless the proposed action is one upon which, by express provision
of statutes or of the certificate of incorporation, a different vote is
specified and required, in which case such express provision shall govern and
control the decision of such question. Notwithstanding the foregoing, candidates
for election as members of the board of directors who receive the highest number
of votes, up to the number of directors to be chosen, shall stand elected, and
an absolute majority of the votes cast shall not be a prerequisite to the
election of any candidate to the board of directors.
2.10 Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with the rules specified by the chairperson presiding at
the meeting unless otherwise prescribed by law. The board of directors shall
designate, when present, the chairman of the board, the president, or another
officer to preside at such meetings.
2.11 Action Without a Meeting. Unless otherwise provided in
the certificate of incorporation, any action required to be taken at any annual
or special meeting of stockholders of the corporation, or any action which may
be
-4-
<PAGE>
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, are (a) signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted; and (b) delivered to
the corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. Every written
consent shall bear the date of signature of each stockholder who signs the
consent and no written consent shall be effective to take the corporate action
referred to therein unless, within sixty days of the earliest dated consent
delivered in the manner required in clause (b) of this paragraph, written
consents signed by a sufficient number of stockholders to take action are
delivered to the corporation in the manner required in clause (b) of this
paragraph. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
shall not have consented in writing.
3. Directors.
3.1 Powers. The business and affairs of the corporation shall
be managed by or under the direction of the board of directors, which may
exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the certificate of incorporation or by these
by-laws directed or required to be exercised or done by the stockholders. The
board of directors shall annually elect a chairman of the board from among its
members and shall
-5-
<PAGE>
designate, when present, either the chairman of the board or the president to
preside at its meetings. If neither the chairman of the board nor the president
is present, the board of directors may designate another director to preside at
such meeting. The chairman of the board and the president may be the same
person. The board of directors may also annually elect one or more vice
chairpersons from among its members, with such duties as the board of directors
shall from time to time prescribe.
3.2 Number, Classes, Election and Term of Office. As of the
date of adoption of these amended and restated by-laws, the number of directors
which shall constitute the full board of directors shall be seven. Thereafter,
the number of directors constituting the full board of directors shall be
determined by resolution of the board of directors. Directors shall be divided
into three classes, each consisting of approximately one-third of the total
number of directors. The term of office of each class shall be three years and
shall expire in successive years at the time of the annual meeting of
stockholders. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 3.3 hereof, and each director
elected shall hold office until his successor is elected and qualified or until
his earlier death, resignation or removal. Directors need not be stockholders.
3.3 Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled,
for the unexpired term, by a majority of the directors then in office, although
less than a quorum, or by a sole remaining director, and each director so chosen
shall hold office for the remainder of the full term of the class of directors
in which the new directorship was created or the vacancy occurred and until his
successor is elected and qualified, or until his earlier death, resignation or
removal. If there are no directors in office, then an election of directors may
be held in the manner
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<PAGE>
provided by statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), the
Court of Chancery of the State of Delaware may, upon application of any
stockholder or stockholders holding at least ten percent of the total number of
the then outstanding shares having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in office, in accordance with the General Corporation Law of the State of
Delaware. In the event that one or more directors resigns from the board,
effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or resignations
shall become effective, and each director so chosen shall hold office for the
remainder of the full term of the class of directors in which the vacancy or
vacancies is or are to occur and until his successor is elected and qualified,
or until his earlier death, resignation or removal.
3.4 Place of Meetings. The board of directors of the
corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
3.5 Annual Meetings. Annual meetings of the board of directors
shall be held each year at the same place as and immediately after the annual
meeting of stockholders, or at such other place and time as shall theretofore
have been determined by the board. At its regular annual meeting, the board of
directors shall organize itself and elect the officers of the corporation for
the ensuing year, and may transact any other business. Except as otherwise
expressly required by law, notice of the annual meeting of the board of
directors need not be given.
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3.6 Regular Meetings. Regular meetings of the board of
directors may be held without notice at such time and at such place as shall
from time to time be determined by the board of directors.
3.7 Special Meetings. Special meetings of the board may be
called by the chairman of the board or the president on 24 hours' notice to each
director, either personally or by telephone, by telecopy, by telex or by
telegram, or on three days' notice, if by mail; special meetings shall be called
by the president or secretary in like manner and on like notice on the written
request of a majority of the total number of directors.
3.8 Quorum and Vote at Meetings. At all meetings of the board,
one director if a board of one director is authorized, or such greater number of
directors as is not less than a majority of the total number of directors, shall
constitute a quorum for the transaction of business. The vote of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the board of directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be present
at any meeting of the board of directors, the directors present thereat may
adjourn the meeting to another time and place, without notice other than
announcement at the meeting of such other time and place.
3.9 Telephone Meetings. Members of the board of directors or
any committee designated by the board may participate in a meeting of such board
or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this section shall
constitute presence in person at such meeting.
3.10 Action Without Meeting. Unless otherwise restricted by
the certificate of incorporation or these by-laws, any action required or
permitted
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to be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board of directors or committee.
3.11 Committees of Directors. The board of directors may by
resolution passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. If a member of a committee shall be absent from any
meeting, or disqualified from voting thereat, the remaining member or members
present and not disqualified from voting, whether or not such member or members
constitute a quorum, may, by unanimous vote, appoint another member of the board
of directors to act at the meeting in the place of such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation (except that
a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
pursuant to Section 151(a) of the General Corporation Law of the State of
Delaware [hereinafter the "GCL"], fix any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of
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the corporation), adopting an agreement of merger or consolidation pursuant to
Sections 251 or 252 of the GCL, recommending to the stockholders the sale, lease
or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the by-laws of the corporation; and,
unless the resolution, by-laws or certificate of incorporation expressly so
provide, no such committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock, or to adopt a certificate of
ownership and merger pursuant to Section 253 of the GCL. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the board of directors. Unless otherwise specified in
the resolution of the board of directors designating the committee, at all
meetings of each such committee of directors, a majority of the total number of
members of the committee shall constitute a quorum for the transaction of
business, and the vote of a majority of the members of the committee present at
any meeting at which there is a quorum shall be the act of the committee. Each
committee shall keep regular minutes of its meetings and report the same to the
board of directors, when required.
3.12 Compensation of Directors. Unless otherwise restricted by
the certificate of incorporation, the board of directors shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the board of directors and
may be paid a fixed sum for attendance at each meeting of the board of directors
or a stated salary as director. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be paid like
compensation for attending committee meetings.
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3.13 Resignation. A director may resign by submitting his
written resignation to the chairman of the board or president. Unless otherwise
specified therein, the resignation of a director need not be accepted to make it
effective and shall be effective immediately upon its receipt by the chairman of
the board or the president or as otherwise specified therein. If the resignation
of a director specifies that it shall be effective at some time later than
receipt, until that time the resigning director shall be competent to act on all
matters before the board of directors.
4. Notices of Meetings.
4.1 Notice Procedure. Whenever, whether under the provisions
of any statute or of the certificate of incorporation or of these by-laws,
notice is required to be given to any director or stockholder, such requirement
shall not be construed to require the giving of personal notice. Such notice may
be given in writing, by mail, addressed to such director or stockholder, at his
address as it appears on the records of the corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
is deposited in the United States mail. Notice to directors may also be given by
telecopy, telex, telegram or telephone.
4.2 Waivers of Notice. Whenever the giving of any notice is
required by statute, the certificate of incorporation or these by-laws, a waiver
thereof, in writing, signed by the person or persons entitled to said notice,
whether before or after the event as to which such notice is required, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the
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business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders, directors or members of a committee of directors need be
specified in any written waiver of notice, unless so required by the certificate
of incorporation, by statute or by these by-laws.
5. Officers.
5.1 Positions. The officers of the corporation shall be a
president, a secretary and a treasurer, and such other officers as the board of
directors may appoint, including a chairman of the board, and one or more vice
presidents, assistant secretaries and assistant treasurers, who shall exercise
such powers and perform such duties as shall be determined from time to time by
the board. Any number of offices may be held by the same person, unless the
certificate of incorporation or these by-laws otherwise provide; provided,
however, that in no event shall the president and the secretary be the same
person.
5.2 Appointment. The officers of the corporation shall be
chosen by the board of directors at its first meeting after each annual meeting
of stockholders.
5.3 Compensation. The compensation of all officers of the
corporation shall be fixed by the board of directors.
5.4 Term of Office. The officers of the corporation shall hold
office until their successors are chosen and qualify or until their earlier
death, resignation or removal. Any officer may resign at any time upon written
notice to the corporation. Any officer elected or appointed by the board of
directors may be removed at any time, with or without cause, by the affirmative
vote of a majority of the board of directors. Any vacancy occurring in any
office of the corporation shall be filled by the board of directors.
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5.5 Fidelity Bonds. The corporation may secure the fidelity of
any or all of its officers or agents by bond or otherwise.
5.6 President. The president shall be ex officio a member of
all standing committees, shall have general and active management of the
business of the corporation, shall ensure that all orders and resolutions of the
board of directors are carried into effect, and, unless otherwise provided by
the board of directors, shall preside at all meetings of the stockholders and
the board of directors. The president shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation. The
president shall also be the chief executive officer of the corporation, unless
the board of directors shall designate the chairman of the board as the chief
executive officer.
5.7 Vice President. In the absence of the president or in the
event of the president's inability or refusal to act, the vice president (or in
the event there be more than one vice president, the vice presidents in the
order designated, or in the absence of any designation, then in the order of
their election) shall perform the duties of the president, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall perform such other duties and have such
other powers and titles as the board of directors may from time to time
prescribe.
5.8 Chairman of the Board. If the directors shall appoint a
chairman of the board, the chairman shall, when present, preside at all meetings
of the board of directors and shall perform such other duties and have such
other powers as may be vested in the chairman by the board of directors.
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5.9 Secretary. The secretary, or an assistant secretary, shall
attend all meetings of the board of directors and all meetings of the
stockholders, and shall record all the proceedings of the meetings of the
stockholders and of the board of directors in a book to be kept for that
purpose, and shall perform like duties for the standing committees, when
required. The secretary, or an assistant secretary, shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
board of directors, and shall perform such other duties as may be prescribed by
the board of directors or by the president, under whose supervision the
secretary shall be. The secretary shall have custody of the corporate seal of
the corporation, and the secretary, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it, and when so affixed
it may be attested by the signature of the secretary or by the signature of such
assistant secretary. The board of directors may give general authority to any
other officer to affix the seal of the corporation and to attest the affixing by
such officer's signature. The secretary or an assistant secretary may also
attest all instruments signed by the chairman of the board, the president or any
vice president.
5.10 Assistant Secretary. The assistant secretary, or if there
be more than one, the assistant secretaries in the order determined by the board
of directors (or if there shall have been no such determination, then in the
order of their election), shall, in the absence of the secretary or in the event
of the secretary's inability or refusal to act or when requested by the chairman
of the board or the president, perform the duties and exercise the powers of the
secretary, and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
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5.11 Treasurer.
5.11.1 Duties. The treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation, and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors. The treasurer shall disburse the funds of the corporation as ordered
by the board of directors, taking proper vouchers for such disbursements, and
shall render to the president, and to the board of directors at its regular
meetings, or when the board of directors so requires, an account of all
transactions as treasurer and of the financial condition of the corporation.
5.11.2 Bond. If required by the board of directors, the
treasurer shall give the corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the board of directors for the faithful
performance of the duties of the treasurer's office and for the restoration to
the corporation, in case of the treasurer's death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind, in the treasurer's possession or under the treasurer's control
and belonging to the corporation.
5.12 Assistant Treasurer. The assistant treasurer, or if there
shall be more than one, the assistant treasurers in the order determined by the
board of directors (or if there shall have been no such determination, then in
the order of their election), shall, in the absence of the treasurer or in the
event of the treasurer's inability or refusal to act, perform the duties and
exercise the powers of the treasurer, and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
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6. Capital Stock.
6.1 Certificates of Stock; Uncertificated Shares. The shares
of the corporation shall be represented by certificates, provided that the board
of directors may provide by resolution or resolutions that some or all of any or
all classes or series of the corporation's stock shall be uncertificated shares.
Any such resolution shall not apply to shares represented by a certificate until
such certificate is surrendered to the corporation. Notwithstanding the adoption
of such a resolution by the board of directors, every holder of stock
represented by certificates and upon request every holder of uncertificated
shares shall be entitled to have a certificate signed by, or in the name of the
corporation by the chairman or vice chairman of the board of directors, or the
president or vice president, and by the treasurer and/or assistant treasurer, or
the secretary or an assistant secretary of such corporation representing the
number of shares registered in certificate form. Any or all the signatures on
the certificate may be facsimile. In case any officer, transfer agent or
registrar whose signature or facsimile signature appears on a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
6.2 Lost Certificates. The board of directors may direct a new
certificate or certificates of stock or uncertificated shares to be issued in
place of any certificate or certificates theretofore issued by the corporation
and alleged to have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming that the certificate of stock has
been lost, stolen or destroyed. When authorizing such issuance of a new
certificate or certificates, the board of directors may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or
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certificates, or such owner's legal representative, to advertise the same in
such manner as the board shall require and/or to give the corporation a bond, in
such sum as the board may direct, as indemnity against any claim that may be
made against the corporation on account of the certificate alleged to have been
lost, stolen or destroyed or on account of the issuance of such new certificate
or uncertificated shares.
6.3 Transfers. The transfer of stock and certificates that
represent the stock and the transfer of uncertificated shares shall be effected
in accordance with the laws of the State of Delaware. Any restriction on the
transfer of a security imposed by the corporation shall be noted conspicuously
on the security.
6.4 Fixing Record Date.
6.4.1 Meetings. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the board of directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the board of directors, and which record
date shall not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the board of directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjourned
meetings.
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6.4.2 Consents. In order that the corporation may
determine the stockholders entitled to consent to corporate action in writing
without a meeting, the board of directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the board of directors, and which date shall not be more than ten
days after the date upon which the resolution fixing the record date is adopted
by the board of directors. If no record date has been fixed by the board of
directors, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the board
of directors is required by law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent to the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the board of directors and prior action by
the board of directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the board of
directors adopts the resolution taking such prior action.
6.4.3 Payments. In order that the corporation may
determine the stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders entitled to exercise
any rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the board of directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be not more than
sixty days prior to such
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action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
board of directors adopts the resolution relating thereto.
6.5 Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, to receive notifications, to vote as such
owner, and to exercise all the rights and powers of an owner; and the
corporation shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of the State of Delaware.
7. Indemnification.
7.1 Authorization of Indemnification. Each person who was or
is a party or is threatened to be made a party to or is involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether by or in the right of the
corporation or otherwise (a "proceeding"), by reason of the fact that he or she,
or a person of whom he or she is the legal representative, is or was a director
or officer of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan, shall be (and shall be deemed to have
a contractual right to be) indemnified and held harmless by the corporation (and
any successor to the corporation by merger or otherwise) to the fullest extent
authorized by, and subject to the conditions and (except as provided herein)
procedures set forth in the GCL, as the same exists or may hereafter be amended
(but any such
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amendment shall not be deemed to limit or prohibit the rights of indemnification
hereunder for past acts or omissions of any such person insofar as such
amendment limits or prohibits the indemnification rights that said law permitted
the corporation to provide prior to such amendment), against all expenses,
liabilities and losses (including attorney's fees, judgments, fines, ERISA taxes
or penalties and amounts paid or to be paid in settlement) reasonably incurred
or suffered by such person in connection therewith; provided, however, that the
corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person (except
for a suit or action pursuant to Section 7.2) only if such proceeding (or part
thereof) was authorized by the board of directors of the corporation. Persons
who are not directors or officers of the corporation may be similarly
indemnified in respect of such service to the extent authorized at any time by
the board of directors of the corporation. The indemnification conferred in this
Section 7.1 also shall include the right to be paid by the corporation (and such
successor) the expenses (including attorney's fees) incurred in the defense of
or other involvement in any such proceeding in advance of its final disposition
(including in the case of a director or former director expenses of separate
legal counsel, up to a maximum of $50,000, but only in the event that the
director or former director as the indemnified party reasonably determines,
assuming an outcome unfavorable to such indemnified party, that there is a
reasonable probability that such proceeding may materially and adversely affect
such indemnified party, or that there may be legal defenses available to such
indemnified party that are different from or in addition to those available to
the corporation); provided, however, that, if and to the extent the GCL
requires, the payment of such expenses (including attorney's fees) incurred by a
director or officer in advance of the final disposition of a proceeding shall be
made only upon delivery to the corporation of an
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undertaking by or on behalf of such director or officer to repay all amounts so
paid in advance if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Section 7.1 or otherwise;
and provided further, that, such expenses incurred by other employees and agents
may be so paid in advance upon such terms and conditions, if any, as the board
of directors deems appropriate.
7.2 Right of Claimant to Bring Action against the Corporation.
If a claim under Section 7.1 is not paid in full by the corporation within sixty
days after a written claim has been received by the corporation, the claimant
may at any time thereafter bring an action against the corporation to recover
the unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled to be paid also the expense of prosecuting such
action. It shall be a defense to any such action (other than an action brought
to enforce a claim for expenses incurred in connection with any proceeding in
advance of its final disposition where the required undertaking, if any is
required, has been tendered to the corporation) that the claimant has not met
the standards of conduct which make it permissible under the GCL for the
corporation to indemnify the claimant for the amount claimed or is otherwise not
entitled to indemnification under Section 7.1 but the burden of proving such
defense shall be on the corporation. The failure of the corporation (in the
manner provided under the GCL) to have made a determination prior to or after
the commencement of such action that indemnification of the claimant is proper
in the circumstances because he or she has met the applicable standard of
conduct set forth in the GCL shall not be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct. An
actual determination by the corporation (in the manner provided under the GCL)
after the commencement of such action that the claimant has not met such
applicable standard of conduct
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shall not be a defense to the action, but shall create a presumption that the
claimant has not met the applicable standard of conduct.
7.3 Non-exclusivity. The rights to indemnification and advance
payment of expenses provided by Section 7.1 shall not be deemed exclusive of any
other rights to which those seeking indemnification and advance payment of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
7.4 Survival of Indemnification. The indemnification and
advance payment of expenses and rights thereto provided by, or granted pursuant
to, Section 7.1 shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the personal representatives, heirs,
executors and administrators of such person.
7.5 Insurance. The corporation shall have power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
against any liability asserted against such person or incurred by such person in
any such capacity, or arising out of such person's status as such, and related
expenses, whether or not the corporation would have the power to indemnify such
person against such liability under the provisions of the GCL.
8. General Provisions.
8.1 Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation and
the
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laws of the State of Delaware, may be declared by the board of directors at any
regular or special meeting. Subject to the provisions of the General Corporation
Law of the State of Delaware, such dividends may be paid either out of surplus,
as defined in the General Corporation Law of the State of Delaware, or in the
event that there shall be no such surplus, out of the net profits for the fiscal
year in which the dividend is declared and/or the preceding fiscal year.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock, subject to the provisions, if any, of the certificate of
incorporation.
8.2 Execution of Instruments. All checks or demands for money
and notes of the corporation shall be signed by such officer or officers or such
other person or persons as the board of directors may from time to time
designate.
8.3 Fiscal Year. The fiscal year of the corporation shall
begin on the first day of October and end on the last day of September each
year, unless otherwise determined by resolution of the board of directors.
8.4 Seal. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the words "Corporate
Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
9. Amendments.
These by-laws may be altered, amended or repealed and new
by-laws may be adopted by the stockholders or the board of directors.
* * * *
The foregoing amended and restated by-laws were adopted in
substantial part by the board of directors on October 14, 1991 and were ratified
in their entirety by the board of directors on November 12, 1991. Sections 7.1
and 1.1 were further amended on December 16, 1991 and October 24-25, 1994,
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respectively. A Certificate of Amendment of Amended and Restated Certificate of
Incorporation changing the name of the corporation to Vitas Healthcare
Corporation was filed with the Secretary of State of the State of Delaware on
May 13, 1992. Certain technical and corrective revisions, including a change in
the registered agent of the Corporation, were approved and adopted by the board
of directors on May 2, 1995.
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EXHIBIT 4.2
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REGISTRATION RIGHTS AGREEMENT
AMONG
VITAS HEALTHCARE CORPORATION,
CERTAIN STOCKHOLDERS OF
VITAS HEALTHCARE CORPORATION,
CHEMED CORPORATION
AND
THE INVESTORS IDENTIFIED HEREIN
-------------------------------------
JUNE 4, 1993
-------------------------------------
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is dated as of June 4, 1993 and is
among Vitas Healthcare Corporation, a Delaware corporation (the "Company"), and
certain stockholders of the Company, Chemed Corporation, a Delaware corporation
("Chemed"), and the Investors, in each case identified on schedule A attached
hereto.
1. BACKGROUND; DEFINITIONS.
1.1 Background.
A. The Company and the persons and entities set forth on Schedule A
under the heading Investors (collectively, "Investors") are parties to a
Preferred Stock Purchase Agreement dated as of the date hereof (the "Stock
Purchase Agreement") pursuant to which the Investors will purchase the number of
shares of Series B Convertible Preferred Stock, par value $1.00 per share, of
the Company (the "Preferred Stock") set forth opposite their respective names on
Schedule A attached hereto. Each share of Preferred Stock is convertible into
shares of common stock of the Company, par value $.001 per share (the "Common
Stock"), in accordance with the terms of the Certificate of Designation,
Preferences and Other Rights of the Series B Preferred Stock. As a condition to
the execution of the Stock Purchase Agreement, the Investors have required that
the Company grant to them registration rights as set forth herein.
B. The Company, Chemed and OCR Holding Company, a Nevada corporation
and wholly owned subsidiary of Chemed ("OCR"), entered into a Registration
Rights Agreement (the "Old Registration Agreement") dated as of December 17,
1991 in connection with the purchase by OCR of 270,000 shares of 9% cumulative
nonconvertible preferred stock, par value $1.00 per share, and the issuance by
the Company to OCR of two warrants (the "Warrants") entitling OCR to purchase
certain shares of the Common Stock, subject to the terms and conditions of the
Warrants (the "Warrant Shares"). The Company desires, and Chemed and OCR have
agreed, to terminate the Old Registration Agreement and include Chemed and OCR
as parties to this Agreement. Upon the execution of this Agreement by the
Company, Chemed and OCR, the Old Registration Agreement shall be deemed
terminated and of no further force and effect.
C. The Company has deemed it advisable and in its best interest to
grant to certain existing security holders of the Company having a significant
equity interest in the Company, other than OCR, as set forth in Schedule A
attached hereto (collectively,
<PAGE>
the "Other Stockholders") registration rights in order to enable the Company to
have an orderly and integrated approach to registration rights for certain
stockholders, including OCR, at the same time that such rights are granted to
the Investors.
1.2 Certain Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
(a) The terms "register," "registered," and "registration" refer to
a registration effected by preparing and filing a registration statement under
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act"), and the declaration of
effectiveness of such registration statement.
(b) The term "Investor Registrable Securities" means: (i) the Common
Stock issued or issuable upon conversion of the Preferred Stock (the "Conversion
Shares"); (ii) the Common Stock of the Company acquired by the Investors or a
Transferee (as hereafter defined), including pursuant to the Stockholders'
Agreement dated the date hereof among the Company, Hugh A. Westbrook and Carole
S. Westbrook (the "Principal Stockholders"), and the Investors (the
"Stockholders' Agreement"); and (iii) any Common Stock of the Company or any
subsidiary of the Company issued as or issuable upon the conversion or exercise
of any right or security which is issued as a dividend or other distribution
with respect to, or in exchange for or in replacement of, the Preferred Stock or
the Common Stock referred to in subsections (i) and (ii) above, or in connection
with a stock split, combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise, other than shares of capital
stock distributed to the public pursuant to an effective registration statement
or Rule 144 (or successor thereto) under the Securities Act, or the subject of a
transaction permitted by Section 4(1) of the Securities Act, and excluding in
all cases, however, any Investor Registrable Securities sold by a person in a
transaction in which its rights under this Agreement are not assigned.
(c) The number of shares of "Investor Registrable Securities then
outstanding" shall be the number of shares of Common Stock outstanding which are
Investor Registrable Securities, and the number of shares of Common Stock which
would be Investor Registrable Securities upon issuance upon conversion or
exercise of, or in exchange for, any of the securities referred to in Section
1.2(b).
(d) The term "Holder" means any person owning or having the right to
acquire Investor Registrable Securities or any assignee thereof in accordance
with the terms of the Stockholders' Agreement.
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<PAGE>
(e) The term "Other Registrable Securities" means: (i) the Common
Stock owned or hereafter acquired by the Principal Stockholders and the Other
Stockholders; (ii) the Common Stock issued or issuable upon exercise of stock
options currently outstanding or granted to the Principal Stockholders and the
Other Stockholders after the date hereof by the Board of Directors or any other
right or security held by such Principal Stockholders and Other Stockholders;
(iii) any Common Stock of the Company or any subsidiary of the Company issued as
or issuable upon the conversion or exercise of any right or security which is
issued as a dividend or other distribution with respect to, or in exchange for
or in replacement of, the Common Stock referred to in subsections (i) and (ii)
above, or in connection with a stock split, combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise,
other than shares of capital stock distributed to the public pursuant to an
effective registration statement or Rule 144 (or successor thereto) under the
Securities Act or the subject of a transaction permitted by Section 4(1) of the
Securities Act.
(f) The term "OCR Registrable Securities" means (i) the Warrant
Shares; (ii) any Common Stock owned or hereafter acquired by OCR; and (iii) any
Common Stock of the Company or any subsidiary of the Company issued as or
issuable upon the conversion or exercise of any right or security which is
issued as a dividend or other distribution with respect to, or in exchange for
or in replacement of the Warrant Shares or the Common Stock referred to in
subsection (ii) above, or in connection with a stock split, combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise, other than shares of capital stock distributed to the public pursuant
to an effective registration statement or Rule 144 (or successor thereto) under
the Securities Act or the subject of a transaction permitted by Section 4(1) of
the Securities Act.
(g) The term "Common Stock on a fully diluted basis" means, at the
time of determination, the number of shares of Common Stock equal to the sum of
(i) the number of outstanding shares of Common Stock, (ii) the number of
Conversion Shares, (iii) the number of Warrant Shares, (iv) the number of shares
of Common Stock issuable upon the conversion or exchange of all outstanding
securities convertible or exchangeable for shares of Common Stock (other than
the Preferred Stock) and upon the exercise of all outstanding options, rights or
warrants (other than the Warrants) to purchase shares of Common Stock
outstanding, in each case on the date of determination.
(h) The term "registrable stock" means, in any particular context
herein, collectively (i) the Investor Registrable Securities held by the
Holders, (ii) the Other
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<PAGE>
Registrable Securities held by the Principal Stockholders and the Other
Stockholders, and (iii) the OCR Registrable Securities held by OCR, in each case
entitled to the registration rights that are the subject of the provision in
which such term is used.
2. REGISTRATION.
2.1 Registration on Request.
(a) If at any time prior to the closing of a Qualified Public
Offering (as defined in the Certificate of Designation, Preferences and Other
Rights of the Preferred Stock) but after January 1, 1996, the Holders and/or any
securityholders, together or individually, with other securityholders of the
Company holding in the aggregate a majority of the Common Stock on a fully
diluted basis (collectively, "Requesting Holders") deem it appropriate that the
Company offer to the public its Common Stock pursuant to a registration
statement under the Securities Act (the "Initial Public Offering"), the
Requesting Holders shall provide written notice to the Company. The Company will
promptly give written notice of such requested offering by certified or
registered mail to all Holders, OCR, the Principal Stockholders and the Other
Stockholders (collectively, "holders"). The holders may thereupon request the
registration of all or part of the registrable stock held by the holders
concurrently with such Initial Public Offering, which request shall specify the
intended method or methods of disposition of such registrable stock. The Company
will use its best efforts to file (at the earliest possible date and if possible
within ninety (90) days after the giving of such written notice by the Company)
the registration statement for the Initial public Offering including therein:
(i) Investor Registrable Securities, OCR Registrable
Securities and Other Registrable Securities which the Company has been so
requested to register by a Holder or Holders, OCR, the Principal
Stockholders and the Other Stockholders for disposition in accordance with
the intended method of disposition stated in such request; and
(ii) other registrable stock which the Company has been
requested to register by other holders, by written request delivered to
the Company within 30 days after the giving of such written notice by the
Company (which request shall specify the intended method of disposition of
such registrable stock), provided that if the Company shall have
previously effected a registration of which notice has been given to
holders pursuant to Section 2.2, the Company shall not be required to
effect a registration pursuant to this Section 2.1(a) until a period of
nine (9) months shall have
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<PAGE>
elapsed from the termination of effectiveness of the most recent such
previous registration.
(b) At any time after the earlier of (x) the Initial Public Offering
and (y) the date the Company becomes a reporting company under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), Galen Partners
II, L.P. and Warburg, Pincus Investors, L.P. (each a "Principal Holder") shall
each be entitled to request, one time, in writing that the Company effect the
registration under the Securities Act of all or part of the Investor Registrable
Securities held by such Principal Holder, which request shall specify the
intended method or methods of disposition of such Investor Registrable
Securities. The Company will promptly give written notice of such requested
registration by certified or registered mail to all holders and thereupon will
use its best efforts to file (at the earliest possible date and if possible
within 90 days after the giving of such written notice by the Company) the
registration, under the Securities Act, of:
(i) the Investor Registrable Securities which the Company has
been so requested to register by such principal Holder, for disposition in
accordance with the intended method of disposition stated in such request;
and
(ii) all other Investor Registrable Securities which the
Company has been requested to register by a Holder or Holders, by written
request delivered to the Company within 30 days after the giving of such
written notice by the Company (which request shall specify the intended
method of disposition of such Investor Registrable Securities), provided
that:
(A) if the Company shall have previously effected a
registration pursuant to Section 2.1(a), or shall have previously
effected a registration of which notice has been given to all
holders pursuant to Section 2.2, the Company shall not be required
to effect another registration pursuant to this Section 2.1(b) until
a period of nine (9) months shall have elapsed from the termination
of effectiveness of the most recent such previous registration;
(B) the Company shall not be required to effect any
registration pursuant to this Section 2.1(b) unless the Principal
Holder and Holders requesting registration pursuant to clauses (i)
and (ii) above have requested to include in the applicable
registration Investor Registrable Securities owned by them
representing an anticipated aggregate value of at least $5,000,000;
and
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<PAGE>
(C) if the Board of Directors determines in good faith and in
the exercise of its reasonable business judgment that the
registration and distribution of all or a specified portion of
Investor Registrable Securities will result in a twenty-five percent
(25%) or more decrease in the market price of the then outstanding
Common Stock, then the Company shall not be required to effect the
registration requested pursuant to this Section 2.1(b) until such
time as shall be reasonably determined by the Board of Directors to
permit such registration and distribution without resulting in such
a decrease in price; provided that in the event the Principal Holder
requesting registration under this Section 2.1(b) is Warburg, Pincus
Investors, L.P. ("Warburg") and Warburg provides written notice to
the Company that it requests registration under this Section 2.1(b)
in order to make a distribution of Investor Registrable Securities
held by Warburg to its limited partners, then notwithstanding
anything contained in this Section 2.1(b)(ii)(C) to the contrary,
the Company shall be required to effect the registration of Investor
Registrable Securities held by Warburg (and no other holders) for
such purpose only in accordance with the terms of this Section
2.1(b) (a "Warburg Distribution Demand")
If any registration requested by the holders pursuant to Section 2.1 is
for an underwritten offering, the Company shall have the right to designate the
underwriter, who shall be an investment banking firm of nationally recognized
standing.
(c) The Company will pay all Registration Expenses in connection
with the registration effected by the Company of registrable stock (including in
connection with the Initial Public Offering) pursuant to Section 2.1(a) and the
registration of Investor Registrable Securities pursuant to Section 2.1(b). The
term "Registration Expenses" shall mean all expenses incident to the Company's
performance of or compliance with this Section 2 including, without limitation,
all registration and filing fees; all printing expenses; the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits required by or
incident to such performance and compliance. Registration Expenses shall exclude
underwriting discounts and/or commissions (or similar payments), transfer taxes,
if any, on registrable stock sold by the holders, all fees and expenses of
compliance with state securities or blue sky laws attributable to such
registrable stock, and the fees and disbursements of counsel for the holders,
all of which shall be borne by the holders.
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<PAGE>
(d) If any registrable stock included by any holder in a
registration pursuant to this Section 2.1 are to be sold in an underwritten
offering, then each other holder who is registering registrable stock in the
same registration shall have the right, at its election, to demand that all
registrable stock be sold in such underwritten offering on the same terms and
conditions, including price, subject, however, to the provisions of Section
2.3(b).
(e) A registration requested pursuant to this Section 2.1 shall not
be deemed to have been effected (i) unless a registration statement with respect
thereto has become effective, provided that a registration which does not become
effective after the Company has filed a registration statement with respect
thereto solely by reason of the refusal to proceed of the holders or Holders, as
the case may be, requesting such registration (the "Initiating Holders") shall
be deemed to have been effected by the Company at the request of such Initiating
Holders unless the Initiating Holders shall have elected to pay all Registration
Expenses in connection with such registration that does not become effective;
provided, however, that if at the time of such refusal to proceed (A) the
Initiating Holders have learned of a material adverse change in the business,
condition or prospects of the Company not known to the Initiating Holders at the
time of their request, (B) the existence of such material adverse change was
known to the Company at the time of the Initiating Holders' request for
registration, and (C) the Initiating Holders have notified the Company of their
refusal to proceed with reasonable promptness following disclosure by the
Company of such material adverse change, then such registration shall not be
deemed to have been effected and the Initiating Holders shall not be required to
pay any Registration Expenses in connection therewith; (ii) if, after it has
become effective, such registration is the subject of any stop order, injunction
or other order or requirement of the Securities and Exchange Commission (the
"Commission") or other governmental agency or court for any reason which cannot
be cured within five (5) business days of the issuance of such stop order,
injunction, order or requirement; or (iii) if the conditions to closing
specified in any underwriting agreement entered into in connection with such
registration are not satisfied and the closing does not occur, other than by
reason of some act or omission by any such Initiating Holders.
2.2. Incidental Registration.
(a) If the Company at any time proposes to register any of its
securities under the Securities Act, whether or not for sale for its own
account, other than pursuant to Section 2.3(b) and other than in connection with
a Warburg Distribution Demand, on a form (other than Form S-4 or S-8) and in a
manner which would permit registration of shares of Common Stock for sale to the
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<PAGE>
public under the Securities Act, it will, each such time, give prompt written
notice to all Holders, OCR, the Principal Stockholders and the Other
Stockholders (collectively, "holders") of its intention to do so, describing
such securities and specifying the form and manner and the other relevant facts
involved in such proposed registration. Upon the written request of any holder
delivered to the Company within 30 days after the giving of any such notice
(which request shall specify the number of shares of registrable stock intended
to be disposed of by such holder and the intended method of disposition
thereof), the Company will include in such registration such number of shares of
registrable stock as a holder may specify in its request, provided that:
(i) if, at any time after giving such written notice of its
intention to register any of its securities and prior to the effective
date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register
such securities, the Company may, at its election, give written notice of
such determination to each holder and thereupon shall be relieved of its
obligation to register any registrable stock in connection with such
registration (but not from its obligation to pay the Registration Expenses
already incurred in connection therewith as provided in subsection (b) of
this Section 2.2), without prejudice, however, to the rights of any one or
more holders to request registration pursuant to Section 2.1;
(ii) if (A) the registration so proposed by the Company
involves an underwritten offering of the securities so being registered,
whether or not for sale for the Company's own account, other than pursuant
to Section 2.1 or Section 2.3(b), (B) the registrable stock so requested
to be registered for sale for the account of any holder are not also to be
included in such underwritten offering, and (C) the managing underwriter
of such underwritten offering shall notify the Board of Directors of the
Company in writing that the registration and distribution of all or a
specified portion of registrable stock concurrently with the securities
being distributed by such underwriters would materially interfere with the
successful marketing of such securities by such underwriters (such notice
to summarize the reasons therefor), then the Company will promptly furnish
each holder who has requested registration of such registrable stock not
to be included in such underwritten offering pursuant to this Section 2.2
with a copy of such notice. The Company may require, by written request
accompanying such copy of such notice to each such holder, that the
registrable stock requested to be included in such registration statement
be
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<PAGE>
included in such underwritten offering or be excluded from such
registration; and
(iii) the Company shall not be obligated to effect any
registration of registrable stock under this section 2.2 incidental to the
registration of any of its securities in connection with mergers, exchange
offers, dividend reinvestment plans, employee stock ownership plans or
stock option plans, thrift plans, pension plans or other employee benefit
plans.
(b) The Company will pay all Registration Expenses (including for
purposes of this Section 2.2, the reasonable fees and disbursements of one
counsel for the holders, as a group, on whose behalf securities are being
registered) in connection with each registration of registrable stock requested
by a holder pursuant to this Section 2.2.
2.3. Registration Procedures.
(a) If and whenever the Company is requested or required to effect
the registration of any registrable stock under the Securities Act as provided
in Sections 2.1, 2.2 or 2.3(b), the Company will as expeditiously as possible:
(i) prepare and file with the Commission a registration
statement on the appropriate form with respect to such registrable stock
and use its reasonable best efforts to cause such registration statement
to become effective as promptly as practicable;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to use its reasonable best efforts to comply with
the provisions of the Securities Act applicable to the Company with
respect to the disposition of all securities covered by such registration
statement until the earlier of such time as all registrable stock has been
disposed of in accordance with the intended methods of disposition by the
holders thereof set forth in such registration statement or the expiration
of 180 days after such registration statement becomes effective;
(iii) furnish to each holder participating in the registration
such number of conformed copies of such registration statement and of each
such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus
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<PAGE>
and any summary prospectus), in conformity with the requirements of the
Securities Act, such documents incorporated by reference in such
registration statement or prospectus, and such other documents of the
Company, as such holder may reasonably request to facilitate the
disposition of registrable stock owned by it;
(iv) use its reasonable best efforts to register or qualify
all securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United States
and its territories as each holder participating in the registration shall
reasonably request, and do any and all other reasonable acts and things
which may be reasonably necessary or advisable to enable such holder to
consummate the disposition in such jurisdictions of its registrable stock
covered by such registration statement, except that the Company shall not
for any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified, or
to consent to general service of process in any such jurisdiction;
(v) furnish to each Holder of 25% of more of Investor
Registrable Securities covered by such registration statement, and use its
reasonable best efforts to furnish to each other holder of registrable
stock covered by such registration statement, a signed counterpart,
addressed to such holder, of (A) an opinion of counsel for the Company,
dated the effective date of such registration statement (or, if such
registration includes an underwritten public offering, dated the date of
the closing under the underwriting agreement), and (B) a "cold comfort"
letter signed by the independent public accountants who have certified the
Company's financial statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to underwriters in
underwritten public offerings of securities of issuers in the health-care
industry;
(vi) promptly notify each holder of registrable stock covered
by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required
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<PAGE>
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and at the
request of any such holder prepare and furnish to such holder a reasonable
number of copies of a supplement to or an amendment of such prospectus as
may be necessary so that, as thereafter delivered to the purchasers of
such registrable stock, such prospectus shall not include 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 in the light of the circumstances then existing;
(vii) notify each holder of registrable stock covered by such
registration statement promptly after the Company shall receive notice or
obtain knowledge of the issuance of any stop order by the Commission
suspending the effectiveness of any such registration statement or
amendment thereto or of the initiation or threatening of any proceeding
for that purpose, and promptly use reasonable best efforts to prevent the
issuance of any stop order or obtain its withdrawal promptly if such stop
order should be issued;
(viii) use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to
its securities holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more than
eighteen months, beginning with the first month of the first fiscal
quarter after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act; and
(ix) use its reasonable best efforts to effectuate the listing
of the registrable stock to be sold on any exchange on which the Common
Stock is then listed.
The Company may require each holder as to which any registration is
being effected to furnish the Company with such information regarding such
holder and the distribution of its registrable stock as the Company may from
time to time request in writing, for inclusion in the applicable registration
statement, as reasonably determined by the Company to be required by law, or by
the Commission, in connection therewith and each holder shall furnish such
information as promptly as practicable after such request.
(b) If requested by the underwriters for any underwritten offering
with respect to an Initial Public Offering or on behalf of a holder or holders
pursuant to a registration requested under Section 2.1, the Company will enter
into an
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underwriting agreement upon mutually satisfactory terms with such underwriters
for such offering, such agreement to contain such representations and warranties
by the Company and the holders and such other terms and provisions as are
customarily contained in underwriting agreements, including, without limitation,
customary indemnities. Whenever a registration requested by one or more holders
pursuant to Section 2.1 is for an underwritten offering, and the underwriters
shall determine that the inclusion of all or a specified portion of registrable
stock requested to be included in such offering would materially interfere with
the successful marketing of such offering, to the extent determined to be
necessary by the underwriters, (i) in the case of a registration pursuant to
Section 2.1(a), the registrable stock requested to be registered by the holders
shall be excluded on a pro rata basis based upon the respective numbers of
registrable stock proposing to participate in such underwritten offering, and
(ii) in the case of a registration pursuant to Section 2.1(b), the Other
Registrable Securities requested to be registered by the Principal Stockholders
and the Other Stockholders shall be excluded first, and to the extent reasonably
determined to be necessary by the underwriters, the Investor Registrable
Securities and the OCR Registrable Securities requested to be registered by the
Holders and OCR, respectively, shall be excluded next on a pro rata basis based
upon the respective numbers of Investor Registrable Securities and OCR
Registrable Securities proposing to participate in such underwritten offering
(the shares excluded in an Initial Public Offering or in a secondary offering
shall be referred to herein as the "Deferred Demand Securities"). The exclusions
in the preceding sentence shall apply until the completion of the distribution
of such securities by such underwriters, but in no event for a period of more
than 150 days after the effective date of such registration. In the event that,
in accordance with this Section 2.3(b), any registrable stock held by a holder
proposing to participate in such underwritten offering pursuant to Section 2.1
shall have been excluded, the Company shall, not later than the end of the 150
day period referred to above, register such Deferred Demand Securities to the
extent required to permit the distribution thereof in accordance with the
intended method of disposition previously disclosed to the Company pursuant to
Section 2.1, unless such holder shall have withdrawn its request to register its
Deferred Demand Securities, and no such deferred registration hereunder shall be
deemed to be a registration pursuant to Section 2.1 hereof. The registration of
such Deferred Demand Securities pursuant to an underwritten offering shall again
be subject to exclusion as set forth in the second sentence of this Section
2.3(b); provided that in no event will the Company be required to effect more
than one registration of Deferred Demand Securities in connection with any
exercise of demand registration rights pursuant to Section 2.1. The Company will
pay all Registration Expenses in connection with the registration of Deferred
Demand Securities
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pursuant to this Section 2.3(b), if the proposed underwritten offering with
respect to which such Securities were deferred was an offering in respect of
which the Company was required to pay Registration Expenses pursuant to Section
2.1(c) hereof.
(c) If the Company at any time proposes to register any of its
securities under the Securities Act whether or not for sale for its own account
as contemplated by Section 2.2, but in circumstances in which Section 2.1 and
Section 2.3(b) do not apply, and such securities are to be distributed by or
through one or more underwriters, the Company will make reasonable efforts, if
requested by any holder who requests incidental registration of registrable
stock in connection therewith pursuant to Section 2.2, to arrange for such
underwriters to include such registrable stock among those securities to be
distributed by or through such underwriters; provided, however, that if the
underwriters shall determine that the inclusion of all or a specified portion of
such registrable stock would materially interfere with the successful marketing
of such offering, all registrable stock requested to be included shall be
excluded, pro rata, based upon the respective numbers of registrable stock
proposing to participate in such underwritten offering. The holders on whose
behalf registrable stock is to be distributed by such underwriters shall be
parties to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters, shall also be made to and for the benefit of
such holders. Any such holder of registrable stock shall not be required to make
any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder, such holder's registrable stock and such holder's intended method of
distribution and any other representations reasonably required and customary in
connection with the registration.
(d) Whenever a deferred registration required pursuant to Section
2.3(b) is for an underwritten offering, or if the Company at any time proposes
to register any of its securities under the Securities Act for sale for its own
account and such securities are to be distributed by or through one or more
underwriters, the Company shall have the right to select the managing
underwriter to administer the offering subject to the approval of the holders of
a majority of the registrable stock included in such registration, such approval
not to be unreasonably withheld.
(e) If any registration pursuant to Sections 2.1, 2.2 or 2.3(b)
shall be in connection with an underwritten offering, each holder agrees, if so
timely required in writing by the managing underwriters, not to sell or
otherwise dispose of (other than to donees who agree to be similarly bound)
registrable stock (other
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than as part of such underwritten public offering) within the period commencing
seven days prior to the effective date of such registration statement and ending
180 days after the effective date of such registration statement, unless
otherwise consented to by the managing underwriters. Each holder of registrable
stock agrees that the Company may instruct its transfer agent to place stop
transfer notations in its records to enforce this Section 2.3(e).
(f) Each holder agrees by acquisition of the registrable stock that,
upon receipt of any notice from the Company of the occurrence of any event of
the kind described in subsection (a)(vi) of this Section 2.3, such holder will
forthwith discontinue the disposition of registrable stock pursuant to the
registration statement relating to such registrable stock until such holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
subsection (a)(vi) of this Section 2.3 and, if so directed by the Company, will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the prospectus
relating to such securities at the time of receipt of such notice; provided,
that if the registration statement is for an underwritten offering, such holder
will use all reasonable efforts to cause the underwriters of such offering to
discontinue the disposition of the registrable stock. In the event the Company
shall give any such notice, the period referred to in subsection (a)(ii) of this
Section 2.3 shall be extended by the length of the period from and including the
date when each seller of any registrable stock covered by such registration
statement shall have received such notice to the date on which each such seller
has received the copies of the supplemented or amended prospectus contemplated
by subsection (a)(vi) of this Section 2.3.
2.4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement registering registrable
stock, the Company will give the holders on whose behalf such securities are to
be so registered and their underwriters, if any, and their respective counsel
and accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company and its subsidiaries with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such holders and such underwriters or
their respective counsel, to conduct a reasonable investigation within the
meaning of the Securities Act.
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<PAGE>
2.5. Indemnification.
(a) In the event of any registration of any securities of the
Company pursuant to Sections 2.1, 2.2 or 2.3(b), the Company will indemnify and
hold harmless each selling holder, its directors, officers, partners, employees,
representatives and affiliates, and each other person, if any, who controls such
holder within the meaning of the Securities Act (each an "Indemnified Person")
against any losses, claims, damages, liabilities and expenses (including
reasonable legal fees and expenses and costs of investigation), joint or
several, to which such Indemnified Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions or proceedings in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered or qualified under the Securities Act or otherwise,
any final prospectus or summary prospectus included therein, or any amendment or
supplement thereto, or any document incorporated by reference therein or
incident to any such registration or qualification, or (ii) any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act or any rule
or regulation promulgated thereunder and relating to action or inaction required
of the Company in connection with any such registration or qualification or
compliance thereunder; and the Company will reimburse each Indemnified Person
for any legal or any other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided that the Company shall not be liable to such Indemnified
Person for indemnification or reimbursement in any such case to the extent that
any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such final prospectus, summary prospectus, amendment
or supplement or any documents incorporated by reference in any of the above in
reliance upon and in conformity with written information furnished by such
Indemnified Person to the Company and designated in writing by such person to be
specifically for use in the preparation thereof, provided, further that the
Company shall not be liable to any Indemnified Person who participates as an
underwriter in the offering or sale of registrable stock or to any other
Indemnified Person, if any, who controls such underwriter within the meaning of
the Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof), or expense
arises out of such Indemnified Person's failure to send or give a copy of the
final prospectus, as the same
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<PAGE>
may be then supplemented or amended, to the person asserting the existence of an
untrue statement or alleged untrue statement or omission or alleged omission at
or prior to the written confirmation of the sale of registrable stock to such
person if such statement or omission was corrected in full in such final
prospectus. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Person and shall
survive the transfer of such securities by such Indemnified Person.
(b) The Company may require, as a condition to including any
registrable stock in any registration statement filed pursuant to Section
2.3(a)(i), that the Company shall have received an undertaking satisfactory to
it from the holder of registrable stock included in such registration, to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in subsection (a) of this Section 2.5) the Company, each director of the
Company, each officer of the Company who shall sign such registration statement,
and each other person, if any, who controls the Company within the meaning of
the Securities Act, with respect to any statement in or omission from such
registration statement, any final prospectus or summary prospectus included
therein, or any amendment or supplement thereto or any documents incorporated by
reference in any of the above, if such statement or omission was made solely in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such holder stating that it is
specifically for use in the preparation of such registration statement, final
prospectus, summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling person and
shall survive the transfer of registrable stock by such holder; provided,
however, that a holder's liability hereunder shall not exceed the aggregate net
proceeds received by such holder from the sale of its registrable stock in such
offering.
(c) If the indemnification provided for in this Section 2.5 is
unavailable or insufficient to hold harmless an indemnified party in respect of
any losses, claims, damages, liabilities, expenses or action in respect thereof
referred to herein, then the indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities, expenses or actions in such proportion as is appropriate
to reflect the relative fault of the indemnifying party on the one hand, and the
indemnified party on the other, in connection with the statement or omission
which resulted in such losses, claims, damages, liabilities, expenses or actions
as well as any other relevant equitable considerations, including the failure to
give the notice required hereunder. The relative fault
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<PAGE>
of the indemnifying party and the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact relates to information supplied by the indemnifying party or
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the holders agree that it would not be just and equitable if
contributions pursuant to this Section were determined by pro rata allocation or
by any other method of allocation which did not take account the equitable
considerations referred to herein. The amount paid or payable to an indemnified
party as a result of the losses, claims, damages, liabilities or action in
respect thereof, referred to above, shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
contribution provisions of this Section, in no event shall the amount
contributed by any holder exceed the aggregate net offering proceeds received by
such holder from the sale of its registrable stock. No person guilty of
fraudulent misrepresentations (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
(d) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in this
Section 2.5, such indemnified party will give written notice to the latter of
the commencement of such action, provided that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying party
of its obligations under the preceding subsections of this Section 2.5, except
to the extent that the indemnifying party is actually prejudiced by such failure
to give notice. In case any such action is brought against an indemnified party,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified,
to the extent that it may wish, 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, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof; provided, however, that if the indemnified party or parties
reasonably determine that there may be a conflict between the positions of the
indemnifying party or parties and of the indemnified party or parties in
conducting the defense of such action or proceeding or that there may be legal
defenses available to such indemnified party or parties different from or in
addition to those available to the indemnifying party or parties, then counsel
for the indemnified party or parties shall be entitled to conduct the defense to
the extent reasonably determined by such
-17-
<PAGE>
counsel to be necessary to protect the interests of the indemnified party or
parties (and the indemnifying party or parties shall bear the reasonable legal
and other expenses incurred in connection therewith). No indemnifying party
will, without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as a term thereof
the giving by the claimant or plaintiff to such indemnified party of a release
from all liability in respect of such claim or litigation. No indemnified party
shall consent to entry of any judgment or enter into any settlement of any such
action the defense of which has been assumed by an indemnifying party without
the prior consent of such indemnifying party.
(e) Indemnification (and, if appropriate, contribution) similar to
that specified in the preceding subsections of this Section 2.5 (with
appropriate modifications) shall be given by the Company and each holder of
registrable stock with respect to any required registration or other
qualification of such securities under any applicable federal securities law
(other than the Securities Act) or state securities or blue sky law or
regulation.
2.6. Form S-3 Registration. In case the Company shall receive from any
Holder or Holders who own at least ten percent (10%) of the Investor Registrable
Securities then outstanding a written request or requests that the Company
effect a registration on Form S-3 (or successor form) and any related
qualification or compliance with respect to all or a part of the Investor
Registrable Securities owned by such Holder or Holders, the Company will:
(a) Promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders; and
(b) As soon as practicable, use its best efforts to effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Investor Registrable Securities as are
specified in such request, together with all or such portion of the Investor
Registrable Securities of any other Holder or Holders joining in such request as
are specified in a written request given within thirty (30) days after receipt
of such written notice from the Company; provided, however, that the Company
shall not be obligated to effect any such registration, qualification or
compliance, pursuant to this Section 2.6: (i) if Form S-3 (or successor form) is
not available for such offering by the Holders, (ii) if the Holders, together
with any other holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Investor Registrable Securities
and other registrable stock (if any) at an aggregate price to the
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<PAGE>
public of less than $1,000,000, (iii) if the Company has, within the six (6)
month period preceding the date of such request, already effected a registration
on Form S-3 (or successor form) for the Holders pursuant to this Section 2.6 or
a registration pursuant to Sections 2.1, 2.2 or 2.3(b) in which Investor
Registrable Securities of such Holders were included, or (iv) in any particular
jurisdiction in which the Company would be required to qualify generally to do
business wherein it is not so qualified or to consent to general service of
process in any such jurisdiction in effecting such registration, qualification
or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Investor Registrable Securities and other registrable
stock pursuant to this Section 2.6 as soon as practicable after receipt of the
request or requests of the Holders. The Company shall use its reasonable best
efforts to keep such registration statement effective and comply with the
provisions of the Securities Act applicable to the Company with respect to the
disposition of all securities covered by such registration statement until all
the Investor Registrable Securities covered by such registration statement have
been sold.
(d) All Registration Expenses incurred in connection with the first
two (2) registrations requested pursuant to this Section 2.6 shall be borne by
the Company. After the first two (2) registrations, all such Expenses shall be
borne pro rata by the holders participating in the Form S-3 registration.
Registrations effected pursuant to this Section 2.6 shall not be counted as
demands for registration effected pursuant to Section 2.1.
2.7. Other Registrations. The Company hereby agrees that if it has
previously filed a registration statement with respect to registrable stock
pursuant to Section 2.2, and if such previous registration has not been
withdrawn or abandoned, the Company will not file or cause to be effected any
other registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except on Form S-4 or Form S-8 or any other similar form for employee
benefit plans), whether on its own behalf or at the request of any holder or
holders of such securities, until a period of at least six (6) months has
elapsed from the effective date of such previous registration or, if sooner,
until all registrable stock included in such previous registration have been
sold.
3. MISCELLANEOUS.
3.1 Rule 144. If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the
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<PAGE>
requirements of the Securities Act, the Company will use its reasonable best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act (or, if the Company is not required to file such reports,
upon the request of any Holder, will use its reasonable best efforts to make
publicly available such information), and will take such further action as any
Holder may reasonably request, all to the extent required from time to time to
enable such Holder to sell Investor Registrable Securities without registration
under the Securities Act within the limitation of the exemptions provided by (a)
Rule 144 under the Securities Act, as such Rule may be amended from time to
time, or (b) any similar rule or regulation hereafter adopted by the Commission.
Upon the request of any Holder, the Company will deliver to such Holder (i) a
written statement as to whether it has complied with such requirements; (ii) if
applicable, a copy of the most recent annual or quarterly report of the Company;
and (iii) such other reports and documents as a Holder may reasonably request to
avail itself of Rule 144 or any other rule or regulation of the Commission
allowing a Holder to sell Common Stock without registration.
3.2. Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively) only with
the written consent of: (i) in the event the amendment or waiver relates to
Section 2.1(b) or Section 2.6, the Company and the Holders of two-thirds (2/3)
or more of the Investor Registrable Securities then outstanding; (ii) in the
event the amendment or waiver relates to Section 2.1(a), the Company and the
holders of a majority of the Investor Registrable Securities, the OCR
Registrable Securities and the Other Registrable Securities; and (iii) in all
other events, the Company and the holders of a majority of the registrable stock
then outstanding. For purposes of this Section 3.2, "registrable stock then
outstanding" shall be the number of shares of Common Stock outstanding which are
registrable stock, and the number of shares of Common Stock which would be
registrable stock upon conversion or exercise of, or in exchange for, any
registrable stock. Each holder shall be bound by any consent authorized by this
Section 3.2.
3.3. Assignment of Investors' Registration Rights. The rights to cause the
Company to register Investor Registrable Securities pursuant to this Agreement
may be assigned by a Holder to a transferee or assignee ("Transferee") of such
securities in accordance with the terms of the Stockholders' Agreement who,
after such assignment or transfer, holds at least 250,000 shares of Investor
Registrable Securities (subject to appropriate adjustments for stock splits,
stock dividends, combinations and other recapitalizations), provided that the
250,000 share threshold
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<PAGE>
referenced above shall not apply to transfers to Permitted Transferees as
defined in the Stockholders' Agreement; provided further that all such assignees
and transferees who do not meet the 250,000 share threshold shall appoint a
single Holder as their attorney-in-fact for the purpose of exercising any
rights, receiving notices or taking any action under this Agreement. No transfer
of Investor Registrable Securities by a Holder shall be effective unless the
Transferee shall have executed a counterpart to this Agreement, as amended or
supplemented.
3.4. Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not enter into any agreement with any
person or entity holding or proposing to hold any securities of the Company
which would provide such person or entity with registration rights more
favorable than the rights granted to the holders under this Agreement, in any
case, without the written consent of the holders of a majority of the
registrable stock entitled to the type of registration rights to be provided to
such person or entity.
3.5. Specific Performance. Inasmuch as the shares of capital stock of the
Company are closely held and the market therefor is limited, irreparable damage
would result if this Agreement were not specifically enforced. Therefore, the
rights granted to holders hereunder shall be enforceable in a court of equity by
a decree of specific performance, and appropriate injunctive relief may be
applied for and granted in connection therewith. Such remedies shall, however,
be cumulative and not exclusive and shall be in addition to any other remedies
which any party may have under this Agreement or otherwise.
3.6. Notices. Except as otherwise provided in this Agreement, notices and
other communications under this Agreement shall be in writing and shall be
delivered, if to the Company, a Principal Stockholder or an Investor, to such
party in the manner set forth in the Stockholders' Agreement, or if to any other
party, to such party at the address specified below its name on the signature
pages hereof, or in any case at such other address as such party shall have
furnished to the Company in writing (or in the case of the Company, at such
other address, or to the attention of such other officer, as the Company shall
have furnished to each holder).
3.7. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
permitted assigns of the parties hereto.
3.8. Entire Agreement. This Agreement embodies the entire agreement and
understanding between each holder and the Company and supersedes all prior
agreements and understandings relating to the subject matter hereof.
-21-
<PAGE>
3.9. Termination. This Agreement shall terminate as to any stockholder who
is a party to this Agreement on the date that such stockholder is entitled to
sell all of the registrable stock then beneficially owned by such stockholder
pursuant to the terms of Rule 144(k) under the Securities Act (or successor
thereto), and shall survive the earlier termination of the Stockholders'
Agreement, provided that any indemnification obligations hereunder shall survive
the termination of this Agreement.
3.10. Gender; Number. Unless the context of this Agreement otherwise
requires, the masculine, feminine or neuter gender shall include the other
genders, and the singular shall include the plural.
3.11. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the law of the State of Delaware (excluding
choice of law provisions thereof).
3.12. Headings. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
3.13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused to be duly
executed this Agreement on the date first written above.
VITAS HEALTHCARE CORPORATION
By: /s/ [ILLEGIBLE]
----------------------------------------
President
/s/ Hugh A. Westbrook
--------------------------------------------
HUGH A. WESTBROOK
/s/ Carole S. Westbrook
--------------------------------------------
CAROLE S. WESTBROOK
/s/ Esther T. Colliflower
--------------------------------------------
ESTHER T. COLLIFLOWER
/s/ Donald Gaetz
--------------------------------------------
DONALD GAETZ
Address: 923 East Choctawhatchee
Road East
Niceville, Florida 32578
/s/ Earl M. Collier, Jr.
--------------------------------------------
EARL M. COLLIER, JR.
Address: c/o Vitas Healthcare Corporation
100 South Biscayne Blvd.
Suite 1500
Miami, Florida 33131
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<PAGE>
/s/ J.R. Williams
--------------------------------------------
J.R. WILLIAMS
Address: c/o Vitas Healthcare Corporation
100 South Biscayne Blvd.
Suite 1500
Miami, Florida 33131
VITAS HEALTHCARE CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN/TRUST
By: /s/ Hugh A. Westbrook
----------------------------------------
Hugh A. Westbrook, Trustee
Address: c/o Vitas Healthcare Corporation
100 South Biscayne Blvd.
Suite 1500
Miami, Florida 33131
OCR HOLDING COMPANY
By:
----------------------------------------
Treasurer
Address: c/o Chemed Corporation
2600 Chemed Center
225 East 5th Street
Cincinnati, OH 45202
With a copy (which shall not constitute
notice) to:
Dinsmore & Shohl
1900 Chemed Center
Suite 16
225 East 5th Street
Cincinnati, OH 45202
Attention: Clifford A. Roe, Jr., Esq.
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<PAGE>
----------------------------------------
J.R. WILLIAMS
Address: c/o Vitas Healthcare Corporation
100 South Biscayne Blvd.
Suite 1500
Miami, Florida 33131
VITAS HEALTHCARE CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN/TRUST
By:
----------------------------------------
Hugh A. Westbrook, Trustee
Address: c/o Vitas Healthcare Corporation
100 South Biscayne Blvd.
Suite 1500
Miami, Florida 33131
OCR HOLDING COMPANY
By: /s/ Timothy S. O'Toole
----------------------------------------
Treasurer
Address: c/o Chemed Corporation
2600 Chemed Center
225 East 5th Street
Cincinnati, OH 45202
With a copy (which shall not constitute
notice) to:
Dinsmore & Shohl
1900 Chemed Center
Suite 16
225 East 5th Street
Cincinnati, OH 45202
Attention: Clifford A. Roe, Jr., Esq.
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<PAGE>
CHEMED CORPORATION
By: /s/ Timothy S. O'Toole
----------------------------------------
Executive VP & Treasurer
Address: 2600 Chemed Center
225 East 5th Street
Cincinnati, OH 45202
GALEN PARTNERS, II, L.P.
By: GWW Partners, L.P.,
its General Partner
By:
----------------------------------------
General Partner
GALEN PARTNERS INTERNATIONAL,
II, L.P.
By: GWW Partners, L.P.,
its General Partner
By:
----------------------------------------
General Partner
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<PAGE>
CHEMED CORPORATION
By:
----------------------------------------
President
Address: 2600 Chemed Center
225 East 5th Street
Cincinnati, OH 45202
GALEN PARTNERS, II, L.P.
By: GWW Partners, L.P.,
its General Partner
By: /s/ Bruce F. Wesson
----------------------------------------
General Partner
GALEN PARTNERS INTERNATIONAL,
II, L.P.
By: GWW Partners, L.P.,
its General Partner
By: /s/ Bruce F. Wesson
----------------------------------------
General Partner
-25-
<PAGE>
GALEN ASSOCIATES
By: Wesson Enterprises, Inc., a
General Partner
By: /s/ Bruce F. Wesson
----------------------------------------
President
WARBURG, PINCUS INVESTORS, L.P.
By: Warburg Pincus & Co.,
its General Partner
By:
----------------------------------------
Partner
HARVEST PARTNERS INTERNATIONAL, L.P.
By: Harvest Associates International,
L.P.,
its General Partner
By:
----------------------------------------
General Partner
DEUTSCHE BETEILIGUNGSGESELLSCHAFT
By:
----------------------------------------
Managing Director
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<PAGE>
GALEN ASSOCIATES
By: Wesson Enterprises, Inc., a
General Partner
By:
----------------------------------------
President
WARBURG, PINCUS INVESTORS, L.P.
By: Warburg Pincus & Co.,
its General Partner
By: /s/ [SIGNATURE ILLEGIBLE]
----------------------------------------
Partner
HARVEST PARTNERS INTERNATIONAL, L.P.
By: Harvest Associates International,
L.P.,
its General Partner
By:
----------------------------------------
General Partner
DEUTSCHE BETEILIGUNGSGESELLSCHAFT
By:
----------------------------------------
Managing Director
-26-
<PAGE>
GALEN ASSOCIATES
By: Wesson Enterprises, Inc., a
General Partner
By:
----------------------------------------
President
WARBURG, PINCUS INVESTORS, L.P.
By: Warburg Pincus & Co.,
its General Partner
By:
----------------------------------------
Partner
HARVEST PARTNERS INTERNATIONAL, L.P.
By: Harvest Associates International,
L.P.,
its General Partner
By: /s/ [SIGNATURE ILLEGIBLE]
----------------------------------------
General Partner
DEUTSCHE BETEILIGUNGSGESELLSCHAFT
By:
----------------------------------------
Managing Director
-26-
<PAGE>
GALEN ASSOCIATES
By: Wesson Enterprises, Inc., a
General Partner
By:
----------------------------------------
President
WARBURG, PINCUS INVESTORS, L.P.
By: Warburg Pincus & Co.,
its General Partner
By:
----------------------------------------
Partner
HARVEST PARTNERS INTERNATIONAL, L.P.
By: Harvest Associates International,
L.P.,
its General Partner
By:
----------------------------------------
General Partner
DEUTSCHE BETEILIGUNGSGESELLSCHAFT
By: /s/ [SIGNATURE ILLEGIBLE]
----------------------------------------
Managing Director
-26-
<PAGE>
FRANKLIN CAPITAL ASSOCIATES II L.P.
By: Franklin Ventures II L.P.,
its General Partner
By: Franklin Venture Capital Inc.,
its General Partner
By: /s/ [SIGNATURE ILLEGIBLE]
----------------------------------------
Vice President
HLM PARTNERS II L.P.
By: HLM Associates II, L.P.,
its General Partner
By:
----------------------------------------
General Partner
THE FORMANEK INVESTMENT TRUST
By:
----------------------------------------
Peter Formanek, Trustee
--------------------------------------------
HOWARD E. COX, JR.
--------------------------------------------
DAVID BELLET
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<PAGE>
FRANKLIN CAPITAL ASSOCIATES II L.P.
By: Franklin Ventures II L.P.,
its General Partner
By: Franklin Venture Capital Inc.,
its General Partner
By:
----------------------------------------
President
HLM PARTNERS II L.P.
By: HLM Associates II, L.P.,
its General Partner
By: /s/ [SIGNATURE ILLEGIBLE]
----------------------------------------
General Partner
THE FORMANEK INVESTMENT TRUST
By:
----------------------------------------
Peter Formanek, Trustee
--------------------------------------------
HOWARD E. COX, JR.
--------------------------------------------
DAVID BELLET
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<PAGE>
FRANKLIN CAPITAL ASSOCIATES II L.P.
By: Franklin Ventures II L.P.,
its General Partner
By: Franklin Venture Capital Inc.,
its General Partner
By:
----------------------------------------
President
HLM PARTNERS II L.P.
By: HLM Associates II, L.P.,
its General Partner
By:
----------------------------------------
General Partner
THE FORMANEK INVESTMENT TRUST
By: /s/ Peter Formanek, Trustee
----------------------------------------
Peter Formanek, Trustee
--------------------------------------------
HOWARD E. COX, JR.
--------------------------------------------
DAVID BELLET
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<PAGE>
FRANKLIN CAPITAL ASSOCIATES II L.P.
By: Franklin Ventures II L.P.,
its General Partner
By: Franklin Venture Capital Inc.,
its General Partner
By:
----------------------------------------
President
HLM PARTNERS II L.P.
By: HLM Associates II, L.P.,
its General Partner
By:
----------------------------------------
General Partner
THE FORMANEK INVESTMENT TRUST
By:
----------------------------------------
Peter Formanek, Trustee
/s/ HOWARD E. COX, JR.
--------------------------------------------
HOWARD E. COX, JR.
--------------------------------------------
DAVID BELLET
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<PAGE>
FRANKLIN CAPITAL ASSOCIATES II L.P.
By: Franklin Ventures II L.P.,
its General Partner
By: Franklin Venture Capital Inc.,
its General Partner
By:
----------------------------------------
President
HLM PARTNERS II L.P.
By: HLM Associates II, L.P.,
its General Partner
By:
----------------------------------------
General Partner
THE FORMANEK INVESTMENT TRUST
By:
----------------------------------------
Peter Formanek, Trustee
--------------------------------------------
HOWARD E. COX, JR.
/s/ DAVID BELLET
--------------------------------------------
DAVID BELLET
-27-
<PAGE>
SCHEDULE A
STOCKHOLDERS
Hugh A. Westbrook
Carole S. Westbrook
Esther T. Colliflower
Donald Gaetz
Earl Collier
J.R. Williams
Vitas Healthcare Corporation
Employee Stock Ownership Plan/Trust
OCR Holding Company
Number of Shares of
Investors Preferred Stock
- --------- -------------------
Galen Partners II, L.P. 81,391
Galen Partners International II, L.P. 18,314
Galen Associates 295
Warburg, Pincus Investors, L.P. 100,000
Harvest Partners International, L.P. 12,500
Deutsche Beteiligungsgesellschaft 22,500
Franklin Capital Associates II L.P. 11,250
HLM Partners II L.P. 10,000
The Formanek Investment Trust 3,750
Howard E. Cox, Jr. 2,000
David Bellet 500
-28-
<PAGE>
EXHIBIT 4.3
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT ("Amendment") dated as of
July 20, 1997, by and among VITAS HEALTHCARE CORPORATION, a Delaware corporation
(the "Corporation"), certain stockholders of the Corporation, Chemed
Corporation, a Delaware corporation ("Chemed"), and the Investors, in each case
identified on Schedule A hereto (collectively, the "Original Parties"), and
NationsBank, N.A. ("NationsBank").
WHEREAS, each of the Original Parties are parties to a Registration
Rights Agreement dated as of June 4, 1993 (the "Registration Rights Agreement");
WHEREAS, the Corporation and NationsBank executed and delivered a
certain Amendment No. 6 dated as of March 24, 1997 (the "Credit Agreement
Amendment") to the Amended and Restated Revolving Credit, Term Loan and
Reimbursement Agreement dated as of February 17, 1995 between the Corporation
and NationsBank of Florida, National Association (predecessor in interest to
NationsBank), as amended (the "Credit Agreement");
WHEREAS, in connection with the execution and delivery of the Credit
Agreement Amendment, the Corporation proposes to execute and deliver or has
executed and delivered to NationsBank a Warrant Agreement and a Warrant
Certificate, copies of which are attached hereto as Exhibits A and B (the
"Warrant Agreement" and the "Warrant Certificate," respectively), evidencing
NationsBank's right to purchase 486,532 shares (the "NationsBank Warrant
Shares") of the Corporation's common stock, par value $.001 per share ("Common
Stock"), at an exercise price of $.01 per share, subject to the terms and
conditions thereof (the "NationsBank Warrants"), including, without limitation,
the limitations on the exercise of the NationsBank Warrants, which provide that
(i) as of the date of the Warrant Agreement and the issuance of the Warrant
Certificate, the number of NationsBank Warrants which may be exercised pursuant
to the Warrant Agreement, and the number of NationsBank Warrant Shares issuable
upon exercise of such NationsBank Warrants, shall be 194,613; (ii) in the event
the Corporation shall not have paid in full its Obligations (as defined in the
Credit Agreement) on or prior to August 30, 1997, the number of NationsBank
Warrants which may be exercised pursuant to the Warrant Agreement, and the
number of NationsBank Warrant Shares issuable upon exercise of such NationsBank
Warrants, shall be automatically increased to 291,919 effective as of August 31,
1997; (iii) in the event the Corporation shall not have paid in full its
Obligations (as defined in the Credit Agreement) on or prior to November 29,
1997, the number of NationsBank Warrants which may be exercised pursuant to the
Warrant Agreement, and the number of NationsBank Warrant Shares issuable upon
exercise of such NationsBank Warrants, shall be automatically increased to
389,226 effective as of November 30, 1997; and (iv) in the event the Corporation
shall not have paid in full its Obligations (as defined in the Credit Agreement)
on or prior to January 30, 1998, the number of NationsBank Warrants which may be
exercised pursuant to the Warrant Agreement, and the number of NationsBank
Warrant Shares issuable upon exercise of such NationsBank Warrants, shall be
automatically increased to 486,532 effective as of January 31, 1998;
<PAGE>
WHEREAS, the Warrant Agreement contemplates that upon execution and
delivery of a counterpart signature page to the Registration Rights Agreement,
NationsBank (and its permitted transferees and assignees of the Warrant
Agreement that also execute and deliver a counterpart signature page to the
Registration Rights Agreement) shall have and be entitled to exercise the rights
of registration granted to, and shall be subject to the obligations of, "Other
Stockholders" under the Registration Rights Agreement; and
WHEREAS, the addition of NationsBank (and each such permitted
transferee and assignee of the Warrant Agreement) as an "Other Stockholder"
constitutes an amendment of the Registration Rights Agreement.
NOW, THEREFORE, in consideration of the foregoing, the parties
hereto agree as follows:
1. Pursuant to Section 3.2 of the Registration Rights Agreement,
each of the undersigned hereby consents to the addition of NationsBank (and each
such permitted transferee and assignee of the Warrant Agreement) as an "Other
Stockholder" for purposes of the Registration Rights Agreement, and that upon
execution and delivery of a counterpart signature page to the Registration
Rights Agreement, NationsBank and each such permitted transferee and assignee
shall have and be entitled to exercise the rights of registration granted to,
and shall be subject to the obligations of, "Other Stockholders" under the
Registration Rights Agreement.
2. NationsBank's execution and delivery of this Amendment shall also
constitute its execution and delivery of a counterpart signature page to the
Registration Rights Agreement.
3. Capitalized terms used but not defined herein shall have the
meaning given to them in the Registration Rights Agreement.
4. Except as expressly amended by this Amendment, all terms of the
Registration Rights Agreement shall remain in full force and effect.
5. This Amendment may be signed in any number of counterparts each
of which shall constitute an original and all of which shall constitute one and
the same agreement.
-2-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed and
delivered this Amendment, or has caused this Amendment to be duly executed and
delivered on its behalf, as of the date set forth above.
VITAS HEALTHCARE CORPORATION
By: /s/ Hugh A. Westbrook
-------------------------------------
Name: Hugh A. Westbrook
Title: Chairman & CEO
-----------------------------------------
HUGH A. WESTBROOK
-----------------------------------------
CAROLE S. WESTBROOK
-----------------------------------------
ESTHER T. COLLIFLOWER
-----------------------------------------
DONALD GAETZ
-----------------------------------------
EARL M. COLLIER, JR.
/s/ J.R. Williams
-----------------------------------------
J.R. WILLIAMS
VITAS HEALTHCARE CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN/TRUST
By: /s/ Hugh A. Westbrook
-------------------------------------
Hugh A. Westbrook
Trustee
-3-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed and
delivered this Amendment, or has caused this Amendment to be duly executed and
delivered on its behalf, as of the date set forth above.
VITAS HEALTHCARE CORPORATION
By:
-------------------------------------
Name:
Title:
-----------------------------------------
HUGH A. WESTBROOK
/s/ Carole S. Westbrook
-----------------------------------------
CAROLE S. WESTBROOK
-----------------------------------------
ESTHER T. COLLIFLOWER
-----------------------------------------
DONALD GAETZ
-----------------------------------------
EARL M. COLLIER, JR.
-----------------------------------------
J.R. WILLIAMS
VITAS HEALTHCARE CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN/TRUST
By:
-------------------------------------
Hugh A. Westbrook
Trustee
-3-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed and
delivered this Amendment, or has caused this Amendment to be duly executed and
delivered on its behalf, as of the date set forth above.
VITAS HEALTHCARE CORPORATION
By:
-------------------------------------
Name:
Title:
-----------------------------------------
HUGH A. WESTBROOK
-----------------------------------------
CAROLE S. WESTBROOK
-----------------------------------------
ESTHER COLLIFLOWER
/s/ Esther T. Colliflower
-----------------------------------------
COLLIFLOWER FAMILY PARTNERSHIP, LTD.
-----------------------------------------
DONALD GAETZ
-----------------------------------------
EARL M. COLLIER, JR.
-----------------------------------------
J.R. WILLIAMS
VITAS HEALTHCARE CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN/TRUST
By:
-------------------------------------
Hugh A. Westbrook
Trustee
-3-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed and
delivered this Amendment, or has caused this Amendment to be duly executed and
delivered on its behalf, as of the date set forth above.
VITAS HEALTHCARE CORPORATION
By:
-------------------------------------
Name:
Title:
-----------------------------------------
HUGH A. WESTBROOK
-----------------------------------------
CAROLE S. WESTBROOK
-----------------------------------------
ESTHER T. COLLIFLOWER
/s/ Donald Gaetz
-----------------------------------------
DONALD GAETZ
-----------------------------------------
EARL M. COLLIER, JR.
-----------------------------------------
J.R. WILLIAMS
VITAS HEALTHCARE CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN/TRUST
By:
-------------------------------------
Hugh A. Westbrook
Trustee
-3-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed and
delivered this Amendment, or has caused this Amendment to be duly executed and
delivered on its behalf, as of the date set forth above.
VITAS HEALTHCARE CORPORATION
By:
-------------------------------------
Name:
Title:
-----------------------------------------
HUGH A. WESTBROOK
-----------------------------------------
CAROLE S. WESTBROOK
-----------------------------------------
ESTHER COLLIFLOWER
-----------------------------------------
COLLIFLOWER FAMILY PARTNERSHIP, LTD.
-----------------------------------------
DONALD GAETZ
/s/ Earl M. Collier
-----------------------------------------
EARL M. COLLIER, JR.
-----------------------------------------
J.R. WILLIAMS
VITAS HEALTHCARE CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN/TRUST
By:
-------------------------------------
Hugh A. Westbrook
Trustee
-3-
<PAGE>
OCR HOLDING COMPANY
By: /s/ Mark W. Stephens
-------------------------------------
Name: Mark W. Stephens
Title: Assistant Treasurer
CHEMED CORPORATION
By: /s/ Timothy S. O'Toole
-------------------------------------
Name: Timothy S. O'Toole
Title: Executive Vice President
& Treasurer
-4-
<PAGE>
GALEN PARTNERS II, L.P.
By: GWW Partners, L.P.
(its General Partner)
By: /s/ Bruce F. Wesson
-------------------------------------
General Partner
GALEN PARTNERS INTERNATIONAL II, L.P.
By: GWW Partners, L.P.
(its General Partner)
By: /s/ Bruce F. Wesson
-------------------------------------
General Partner
GALEN EMPLOYEE FUND, L.P.
By: /s/ Bruce F. Wesson
-------------------------------------
General Partner
-5-
<PAGE>
WARBURG, PINCUS INVESTORS, L.P.
By: Warburg Pincus & Co.
(its General Partner)
By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------------
Name:
Title:
HARVEST PARTNERS INTERNATIONAL, L.P.
By: Harvest Associates International, L.P.
(its General Partner)
By:
-------------------------------------
General Partner
DEUTSCHE BETEILIGUNGSGESELLSCHAFT
MBH & CO. FONDS I KG
By:
-------------------------------------
Name:
Title:
-6-
<PAGE>
WARBURG, PINCUS INVESTORS, L.P.
By: Warburg Pincus & Co.
(its General Partner)
By:
-------------------------------------
Name:
Title:
HARVEST PARTNERS INTERNATIONAL, L.P.
By: Harvest Associates International, L.P.
(its General Partner)
By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------------
General Partner
DEUTSCHE BETEILIGUNGSGESELLSCHAFT
MBH & CO. FONDS I KG
By:
-------------------------------------
Name:
Title:
-6-
<PAGE>
FRANKLIN CAPITAL ASSOCIATES II L.P.
By: Franklin Ventures II L.P.
(its General Partner)
By: Franklin Venture Capital Inc.
(its General Partner)
By: /s/ Larry H. Coleman
-------------------------------------
Name: Larry H. Coleman
Title: President
HLM PARTNERS II L.P.
By: HLM Associates II, L.P.
(its General Partner)
By:
-------------------------------------
General Partner
THE FORMANEK INVESTMENT TRUST
By:
-------------------------------------
Peter Formanek
Trustee
/s/ Howard E. Cox, Jr.
-----------------------------------------
HOWARD E. COX, JR.
-----------------------------------------
DAVID BELLET
-7-
<PAGE>
FRANKLIN CAPITAL ASSOCIATES II L.P.
By: Franklin Ventures II L.P.
(its General Partner)
By: Franklin Venture Capital Inc.
(its General Partner)
By:
-------------------------------------
Name:
Title:
HLM PARTNERS II L.P.
By: HLM Associates II, L.P.
(its General Partner)
By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------------
General Partner
THE FORMANEK INVESTMENT TRUST
By:
-------------------------------------
Peter Formanek
Trustee
/s/ Howard E. Cox, Jr.
-----------------------------------------
HOWARD E. COX, JR.
-----------------------------------------
DAVID BELLET
-7-
<PAGE>
NATIONSBANK, N.A.
By: /s/ Allison Freeland
-------------------------------------
Name: Allison Freeland
Title: Senior Vice President
-8-
<PAGE>
SCHEDULE A
Stockholders
Hugh A. Westbrook
Carole S. Westbrook
Esther T. Colliflower
Donald Gaetz
Earl M. Collier, Jr.
J.R. Williams
Vitas Healthcare Corporation
Employee Stock Ownership Plan/Trust
OCR Holding Company
Investors
Galen Partners II, L.P.
Galen Partners International II, L.P.
Galen Employee Fund, L.P.
Warburg, Pincus Investors, L.P.
Harvest Partners International, L.P.
Deutsche Beteiligungsgesellschaft
mbH & Co. Fonds I KG
Franklin Capital Associates II L.P.
HLM Partners II L.P.
The Formanek Investment Trust
Howard E. Cox, Jr.
David Bellet
<PAGE>
EXHIBIT 4.4
INVESTOR AGREEMENT
Investor Agreement, dated as of December 17, 1991, between Hospice Care
Incorporated, a Delaware corporation ("HCI" or the "Company"), Chemed
Corporation, a Delaware corporation ("Chemed"), and OCR Holding Company (the
"Investor"), a Nevada corporation, which is a direct, wholly owned subsidiary of
Chemed.
WHEREAS, Chemed, the Investor and their associates and affiliates do not
currently beneficially own any securities of HCI;
WHEREAS, HCI has agreed, subject to the terms and conditions of a Preferred
Stock Purchase Agreement dated as of December 17, 1991 (the "Preferred Stock
Agreement"), to issue to the Investor 270,000 shares of HCI 9% Cumulative
Nonconvertible Preferred Stock, par value $1.00 per share (the "HCI Preferred
Stock");
WHEREAS, in conjunction with the issuance of such HCI Preferred Stock to
the Investor, HCI has also agreed to issue two warrants (the "Warrants") to the
Investor which entitle the Investor to purchase in the aggregate up to 28.3% of
the fully diluted shares of HCI common stock, par value $.001 per share ("HCI
Common Stock"), for an aggregate exercise price of $18 million (the "Warrant
Shares"), subject to the terms and conditions of the Warrants (the HCI Preferred
Stock, the Warrants and the Warrant Shares sometimes collectively referred to
herein as the "HCI Securities");
<PAGE>
WHEREAS, the Investor has represented that it is acquiring the HCI
Preferred Stock and the Warrants (and, if it exercises the Warrants, will be
acquiring the Warrant Shares) for investment and not for the purpose or effect
of changing or influencing the control of HCI or in connection with or as a
participant in any transaction having such purpose or effect;
NOW THEREFORE, in consideration of the provisions and mutual covenants
hereinafter set forth, and for other valuable consideration, HCI, Chemed and the
Investor agree as follows:
1. Increase in Size of Board of Directors.
(a) Promptly following the issuance of HCI Preferred Stock to the
Investor, one designee of the Investor shall be appointed as a director of HCI
in Class I, the directors of which would, when elected at a stockholders'
meeting expected to be held promptly after the date hereof, have terms expiring
in 1994. The Board of Directors of HCI shall thereupon take appropriate action
in accordance with the Company's Bylaws to fix at eight the number of directors
constituting the entire Board of Directors, subject to Section l(c) hereof. As
long as this Agreement is in effect and the Investor beneficially owns at least
10 percent of the outstanding HCI Common Stock (or, if the Warrants have not
been exercised, beneficially owns at least a majority of the outstanding HCI
Preferred Stock), HCI agrees to renominate such designee, or to nominate an
alternative person selected by the Investor, for election as a director of HCI.
Such designee or alternative person selected by
-2-
<PAGE>
the Investor to serve as director of HCI will be Timothy S. O' Toole or such
other person as may be reasonably acceptable to HCI. As long as this Agreement
is in effect, Chemed and the Investor agree not to seek or accept the election
or appointment of more than one designee of the Investor as director of HCI,
except as set forth in Section 1(c) hereof or as otherwise agreed to in writing
by Chemed, the Investor and HCI.
(b) In the event that the Investor shall cease to beneficially own at
least 10 percent of the outstanding HCI Common Stock (or, if the Warrants have
not been exercised, cease to beneficially own at least a majority of the
outstanding HCI Preferred Stock), the Investor, if requested by a majority of
the other directors of HCI excluding the Investor's designee, will cause its
designee on the Board of Directors of HCI promptly to resign as director.
(c) It is understood and agreed that HCI contemplates the appointment
or election of another non-employee director to its Board of Directors as soon
as practicable after the closing of the Preferred Stock Agreement and other
transactions expected to occur at or about the same time, which would thereby
increase the size of the Board of Directors of HCI to nine. As long as this
Agreement is in effect and the Investor beneficially owns at least 10 percent of
the outstanding HCI Common Stock, HCI agrees that Investor's designees will
constitute no less than one ninth (1/9) of the entire HCI Board of Directors
(rounded up to the nearest full number); provided, however, that as long as the
HCI Board of Directors is comprised of ten or fewer directors, the Investor
shall be entitled to only one designee.
-3-
<PAGE>
2. Restriction on Acquisitions of HCI Common Stock.
As long as this Agreement is in effect, Chemed and the Investor, on behalf of
themselves and their affiliates and associates, individually and collectively,
agree not to, directly or indirectly, through one or more transactions or acting
in concert with one or more persons or companies or otherwise, offer to acquire
or acquire any HCI Common Stock (other than the Warrant Shares), except with the
prior written approval of HCI's Board of Directors. The foregoing restriction
shall also cover any agreement, arrangement, understanding, right or option to
acquire shares of HCI Common Stock (other than the Warrant Shares).
Notwithstanding the foregoing, in the event that the Investor ceases to
beneficially own at least 20 percent of HCI Common Stock at any time during the
term of this Agreement as a result of any action taken by HCI, the Investor
shall be entitled to acquire additional HCI Common Stock without the prior
approval of HCI in the open market or in private transactions so as to maintain
its beneficial ownership level at up to 20 percent provided that the Investor
shall not exceed such 20 percent interest without HCI's prior written approval.
3. Restrictions on Dispositions of HCI Preferred Stock, Warrants and
Shares.
(a) The Investor acknowledges and agrees that by its terms, the HCI
Preferred Stock is nontransferable without the prior written approval of the
Company. The Investor also acknowledges and agrees that, except as permitted
under paragraph 14, the Warrants are nontransferable without the prior written
approval of the Company. Subject to
-4-
<PAGE>
the terms and conditions of this Agreement, the Investor agrees that until the
earlier of (i) December 17, 1993 or (ii) such date that is six months (or such
other period of time as determined by the underwriters for such Offering to be
appropriate) after the closing of a Qualified Initial Public Offering (as
defined below), if any, by HCI, the Investor will not sell, hypothecate,
transfer or dispose (or agree to sell, hypothecate, transfer or dispose) of the
Warrant Shares or any other shares of HCI Common Stock hereafter acquired by the
Investor without the prior written approval of HCI; provided, however, that it
is understood and agreed that the foregoing time limitation in clause (a)(i)
above shall not apply at such time as (i) there has been a material adverse
change in the consolidated financial condition, results of operation or business
of HCI after the date hereof; (ii) there has been a "change in control of HCI"
(as defined below); or (iii) the Investor shall be entitled to have its HCI
Common Stock registered under that certain Registration Agreement dated as of
December __, 1991 among HCI, the Investor and Chemed. For purposes of this
Agreement, a "Qualified Initial Public Offering" means a public offering of HCI
Common Stock which (i) results in gross proceeds to HCI from such offering in an
amount not less than $12 million, and (ii) results in a market capitalization of
the common equity of HCI of at least $60 million; and a "change in control of
HCI" shall be deemed to have taken place if after the date hereof (i) any person
(excluding Hugh A. Westbrook) becomes a beneficial owner of 50% or more of the
total number of outstanding shares of HCI Common Stock; (ii) any liquidation of
HCI, sale of all or substantially all of the Company's assets or other similar
extraordinary corporate transaction shall have occurred; or (iii) as a result
of, or in connection with, any cash tender or exchange
-5-
<PAGE>
offer, merger or other business combination, or contested election, the persons
who were directors of HCI before such transaction shall cease to constitute at
least a majority of the Board of Directors of the Company.
(b) Notwithstanding any other provisions in this Agreement but subject
to the provisions of paragraph 14 hereof, until completion of a Qualified
Initial Public Offering the Investor will not sell, hypothecate, transfer or
dispose (or agree to sell, hypothecate, transfer or dispose) of the Warrants,
Warrant Shares and any other shares of HCI Common Stock hereafter acquired by
the Investor, in one private transaction or a series of private transactions (a
"Proposed Sale Transaction") unless HCI or its designee is first given an
opportunity to acquire such Warrants, Warrant Shares and any such shares of HCI
Common Stock hereafter acquired by the Investor during the period of 90 days
after HCI receives written notice from the Investor of the Proposed Sale
Transaction or agreement evidencing such Transaction on the same terms and
conditions as the Proposed Sale Transaction. Such notice shall include the
identity of the potential purchaser, the number of Warrants, Warrant Shares or
other shares of HCI Common Stock proposed to be sold, hypothecated, transferred
or disposed of, and the material terms of such Proposed Sale Transaction,
including (if applicable) the price and form of consideration to be paid. In the
event HCI or its designee does not purchase the Warrants, Warrant Shares or
shares of HCI Common Stock proposed to be included in the Proposed Sale
Transaction within such 90-day period, then, subject to compliance by the
Investor with applicable federal and state securities laws and the terms of this
Agreement, (including, if applicable, compliance with Section
-6-
<PAGE>
3(c)), the Investor shall be permitted to sell, hypothecate or dispose (at the
same or higher price) of such Warrants, Warrant Shares or HCI Common Stock to
such proposed purchaser or transferee; provided, however, that if such Warrants,
Warrant Shares or HCI Common Stock are not sold or transferred by the Investor
to such proposed purchaser or transferee within 60 days after the end of such
90-day period, then HCI or its designee shall continue to be entitled to one or
more further rights of first refusal as described above; and provided, further,
that as a condition to any sale, hypothecation, transfer or disposition, the
Investor shall take steps to ensure that the proposed transferee becomes bound
by and subject to the provisions of this Agreement as evidenced by the execution
and delivery by such proposed transferee as a condition precedent to such
transfer of a counterpart to this Agreement to which the proposed transferee
will become an additional party. HCI in its sole discretion may assign its
rights of first refusal to any person or entity so designated by HCI. Subject to
paragraph 14, in the event of a Payment Default (as hereafter defined), the
90-day period referred to herein shall be 45 days during such time that such
Payment Default has not been cured; provided, however, that with respect to a
Proposed Sale Transaction of which HCI receives notice at a time when a Payment
Default exists, the 90-day period referred to herein shall be in any event 45
days.
(c) Notwithstanding any other provision hereof but subject to the
provisions of paragraph 14, until completion of a Qualified Initial Public
Offering, the Investor agrees not to sell, hypothecate, transfer or dispose (or
agree to sell, hypothecate, transfer or dispose) of the Warrant Shares or any
other shares of HCI Common Stock
-7-
<PAGE>
hereafter acquired by the Investor to any person or entity without the prior
written approval of HCI, which approval shall not be unreasonably withheld.
(d) In the event HCI completes a Qualified Initial Public Offering for
the shares of HCI Common Stock, Chemed and the Investor agree as follows with
respect to any sale, hypothecation, transfer or other disposition of Warrant
Shares or any other shares of HCI Common Stock beneficially owned by Chemed, the
Investor, their affiliates and associates:
(i) Open Market Sales. Open market sales of Warrant Shares or any
other HCI Common Stock may only be made pursuant to an effective
registration statement under the Securities Act of 1933 or pursuant to an
available exemption from registration as evidenced by a written opinion
from Investor's counsel, which counsel shall be experienced in securities
law matters and which opinion shall be reasonably satisfactory in form and
substance to HCI and its counsel.
(ii) Overall Limitation on Dispositions. Except as provided in
paragraph (iii) below, Chemed and the Investor, each on behalf of itself
and its affiliates and associates, will not knowingly offer, sell or
transfer any Warrant Shares or any other shares of the HCI Common Stock
beneficially owned by them to any person or company who then or, as a
result of such sale or transfer, would, directly or indirectly,
beneficially own, control or hold proxies or options for five percent or
more of the outstanding HCI Common Stock
-8-
<PAGE>
except with the prior written approval of HCI unless prior thereto, HCI or
its designee is first given an opportunity to acquire such shares on the
same terms and conditions as set forth in paragraph 3(b) above except that
the 90-day period provided for in paragraph 3(b) shall be 45 days for
purposes of this paragraph (ii). In sales other than in the open market,
the Investor, on behalf of itself and its affiliates and associates, shall
obtain appropriate representations from each purchaser as to compliance
with this five percent limitation.
(iii) Sales Pursuant to Tender Offers. Chemed and the Investor, each
on behalf of itself and its affiliates and associates, shall be entitled to
participate without restriction in any tender or exchange offer made to all
stockholders of HCI; provided, however, that if such tender or exchange
offer is one which the HCI Board of Directors opposes, the Investor agrees
that no HCI Common Stock beneficially owned by Chemed and the Investor, or
any of its respective affiliates or associates, will be tendered unless 50
percent of all outstanding shares of HCI Common Stock (which for the
purpose of this calculation shall include all shares beneficially owned by
the bidder) have previously been tendered by stockholders other than
Chemed, the Investor, and their respective affiliates and associates, and
that, in such event, no tender or indication or arrangement to tender any
of the HCI Common Stock beneficially owned by them may be made until 48
hours prior to the scheduled expiration of the tender or exchange offer.
-9-
<PAGE>
4. Repurchase of HCI Preferred Stock. In the event of a change in control
of Chemed and/or the Investor as defined in Section 5 hereof, the Investor
hereby agrees, upon at least 15 days' prior written notice and subject to
appropriate documentation and compliance with all applicable legal requirements,
to sell and deliver to any designee of HCI all or a portion of the shares of HCI
Preferred Stock which such designee wishes to acquire so long as such designee
tenders to the Investor the same price that the Investor would receive if HCI
were to redeem at the option of HCI such shares pursuant to Section 3 of the
Certificate of Designation, Preferences and Other Rights to HCI's Certificate of
Incorporation.
5. Change in Control of Chemed and/or the Investor.
In the event of a "change in control of Chemed and/or the Investor" (as defined
below) during the term of this Agreement, HCI or its designee shall have the
right to repurchase the Warrants, the Warrant Shares and/or the HCI Common Stock
then owned by Chemed and the Investor, and Chemed and the Investor hereby grant
HCI or its designee such right and agree to sell the Warrants, the Warrant
Shares and/or the HCI Common Stock pursuant to the exercise of such right, on
the following terms and conditions:
(i) The repurchase price for the Warrants shall be an amount equal to the
product of (x) the aggregate exercise price of all Warrants which remain
unexercised at the date of repurchase; (y) 1%; and (z) the number of full
months elapsed from the date of this Agreement to the date of repurchase;
provided, however, that in no event shall such repurchase price exceed the
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<PAGE>
difference (if any) between (A) the aggregate Fair Market Value of the HCI
Common Stock covered by the Warrants to be repurchased minus (B) the
aggregate exercise price of such Warrants.
(ii) The repurchase price for the HCI Common Stock shall be an amount equal
to the product of (x) the purchase price paid by Chemed and/or the Investor
for such HCI Common Stock; (y) 1%; and (z) the number of full months
elapsed from the date of this Agreement to the date of repurchase;
provided, however, that in no event shall such repurchase price exceed the
aggregate Fair Market Value of such HCI Common Stock.
(iii) For purposes of (i) and (ii) above, the Fair Market Value of the HCI
Common Stock, if shares of HCI Common Stock are publicly traded, shall mean
the average of the Current Market Prices (as hereinafter defined) of such
shares for each day of the Adjustment Period (as hereinafter defined).
"Current Market Price" of publicly traded shares of HCI Common Stock for a
day shall mean the last reported sales price, regular way, or, in case no
sale takes place on such day, the average reported closing bid and asked
prices, regular way, in either case as reported on the New York Stock
Exchange Composite Tape or, if such shares are not listed or admitted to
trading on any national securities exchange, on the NASDAQ National Market
System or, if such shares are not
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<PAGE>
quoted on such National Market System, the average of the closing bid and
asked prices on each such day in the over-the-counter market as reported by
NASDAQ, or, if bid and asked prices for such shares on each such day shall
not have been reported through NASDAQ, the average of the bid and asked
prices for such day as furnished by any New York Stock Exchange member firm
regularly making a market in such shares selected for such purpose by the
Board of Directors of the Company on each trading day during the Adjustment
Period. "Adjustment Period" shall mean the period of five (5) consecutive
trading days, selected by the Board of Directors of the Company in its sole
discretion, during the twenty (20) trading days preceding, and including,
the date as of which the Fair Market Value of such shares is to be
determined. The Fair Market Value of HCI Common Stock which is not publicly
traded shall mean the fair market value thereof as determined in good faith
by the Board of Directors of the Company in its sole discretion.
For purposes of this Section 5, a "change in control of Chemed and/or the
Investor" shall be deemed to have taken place if after the date hereof (i) any
person not now such a beneficial owner becomes a beneficial owner of 50% of more
of the total number of voting shares of capital stock of Chemed and/or the
Investor; (ii) any person (other than the persons named as proxies solicited on
behalf of the Board of Directors of Chemed) holds revocable or irrevocable
proxies, as to the election or removal of more than one third of the
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<PAGE>
entire Board of Directors of Chemed, for 50% or more of a total number of voting
shares of capital stock of Chemed; (iii) for any reason, the Board of Directors
of Chemed and/or the Investor (but, in the case of the Investor, only if the
Investor is no longer affiliated with Chemed) is comprised of persons a majority
of whom have not served on such Board of Directors of Chemed and/or the Investor
during the immediately preceding two year period; or (iv) any liquidation of
Chemed and/or the Investor, sale of all or substantially all of Chemed's assets
or other similar extraordinary corporate transaction shall have occurred, which
liquidation, sale or other similar transactions results in the persons who were
directors of Chemed and/or the Investor before such transaction ceasing to
constitute at least a majority of the Board of Directors of Chemed and/or the
Investor. HCI of its designee may exercise its rights under this Paragraph 5
after a change in control of Chemed and/or the Investor shall have occurred by
(i) providing written notice to the Investor no later than 30 days after
ascertaining that a change in control of Chemed and/or the Investor has occurred
of its intention to exercise its rights hereunder and (ii) consummating the
purchase of the Warrants, Warrant Shares and/or HCI Common Stock, as the case
may be, specified in the aforesaid notice, within 90 days after such notice is
given.
6. Representations of Chemed and the Investor. Chemed and the Investor
represent and warrant as follows:
(a) Chemed and the Investor have the requisite power and authority to
enter into this Agreement, and that this Agreement is a valid, binding and
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<PAGE>
enforceable obligation of Chemed and the Investor enforceable in accordance
with its terms, except as (i) the enforceability thereof may be limited by
bankruptcy, reorganization, insolvency or similar laws affecting the
enforcement of creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(b) The statements contained in this Agreement, pertaining to Chemed
and the Investor are true and correct in all respects.
7. Representation of HCI. HCI represents and warrants that it has the power
and authority to enter into this Agreement and this Agreement is a valid,
binding and enforceable obligation of HCI, enforceable in accordance with its
terms, except as (i) the enforceability thereof may be limited by bankruptcy,
reorganization, insolvency or similar laws affecting the enforcement of
creditors' rights generally and (ii) the availability of equitable remedies may
be limited by equitable principles of general applicability.
8. Additional Covenants of the Investor. The Investor agrees that for as
long as the Investor and its affiliates and associates beneficially own at least
five percent of the outstanding HCI Common Stock and no change in control of HCI
(as defined in Section 3(a) hereof) has occurred, without the prior written
approval of HCI's Board of Directors, neither Chemed or the Investor nor any of
their affiliates or associates will (i) call a special
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<PAGE>
meeting of stockholders other than a special meeting of stockholders, the call
of which is supported by HCI's board of directors; (ii) institute, encourage or
participate in any proxy solicitation with respect to any matter submitted or
proposed to be submitted to a vote of HCI stockholders; provided, however, that
it is understood and agreed that this subparagraph shall not limit in any manner
the ability of the Investor to vote its shares of HCI Common Stock; (iii)
announce, publicly propose or solicit any person or company to acquire, offer to
acquire or agree to acquire, by merger, tender offer, purchase or otherwise, HCI
or a substantial portion of its assets or more than ten percent of HCI Common
Stock; (iv) have or seek to have any designee of Chemed and/or the Investor
serve as the Chairman of the Board of Directors of HCI; (v) propose a director
or directors in opposition to the nominees proposed by the management of HCI or
the Board of Directors of HCI, other than as permitted in this Agreement; or
(vi) except as necessary or advisable solely in connection with the performance
of duties by the Investor's designee as a member of HCI's Board of Directors,
exercise or attempt to exercise, directly or indirectly, control or controlling
influence over the management, policies or business operations of HCI. The
Investor further agrees that the Investor, its affiliates and associates will
not act in concert with any person or entity or assist, and or abet any
affiliate or associate to act, or act in concert, with any person or entity, in
a manner which is inconsistent with the terms hereof or which attempts to evade
any provision or requirement of this Agreement.
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<PAGE>
9. Injunctive and Other Relief. The parties hereto agree that in the event
either HCI, on the one hand, and Chemed or the Investor, on the other hand,
breaches or threatens to breach this Agreement, the other will be irreparably
harmed and will be entitled to injunctive relief and specific enforcement
(without proof of actual damage) in addition to any other legal rights which it
or they may have.
10. Termination. This Agreement shall terminate (i) if after the issuance
by HCI to the Investor of the HCI Preferred Stock and Warrants, the Investor and
its respective affiliates and associates, cease to be the beneficial owners of
more than ten percent of the outstanding shares of HCI Common Stock for a period
of six months, or (ii) upon mutual written agreement by HCI, Chemed and the
Investor.
11. Definitions. For purposes of this Agreement, the term "beneficial
ownership" shall have the meaning ascribed to such term in Rule 13d-3 under the
1934 Act, the terms "associate", "affiliate", and "control" shall have the
meanings ascribed to such terms in Rule 12b-2 under the 1934 Act. The percentage
of outstanding shares of the HCI Common Stock beneficially owned by the Investor
shall be calculated hereunder in accordance with the provisions of Rule 13d-3(d)
under the 1934 Act.
12. Entire Agreement; Modification. This Agreement, the Preferred Stock
Agreement (including all exhibits and schedules thereto), the Registration
Agreement dated
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<PAGE>
December __, 1991 (the "Registration Agreement") and the letter agreement dated
July 23, 1991 between Chemed and Furman Selz Incorporated related to
confidentiality (the "Confidentiality Agreement") set forth the entire agreement
and understanding between the parties hereto with respect to the subject matter
hereof and the purchase of the HCI Securities and merges and supersedes any and
all prior discussions, agreements, and understandings between or among them with
respect thereto, and no party shall be bound by any condition, definition,
warranty or representation, other than those expressly set forth or provided for
in this Agreement, the Preferred Stock Agreement, the Registration Agreement and
the Confidentiality Agreement or in any document or instrument delivered
pursuant to such agreements, or as may be set forth in writing and signed by the
party or parties to be bound thereby on or subsequent to the date hereof. This
Agreement may not be changed or modified, except by an agreement in writing
executed by HCI, Chemed and the Investor. This Agreement, and the rights and
obligations hereunder, may not be assigned to any person or entity except as
otherwise specifically permitted herein.
13. Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by Delaware law (excluding the choice of law
provisions).
14. Certain Default Provisions. In the event HCI defaults in any obligation
to pay dividends on the HCI Preferred Stock or to make any mandatory redemption
payment
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<PAGE>
in accordance with the terms of the Certificate of Designation relating to the
HCI Preferred Stock (a "Payment Default") and such Payment Default remains
uncured for five business days after the date of such Payment Default, during
the time that such Payment Default continues the following provisions of this
Agreement shall be suspended and shall not be operative:
(i) the restrictions imposed on dispositions of Warrants, Warrant
Shares and any other shares of HCI Common Stock beneficially owned by the
Investor imposed under paragraph 3(a) hereof;
(ii) the provisions of paragraph 3(b) if such Payment Default
continues for more than 120 days;
(iii) the provisions of paragraph 3(c);
(iv) the provisions of paragraph 3(d)(ii) and 3(d)(iii); and
(v) the provisions of paragraph 8.
Such provisions shall immediately again become operative at such time as the
Payment Default has been cured.
15. Counterparts. This Agreement may be executed in one or more
counterparts.
16. Severability. If any provision contained in this Agreement operates or
would operate prospectively to invalidate this Agreement in whole or in part,
then only such
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<PAGE>
provision shall be held ineffective as though not herein contained and the
remainder of this Agreement shall remain operative and in full force and effect.
If any provision contained in this Agreement is invalidated, the parties hereto
will use their best efforts to adopt an appropriate substitute for the
invalidated provision consistent with the intent of the parties.
17. Binding Effect of Agreement. The terms of this Agreement shall be
binding on and inure to the benefit of the parties hereto and their respective
subsidiaries, parents or other affiliated entities, successors, agents,
representatives and permitted assigns.
18. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or certified or registered mail, return receipt requested, to
the addresses set forth below the signatures of the respective parties hereto.
In the case of communications to Chemed and the Investor, to Chemed Corporation,
2600 Chemed Center, 225 E. Fifth Street, Cincinnati, OH 45202, and a copy (which
shall not constitute notice) shall be delivered concurrently to Dinsmore &
Shohl, 1900 Chemed Center, 225 E. Fifth Street, Suite 16, Cincinnati, OH
45202-3172, Attention: Clifford A. Roe, Esq. In the case of communications to
HCI, to Hospice Care Incorporated, Suite 1500, 100 South Biscayne Boulevard,
Miami, Fl 33131 and a copy (which shall not constitute notice) shall be
delivered concurrently to Hogan & Hartson; 555 Thirteenth Street, N.W.;
Washington, D.C. 20004, Attention: Robert J. Waldman, Esq.
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<PAGE>
19. Headings. The headings in the sections of this Agreement are inserted
for convenience only and shall not constitute a part hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
HOSPICE CARE INCORPORATED CHEMED CORPORATION
By: /s/ Earl M. Collier, Jr. By: /s/ Thomas C. Hutton
-------------------------------- ----------------------------
President Vice President
OCR HOLDING COMPANY
By: /s/ [Signature Illegible]
----------------------------
Vice President
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<PAGE>
EXHIBIT 4.5
================================================================================
STOCKHOLDERS' AGREEMENT
AMONG
VITAS HEALTHCARE CORPORATION,
HUGH A. WESTBROOK,
CAROLE S. WESTBROOK
AND
THE INVESTORS IDENTIFIED HEREIN
-------------------------------
June 4, 1993
-------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - BOARD OF DIRECTORS ......................................... 2
1.1 Designees of Investors ..................................... 2
1.1.1 Principal Investors of Investor Group Each
Entitled to Designate One Director .................. 2
1.1.2 Certain Resignations or Removals .................... 2
1.1.3 Filling Vacancies ................................... 3
1.1.4 Notice of Meetings; Expenses ........................ 3
1.2 Covenant to Vote ........................................... 3
1.3 No Voting or Conflicting Agreements ........................ 4
1.4 Actions Consistent with Agreement .......................... 4
ARTICLE II - LIMITATION OF CONVERSION SHARES VOTING POWER .............. 4
Limitation of Voting Power ....................................... 4
a. Definitions ................................................ 4
i. Voting Percentage .................................... 5
ii. Total Common Votes ................................... 6
iii. Total Conversion Share Common Votes .................. 6
b. Application of Restrictions ................................ 6
ARTICLE III - RESTRICTIONS ON TRANSFERS AND ISSUANCES OF STOCK ......... 6
3.1 General Prohibition on Transfers by Investors ............... 6
3.1.1 Transfers in Accordance with Agreement ............ 6
3.1.2 Transferee to Execute a Counterpart of this
Agreement ......................................... 6
3.1.3 Legend on Stock Certificate ....................... 6
3.2 Compliance with Securities Laws ............................. 7
3.3 Permitted Transfers ......................................... 7
3.4 Right of First Refusal ...................................... 8
3.5 Investor Group's Right to Purchase .......................... 9
3.5.1 Company Notice .................................... 9
3.5.2 Designation of Investor Group as Designee ......... 10
3.5.3 Allocation of Right to Purchase ................... 11
3.5.3.1 Notice of Final Allocation of
Investor First Refusal Shares ............ 12
3.5.4 Seller's Right to Transfer ....................... 12
3.5.5 First Refusal Shares Other Than Investor
First Refusal Shares .............................. 12
3.5.6 Representations and Covenant of the
Company ........................................... 12
3.5.6.1 Representations .......................... 12
3.5.6.2 Covenants ................................ 13
3.6 Sales of Restricted Stock .................................. 13
3.6.1 "Tag Along" Rights ................................ 14
3.6.1.1 Delivery of Investor Purchase Offer ...... 14
3.6.1.2 Reduction in Offered Shares .............. 15
3.6.1.3 Failure to Consummate Transfer ........... 15
(i)
<PAGE>
3.6.1.4 Right to Abandon Transfer ................ 16
3.6.1.5 Provisions Inapplicable to Section
3.5 Transfers ............................ 16
3.6.1.6 Closing of Purchase ...................... 17
3.6.2 Definition ........................................ 17
3.7 Form of Consideration for Stock ............................ 17
3.8 Merger Transaction ......................................... 17
3.9 Issuance of New Securities ................................. 18
3.9.1 Definitions ....................................... 18
3.9.2 Notice ............................................ 19
3.9.3 Closing ........................................... 19
3.10 Conflict ................................................... 19
3.11 Agreement on File .......................................... 20
ARTICLE IV - INFORMATION RIGHTS ........................................ 20
4.1 Investor Financial Information ............................. 20
4.1.1 Quarterly Statements .............................. 20
4.1.2 Annual Statements ................................. 20
4.1.3 Other Reports ..................................... 20
4.2 Director Materials ......................................... 21
4.2.1 Monthly Financial Statements ...................... 21
4.2.2 Business Plan; Projections ........................ 21
4.2.3 Audit Reports ..................................... 21
4.2.4 Requested Information ............................. 21
ARTICLE V - REPRESENTATIONS, WARRANTIES AND ADDITIONAL
COVENANTS .................................................. 21
5.1 Representations of the Investors ........................... 21
5.2 Representation of the Company .............................. 22
5.3 Additional Covenants of the Investors ...................... 22
ARTICLE VI - MISCELLANEOUS ............................................. 23
6.1 Term ....................................................... 23
6.2 Injunctive Relief .......................................... 23
6.3 Notices .................................................... 23
6.4 Successors and Assigns ..................................... 24
6.5 Governing Law .............................................. 24
6.6 Headings; Schedules ........................................ 24
6.7 Gender; Number ............................................. 25
6.8 Entire Agreement; Modification ............................. 25
6.9 Certain Definitions ........................................ 25
6.10 Counterparts ............................................... 25
SCHEDULE A ............................................................. 30
SCHEDULE B ............................................................. 31
SCHEDULE 1 ............................................................. 32
SCHEDULE 2 ............................................................. 33
(ii)
<PAGE>
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT (the "Agreement") is dated June 4, 1993 by
and among VITAS HEALTHCARE CORPORATION, a Delaware corporation (the "Company"),
HUGH A. WESTBROOK, a resident of the State of Florida ("Westbrook"), CAROLE S.
WESTBROOK, a resident of the State of Florida ("Carole Westbrook"), and the
INVESTORS identified on Schedule A attached hereto (individually, an "Investor"
and collectively, the "Investors" or the "Investor Group"). This Agreement shall
become effective on the date of, and simultaneously with, the closing of the
transactions under the Stock Purchase Agreement (as defined below) (the "Closing
Date").
R E C I T A L S
A. The Company is, as of the date hereof, issuing to the Investor Group,
subject to the terms and conditions of a Preferred Stock Purchase Agreement of
even date herewith (the "Stock Purchase Agreement"), 262,500 shares of the
Company's Series B Convertible Preferred Stock, par value $1.00 per share (the
"Series B Preferred Stock")
B. The Series B Preferred Stock may be converted into shares of the
Company's common stock, par value $.001 per share ("Common Stock") (the shares
of Common Stock issued and issuable upon conversion of the Series B Preferred
Stock are referred to herein as "Conversion Shares"). The Investor Group has
agreed to restrict the voting of certain voting securities of the Company as
provided herein and in the Certificate of Designation, Preferences and Other
Rights of the Series B Preferred Stock, and to restrict the sale or other
disposition of certain voting securities of the Company as provided herein.
C. Westbrook is one of the Company's co-founders, directors and executive
officers, and Westbrook and Carole Westbrook are among the principal
stockholders of the Company (Westbrook and Carole Westbrook are referred to
herein as the "Principal Stockholders"). The Principal Stockholders have agreed
to restrict the sale or other disposition of capital stock of the Company owned
or hereafter acquired by them as provided herein.
In consideration of the premises and of the terms and conditions herein
contained, the parties hereto mutually agree as follows:
<PAGE>
ARTICLE I
BOARD OF DIRECTORS
1.1 Designees of Investors.
1.1.1 Principal Investors of Investor Group Each Entitled to
Designate One Director. Concurrently with the closing of the Stock Purchase
Agreement, one designee of Galen Partners II, L.P. and Galen Partners
International II, L.P. (together "Galen") and one designee of Warburg, Pincus
Investors, L.P. ("Warburg Pincus", together with Galen, the "Principal
Investors"), on behalf of the Investor Group, shall each be appointed as
directors of the Company, one in Class II, the directors of which have terms
expiring in 1995, and one in Class III, the directors of which have terms
expiring in 1993. The Board of Directors of the Company (the "Board") shall take
appropriate action in accordance with the Company's By-Laws to increase the
number of directors constituting the entire Board and to create new
directorships to permit the appointment of such designees to the Board by
filling such newly created directorships as provided in this Section 1.1.1. As
long as this Agreement is in effect and provided each of the Principal Investors
has voting power through its ownership of voting securities of the Company
("Voting Power") equal to at least 5 percent of the total votes entitled to be
cast at meetings of the Company's stockholders when all classes are voting
together and not as individual classes (the "Outstanding Votes"), the holders of
a majority of the outstanding shares of Series B Preferred Stock shall be
entitled to vote for and elect both of such designees (provided, that if one of
the Principal Investors has Voting Power equal to 5% of the Outstanding Votes
and the other Principal Investor has Voting Power of less than 5% of the
Outstanding Votes, a majority of the outstanding shares of Series B Preferred
Stock shall be entitled to elect only the designee of the Principal Investor
with Voting Power equal to 5% of the Outstanding Votes), or to elect an
alternative person or persons selected by such Principal Investors, as directors
of the Company. Galen's designee to serve as director of the Company will be
Bruce F. Wesson and Warburg Pincus's designee will be Patrick Hackett or, in
each case, such other persons as may be reasonably acceptable to the Company.
1.1.2 Certain Resignations or Removals. In the event that any
director would not continue to be entitled to be elected a director pursuant to
Section 1.1.1, the Investor Group, if requested by a majority of the other
directors of the Company excluding the Investor Group's designees, will cause
any such designee on the Board promptly to resign. The Investor Group, acting by
majority of the then outstanding shares of Series B Preferred Stock, shall at
all times have the right to remove with or without cause, a director designated
by the Principal Investors.
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<PAGE>
If such director shall fail to resign as required by the first sentence of this
Section 1.1.2, the Company may cause a special meeting of the holders of Series
B Preferred Stock to be called for the purpose of removing such director and the
Investor Group shall vote all shares of Series B Preferred Stock over which each
Investor has voting power entitled to vote at such meeting in favor of removal.
1.1.3 Filling Vacancies. In the event of the death, removal or
resignation (other than a resignation pursuant to Section 1.1.2) of any director
elected in accordance with Section 1.1.1, at the written request of the
Principal Investor which designated such director or holders of a majority of
the outstanding shares of Series B Preferred Stock, unless the Board shall have
previously filled such vacancy with a director selected in accordance with
Section 1.1.1, the Company shall call a special meeting of the holders of Series
B Preferred Stock for the purpose of electing the director selected in
accordance with Section 1.1.1 to fill the vacancy created by such death, removal
or resignation.
1.1.4 Notice of Meetings; Expenses. Notice shall be given to each
member of the Board prior to any meeting of the Board in accordance with the
Company's By-Laws. To the extent permitted by Company policy, the Company shall
reimburse each member of the Board for the reasonable out-of-pocket expenses,
including, without limitation, travel and lodging expenses, incurred by him in
attending any meeting of the Board. The parties hereto acknowledge that the
Company's existing policy permits such reimbursement, and there is no present
intention on the part of the Company to change such policy.
1.2 Covenant to Vote. Each Investor shall appear in person or by proxy at
any annual or special meeting of stockholders of the Company called for the
purpose of voting on the election or removal of any director and shall vote (a)
the shares of Series B Preferred Stock held by such Investor at such meeting in
favor of (i) the election of the directors designated in accordance with Section
1.1.1, (ii) the removal of directors in accordance with Section 1.1.2, (iii) the
election of directors to fill vacancies in accordance with Section 1.1.3., and
(b) the shares of Series B Preferred Stock, the Conversion Shares and any shares
of any other voting securities of the Company held by such Investor at such
meeting in favor of the election of directors nominated by management of the
Company or the Board consistent with the terms of this Agreement, provided that
the Investors shall be obligated to appear in person or by proxy and vote as
provided in this clause (b) only for as long as the Investor Group has Voting
Power of less than fifty-one percent (51%) of the Outstanding Votes. Any action
required to be taken by the Investors as stockholders of the
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<PAGE>
Company pursuant to this Article I may be effected by written consent in
accordance with applicable Delaware law.
1.3 No Voting or Conflicting Agreements. After the date hereof, no
Investor shall grant any proxy, or enter into, or agree to be bound by, any
voting trust with respect to the voting of any voting securities of the Company
held by such Investor, nor shall any Investor enter into any shareholder
agreements or arrangements of any kind with any person with respect to the
voting of any voting securities of the Company held by such Investor
inconsistent with the provisions of this Article I (whether or not such
agreements and arrangements are with other stockholders of the Company that are
not parties to this Agreement). No Investor shall act, for any reason, as a
member of a group or in concert with any other persons in connection with the
voting of shares of voting securities of the Company in any manner which is
inconsistent with the provisions of this Article I.
1.4 Actions Consistent with Agreement. The Company and the Board shall not
circumvent this Agreement by taking any action through a subsidiary that would
be prohibited under this Agreement if taken directly by the Company.
ARTICLE II
LIMITATION OF CONVERSION SHARES VOTING POWER
2.1 Limitation of Voting Power. Notwithstanding the number of votes to
which the holders of Issued Conversion Shares (as defined below) may otherwise
be entitled, each Investor holding shares of Common Stock issued upon conversion
of shares of Series B Preferred Stock ("Issued Conversion Shares") shall be
entitled to vote on all matters together with the holders of shares of Common
Stock and in so voting shall be entitled to exercise Voting Power equal to the
Total Conversion Share Common Votes (as defined below) allocated to each
Investor ratably on the basis of the number of Issued Conversion Shares held by
each Investor in proportion to the total number of Issued Conversion Shares
outstanding on the record date for the determination of stockholders entitled to
vote on such matters. The remaining votes attributable to the Issued Conversion
Shares in excess of the Total Conversion Share Common Votes shall be voted on
such matters pro rata based on the total votes cast on such matters, excluding
Total Conversion Share Common Votes.
a. Definitions. For purposes of this Article II, the following definitions
shall apply:
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<PAGE>
i. Voting Percentage. "Voting Percentage" shall mean a fraction, the
numerator of which is the sum of (a) the number of Issued Conversion Shares
outstanding on such record date (after giving effect to proportionate
adjustments for stock splits, subdivisions and the like) plus (b) the number of
shares of Common Stock into which the shares of Series B Preferred Stock could
be converted on such record date, and the denominator of which is the sum of (a)
the number of shares of Common Stock (including Issued Conversion Shares)
outstanding on such record date plus (b) the number of shares of Common Stock
into which the shares of Series B Preferred Stock could be converted on such
record date plus (c) the number of shares of Common Stock issuable upon the
conversion or exchange of all securities convertible into or exchangeable for
shares of Common Stock (other than Series B Preferred Stock) and upon the
exercise of all options, rights or warrants to purchase shares of Common Stock
outstanding on such record date (the "Voting Percentage Denominator"); provided,
however, that if on such record date the Voting Percentage Denominator is less
than 18,826,634 (as adjusted for stock splits, subdivisions and the like), the
Voting Percentage shall be calculated using a Voting Percentage Denominator
equal to (1) the sum of (x) 18,826,634 (as adjusted for stock splits,
subdivisions and the like) plus (y) the number of shares of Common Stock
issued after the date hereof, if any, plus (z) the number of shares of Common
Stock issuable upon the conversion or exchange of all securities convertible
into or exchangeable for shares of Common Stock issued after the date hereof, if
any, and upon the exercise of all options, rights or warrants to purchase shares
of Common Stock issued after the date hereof, if any, minus (2) the sum of (w)
the number of outstanding shares of Common Stock repurchased or redeemed by the
Company after the date hereof, if any, plus (x) the number of shares of Common
Stock issuable upon the exercise of any of the common stock purchase warrants
issued in connection with the issuance of the 9.0% Cumulative Nonconvertible
Preferred Stock of the Company that have expired or have been cancelled or
repurchased by the Company after the date hereof, if any, plus (y) the number of
shares of Common Stock issuable upon conversion or exchange of any securities
convertible or exchangeable for shares of Common Stock issued after the date
hereof that have expired or have been cancelled or repurchased by the Company
after the date hereof, if any, and upon the exercise of options, rights or
warrants to purchase Common Stock issued after the date hereof that have expired
or have been cancelled or repurchased by the Company after the date hereof, if
any, plus (z) the number of shares of Series B Preferred Stock cancelled
pursuant to the terms of the Stock Purchase Agreement, if any. The Voting
Percentage calculated as of the date hereof is 29.354%.
ii. Total Common Votes. "Total Common Votes" shall mean a fraction,
the numerator of which is the number of Issued Conversion Shares outstanding on
such record date (after giving effect to proportionate adjustments for stock
splits, subdivisions
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and the like), and the denominator of which is equal to one (1) minus the Voting
Percentage.
iii. Total Conversion Share Common Votes. "Total Conversion Share
Common Votes" shall mean the Total Common Votes multiplied by the Voting
Percentage.
b. Application of Restrictions. The obligations of the Investors contained
in this Article II shall apply only to the Issued Conversion Shares held by the
Investors and shall not apply to the shares of the Series B Preferred Stock
(which are subject to and governed by the Certificate of Designation,
Preferences and Other Rights of the Series B Preferred Stock) or to any other
voting securities of the Company acquired by the Investors after the date
hereof.
ARTICLE III
RESTRICTIONS ON TRANSFERS AND ISSUANCES OF STOCK
3.1 General Prohibition on Transfers by Investors.
3.1.1 Transfers in Accordance with Agreement. No Investor shall, at
any time, directly or indirectly, sell, assign, pledge or encumber or otherwise
transfer (any such transaction, whether or not for consideration, being referred
to hereinafter as a "Transfer") any shares of Series B Preferred Stock,
Conversion Shares or any Common Stock or other voting securities of the Company
hereafter acquired by such Investor (collectively, "Company Securities"), or the
right to acquire any Company Securities, to any person (any such person,
regardless of the method of transfer, shall be referred to individually as a
"Transferee" and collectively as "Transferees") unless such Transfer shall have
been effected in accordance with the terms of this Agreement. The Company shall
not record upon its books any Transfer of Company Securities held or owned by
any of the Investors to any person except a Transfer in accordance with the
terms of this Agreement.
3.1.2 Transferee to Execute a Counterpart of this Agreement. No
Transfer of Company Securities by an Investor shall be effective unless the
Transferee shall have executed a counterpart to this Agreement, as amended or
supplemented.
3.1.3 Legend on Stock Certificate. The certificates representing
Series B Preferred Stock and the Issued Conversion Shares shall bear legends on
their face, or on the reverse thereof with a reference thereto on the face, as
follows:
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" (i) The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"), or
under the securities or "blue sky" laws of any state. Accordingly, such
securities may not be transferred, sold, pledged, encumbered or otherwise
disposed of (a "Transfer") except (A) pursuant to an effective
registration statement under the Act or (B) upon receipt of an opinion of
counsel reasonably satisfactory to the Company to the effect that such
transfer is exempt from registration under the Act and under any
applicable state securities or "blue sky" laws.
(ii) The securities represented by this certificate may not be
Transferred unless such Transfer complies with the terms and conditions
set forth in a Stockholders' Agreement, dated June 4, 1993, a copy of
which is on file with the Secretary of the Company and which will be
furnished by the Company to the holder hereof upon written request and
without charge. No Transfer of such securities will be made on the books
of the Company unless accompanied by evidence of compliance with the terms
of such Agreement."
3.2 Compliance with Securities Laws. No Investor shall Transfer any
Company Securities at any time if such action would constitute a violation of
any federal or state securities or blue sky laws or a breach of the conditions
to any exemption from registration of any Transfer of any Company Securities
under any such laws or a breach of any undertaking or agreement of such Investor
entered into pursuant to such laws or in connection with obtaining an exemption
thereunder.
3.3 Permitted Transfers. The restrictions contained in Section 3.4 of this
Agreement with respect to Transfers by Investors of Company Securities shall not
apply to: (a) any Transfers (i) between any members of the Investor Group or
their affiliates, (ii) to or between the respective partners or retired partners
of an Investor which is a partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses) or affiliates of such
partners, or (iii) to beneficiaries of an Investor which is a trust; (b) any
Transfer by an individual Investor to the spouse or a child, lineal descendant,
parent, grandparent, brother, sister, niece or nephew (collectively, a
"Relative") of such Investor or spouse, or to a trust of which there are no
principal (i.e. corpus) beneficiaries other than the
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grantor and/or one or more of such described Relatives and provided, in the
case of a trust, that the existing beneficiaries and/or trustee(s) and/or
grantor(s) of such trust have the power to act with respect to the trust's
assets without court approval; (c) any Transfer to a legal representative of an
individual Investor in the event such Investor becomes mentally incompetent; (d)
any Transfer to the personal representative of a deceased individual Investor;
(e) any Transfer by an individual Investor or Relative of such Investor to any
other Investor or Relative of such other Investor; or (f) any Transfer by will
or by the laws of intestacy by an individual Investor (each Transferee described
in (a) through (f) above hereafter referred to individually as a "Permitted
Transferee" and collectively as "Permitted Transferees").
3.4 Right of First Refusal. Notwithstanding any other provisions in this
Agreement, except as otherwise permitted in Section 3.3, until the earlier of
the completion of a Qualified Public Offering (as hereinafter defined) and
January 1, 1997, no Investor will Transfer (or agree to Transfer) any Company
Securities, in one private transaction or a series of private transactions (a
"Proposed Sale Transaction") unless the Company or its designee is first given
an opportunity to acquire such Company Securities during the period of 90 days
after the Company receives written notice from such Investor of the proposed
Sale Transaction, or a copy of the agreement evidencing such transaction, on the
same terms and conditions as the Proposed Sale Transaction. Such notice shall
include the identity of the Proposed Transferee, the number of shares of Company
Securities proposed to be Transferred, and the material terms of such proposed
Sale Transaction, including (if applicable) the price and form of consideration
to be paid. In the event the Company or its designee does not purchase the
Company Securities proposed to be included in the Proposed Sale Transaction
within such 90-day period, then, subject to compliance by such Investor with the
terms of this Agreement, such Investor shall be permitted to Transfer (at the
same or higher price) such Company Securities to the proposed Transferee;
provided, that if such Company Securities are not Transferred within 60 days
after the end of such 90-day period, then the Company or its designee shall
continue to be entitled to one or more further rights of first refusal as
described above; and provided further that, as a condition to any Transfer, such
Investor shall take steps to ensure that the proposed Transferee becomes bound
by and subject to the provisions of this Agreement as evidenced by the execution
and delivery by such proposed Transferee as a condition precedent to such
Transfer of a counterpart to this Agreement, pursuant to which the proposed
Transferee shall become an additional party, as provided in Section 3.1.2. The
Company in its sole discretion may assign its rights of first refusal to any
person or entity so designated by the Company. For purposes of this Agreement,
"Qualified Public Offering" shall mean a public offering of Common
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Stock (a) at a price per share of (i) $8.50 (as proportionately adjusted for
stock splits, subdivisions and the like) or more in the event such offering is
consummated on or prior to June 30, 1995 or (ii) $10.00 (as proportionately
adjusted for stock splits, subdivisions and the like) or more in the event such
offering is consummated subsequent to June 30, 1995, and (b) with gross proceeds
(before underwriting discounts and commissions, if any) to the Company in excess
of $25,000,000.
Notwithstanding any other provisions of this Agreement, until completion of a
Qualified Public Offering, each Investor agrees not to Transfer (or agree to
Transfer) any Company Securities to any person or entity (i) who is a competitor
of the Company or any subsidiary, or (ii) whose ownership of Company Securities
(or rights related thereto) is reasonably likely to result in (A) the loss of,
or failure to obtain, a certificate of need, license, permit or other regulatory
approval or authorization of or reimbursement to or for the Company or any
subsidiary material to the operations of the Company or any subsidiary, or (B)
the imposition of any condition, modification, or limitation on such
certificate, license, permit, approval, authorization or reimbursement that
would be materially adverse to the operations of the Company or any subsidiary,
or (iii) who, upon request by the Company, is unable in writing in connection
with such Transfer to make the representations and warranties set forth in
Section 5.13 of the Stock Purchase Agreement (provided that for purposes of this
Section 3.4, clause (ii) of the first sentence of said Section 5.13 shall be
amended as set forth in Schedule 2 attached to this Agreement) as of the date
immediately following the date of such Transfer, which representations and
warranties may be updated in good faith from time to time as may be reasonably
necessary to reflect changes in applicable laws, regulations and policies; or
(iv) which would cause the Company to become a reporting company pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). For purposes of this Section 3.4, the good faith determination of a
majority of the entire Board (excepting any directors designated by the proposed
Transferor), made within thirty (30) days of written notice to the Board of the
proposed Transfer, that a proposed Transferee is within the categories described
in clauses (i), (ii) or (iii) above, shall in all respects be conclusive.
3.5 Investor Group's Right to Purchase.
3.5.1 Company Notice. If at any time the Company has a first right
to purchase or offer to purchase shares of capital stock of the Company
(including without limitation, the Series B preferred Stock or any class or
other series of preferred stock, any security convertible into shares of Common
Stock or preferred stock, any option, right or warrant to purchase shares of
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Common Stock or preferred stock) (collectively, "First Refusal Shares") from any
holder of capital stock of the Company (including the Principal Stockholders and
the Investors) (a "Selling Stockholder") prior to a Transfer (whether by
operation of law or otherwise) by such Selling Stockholder to a person or
entity, regardless of whether such person or entity is then a holder of capital
stock of the Company, or similar opportunity or right of first refusal or first
offer, pursuant to a written agreement, arrangement, policy or plan (a "Selling
Document," which shall include, without limitation, the Company's Employee Stock
Ownership Plan/Trust (the "ESOP") and the Company's Management Equity Incentive
Plan) (collectively, "Company First Refusal Right"), the Company shall promptly
give written notice to the Investors upon the occurrence of the event (a "First
Refusal Event") giving rise to the Company First Refusal Right (the "Company
Notice"), together with a copy of the Selling Document. In the event that the
First Refusal Event is the receipt of written notice from the Selling
Stockholder, the Company Notice shall also be accompanied by a copy of such
Selling Stockholder's notice (the "Seller's Notice").
3.5.2 Designation of Investor Group as Designee. Within five (5)
business days of receipt of the Seller's Notice (or if no Seller's Notice was
received, five (5) business days of the First Refusal Event), the Company shall
give written notice to the Investors as to whether the Company will exercise the
Company First Refusal Right (the "Company Election Notice"). In the event (i)
the Company notifies the Investors that the Company will elect not to exercise
in full or in part the Company First Refusal Right or (ii) the Company notifies
the Investors that the Company will exercise the Company First Refusal Right,
but elects not to do so prior to the expiration of the period within which the
Company or its designee (or assignee) is entitled to exercise the Company First
Refusal Right pursuant to the terms of the Selling Document (the "Stated
Exercise Period"), the Company shall, subject to the proviso contained in the
last sentence of this Section 3.5.2, designate the Investor Group as its
designee (or assign to the Investor Group the Company First Refusal Right) for
that number of First Refusal Shares equal to the product of the number of First
Refusal Shares with respect to which the Company has elected to not exercise the
Company First Refusal Right multiplied by the Voting Percentage (the "Investor
First Refusal Shares"). Upon such designation (or assignment), the Investor
Group shall be entitled to exercise the Company First Refusal Right with respect
to the Investor First Refusal Shares as provided in Section 3.5.3 and upon the
terms and conditions set forth in the Selling Document (the "Investor Purchase
Right"); provided, that the Company shall designate the Investor Group (or
assign to the Investor Group the Company First Refusal Right) only in the event
that the Selling Stockholder proposes to Transfer or Transfers an aggregate of
at least 400,000 First Refusal Shares (as adjusted proportionately for
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stock splits, subdivisions and the like) (if other than shares of Common Stock
or preferred stock, determined as if converted into shares of Common Stock or
preferred stock at the time of the Company Notice), whether in a single
transaction or series of transactions, whether to the same or different
Transferees (such 400,000 First Refusal Shares referred to herein as the "First
Refusal Exemption Threshold"), provided further that Transfers of First Refusal
Shares by the Selling Stockholder to its or his Permitted Stockholder
Transferees (as defined in Section 3.6.1.5) shall not be included in determining
whether the First Refusal Exemption Threshold has been met (but Transfers of
First Refusal Shares by the Selling Stockholder and/or its or his Permitted
Stockholder Transferees, individually or in the aggregate, to Transferees other
than Permitted Stockholder Transferees shall be included in such determination).
3.5.3 Allocation of Right to Purchase. The Company Election Notice
shall state the number of Investor First Refusal Shares that each Investor would
have the right to purchase upon the exercise by the Investor Group of the
Investor Purchase Right, which number shall in each case be calculated as the
product of (i) the number of Investor First Refusal Shares multiplied by (ii) a
fraction, the numerator of which shall be the number of Conversion Shares
beneficially owned by such Investor and the denominator of which shall be the
number of Conversion Shares beneficially owned by all the Investors (the
"Proportionate Share"). Within five (5) business days of receipt of the Company
Election Notice, each Investor shall deliver to the Company a written notice
(the "Investor Election Notice") stating its election to participate and the
maximum number of First Refusal Shares (up to all the Investor First Refusal
Shares) that such Investor is willing to purchase, and such Investor Election
Notice shall constitute an irrevocable commitment to purchase such number of
Investor First Refusal Shares, if any, as are allocated to such Investor
pursuant to this Section 3.5.3 up to such maximum number of Investor First
Refusal Shares. To the extent that the number of Investor First Refusal Shares
allocated to an Investor exceeds the number such Investor indicated it was
willing to purchase in its Investor Election Notice, the Company shall allocate
all Investor First Refusal Shares not subscribed for to the Investors who
subscribed for more Investor First Refusal Shares than their Proportionate Share
(the "Fully Participating Investors") in the proportion that the number of
Conversion Shares each Fully Participating Investor beneficially owns bears to
the total number of Conversion Shares beneficially owned by all Fully
Participating Investors. If the number of Investor First Refusal Shares so
allocated to a Fully Participating Investor exceeds the maximum number of
Investor First Refusal Shares that it indicated in its Investor Election Notice
to the Company it was willing to subscribe for, then the Company shall allocate
any such excess among all
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Fully Participating Investors who have subscribed for a maximum number of
Investor First Refusal Shares which exceeds the number of Investor First Refusal
Shares allocated to them pursuant to the preceding sentence, in the proportion
that the number of Conversion Shares each Fully Participating Investor
beneficially owns bears to the total number of Conversion Shares beneficially
owned by all such Fully Participating Investors, and the Company shall follow
this procedure, if necessary, until all Investor First Refusal Shares available
for purchase by the Investors have been allocated to them; provided, that any
such excess may be allocated in such other manner as may otherwise be agreed by
the Company and the Fully Participating Investors.
3.5.3.1 Notice of Final Allocation of Investor First Refusal
Shares. The Company shall, within thirty (30) days of receipt of the Seller's
Notice (or if no Seller's Notice was received, the First Refusal Event), notify
the Selling Stockholder and each Investor in writing setting forth the final
allocation of the Investor First Refusal Shares. Such notice to the Selling
Stockholder shall be deemed the irrevocable exercise of the respective Investor
Purchase Right on behalf of each purchaser named therein.
3.5.4 Seller's Right to Transfer. If the Company and the Investor
Group shall not exercise the Company First Refusal Right and the Investor
Purchase Right, respectively, to purchase in the aggregate all of the First
Refusal Shares as provided herein and within the Stated Exercise Period, then
the Selling Stockholder shall be free to Transfer all (but not less than all) of
the First Refusal Shares to its proposed Transferee upon the terms and
conditions set forth in the Selling Document. If the Transfer of any First
Refusal Shares to a proposed Transferee is not consummated in accordance with
the terms and conditions of the Selling Document, then the Company shall be
required to again comply with all of the provisions of this Section 3.5 as a
condition to a Transfer of any such First Refusal Shares to a proposed
Transferee.
3.5.5 First Refusal Shares Other Than Investor First Refusal Shares.
The Company shall have sole discretion over the exercise of or election with
respect to any Company First Refusal Right relating to First Refusal Shares not
included in the Investor First Refusal Shares.
3.5.6 Representations and Covenant of the Company.
3.5.6.1 Representations. The Company represents and warrants
to the Investors that, except as set forth in Schedule 1 attached hereto: (i)
all of the Company's Company
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First Refusal Rights are set forth in the documents described in Schedule 4.2 to
the Stock Purchase Agreement; (ii) the Company is entitled to designate a
designee (or assign to an assignee the Company First Refusal Right) under each
Selling Document in each instance in which the Company has a Company First
Refusal Right; (iii) nothing contained in the Selling Documents or to the
Company's best knowledge otherwise prohibits the Company from designating the
Investor Group as its designee (or assigning to the Investor Group the Company
First Refusal Right as its assignee) as provided in this Section 3.5; (iv) the
time periods provided in this Section 3.5 for the exercise of the Investor
Purchase Right are within the Stated Exercise Periods expressly provided in the
Selling Documents so as to permit the Investor Group to exercise the Investor
Purchase Right in accordance with the terms and conditions set forth in this
Section 3.5; and (v) upon the designation of the Investor Group (or the
assignment to the Investor Group of the Company First Refusal Right) as provided
herein, the Investor Group shall be entitled to exercise the Company First
Refusal Right as contemplated in this Section 3.5 and in accordance with the
terms of the Selling Documents.
3.5.6.2 Covenants.
(i) In the event that the actual operation of any Stated
Exercise Period is not sufficient to permit the exercise by the Investors of an
Investor Purchase Right as contemplated in this Section 3.5, the Company will
use its best efforts to obtain any necessary waiver of or modification to such
Stated Exercise Period to enable the Investors to exercise the Investor Purchase
Right.
(ii) For as long as this Agreement shall remain in effect, the
Company will not (A) terminate any Company First Refusal Right, or (B) amend or
modify the terms and conditions contained in any Selling Document or otherwise
relating to the Company First Refusal Right or seek or enter into any
understanding or arrangement to amend or modify, or waive (or agree or enter
into any understanding or arrangement to waive) the observance of any such term
or condition, in each case specified in this clause (B), in any manner that may
adversely affect the Investor Purchase Right or the exercise thereof by the
Investors, in each case without the prior written consent of Investors
beneficially owning at least 66 2/3% of the Conversion Shares. For purposes of
this Section 3.5.6.2, the Company's consent to a Transfer by any of the
Principal Stockholders, Donald Gaetz, Esther T. Colliflower or Earl M. Collier,
Jr. to a Permitted Stockholder Transferee of such individuals as expressly
contemplated to be permitted in the relevant Selling Document shall not be
deemed an amendment, modification or waiver of the Company First Refusal Right
with respect to such person.
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3.6 Sales of Restricted Stock. Except as otherwise permitted in Section
3.6.1.5 of this Agreement, any Transfers by either Principal Stockholder of
capital stock of the Company, including without limitation, any class or series
of preferred stock, any security convertible into shares of Common Stock or
preferred stock, and any option, right or warrant to purchase shares of Common
Stock or preferred stock (collectively, "Restricted Stock"), owned by said
persons (collectively, the "Restricted Persons") are subject to the following
provisions of this Section 3.6:
3.6.1 "Tag Along" Rights. If at any time during the term of this
Agreement a Restricted Person proposes to Transfer to any Transferee Restricted
Stock (the shares proposed to be Transferred being referred to herein as the
"Offered Shares" and the proposed Transferee being referred to as an "Offeree"),
no such Transfer shall be consummated by the Restricted Person seeking to sell
such Restricted Stock (the "Selling Restricted Stockholder"), unless in
connection with such Transfer the Offeree shall offer, in writing to each
Investor, to purchase the Sale Percentage (as hereinafter defined) of the
Company Securities then beneficially owned by each Investor (the "Investor
Purchase Offer"). The Investor Purchase Offer shall be at the same purchase
price per share for the Offered Shares (the "Offering Price") and on the same
terms and conditions set forth in the Offeree's offer to purchase (the "Offer").
Notwithstanding anything contained herein to the contrary, the "Tag Along
Rights" granted to the Investors in this Section 3.6 shall be exercisable only
(a) in the event that (i) the Company (or its designee or assignee) shall have
failed to exercise its Right of First Refusal under Section 3.4 hereof, and (ii)
the Selling Restricted Stockholder and/or his or her Permitted Stockholder
Transferees, individually or in the aggregate, shall have, from the date hereof,
Transferred (taking into account the Offered Shares, but not taking into account
Transfers of Restricted Stock to Permitted Stockholder Transferees of the
Selling Restricted Stockholder) in the aggregate (whether in a single
transaction or multiple transactions, related or unrelated) thirty percent (30%)
of the Restricted Stock beneficially owned by such Selling Restricted
Stockholder and/or his or her Permitted Stockholder Transferees as of the date
immediately following the date of this Agreement (the "Permitted Sale Amount");
and (b) with respect to Offered Shares in excess of the Permitted Sale Amount.
3.6.1.1 Delivery of Investor Purchase Offer. The Selling Restricted
Stockholder shall within five (5) business days of receipt of the Offer, deliver
to the Investors written notice thereof, together with a copy of such Offer (the
"Sale Notice"), and shall have delivered the Investor Purchase Offer to the
Investors within ten (10) days of the date of the Sale Notice. Such Sale Notice
shall specify the aggregate Sale Percentage of the
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Company Securities entitled to be sold by the Investors. Each Investor shall
have the right to sell its pro rata share of such Sale Percentage based upon the
number of Conversion Shares beneficially owned by such Investor at the time of
the proposed Transfer. Each Investor shall have a right of over-allotment such
that if any Investor fails to exercise its right to sell its pro rata portion of
Company Securities, the other Investors may sell the non-selling Investor's
portion on a pro rata basis determined in the same manner as provided in Section
3.5.3 (except that "Investor First Refusal Shares" shall be deemed to mean the
"Sale Percentage of the Company Securities" and the terms "purchase" and
"subscribe for" shall be deemed to mean "sell"). For purposes of this Section
3.6, the "Sale Percentage" shall mean the same percentage of the shares of
Company Securities then beneficially owned by the Investors as the Offered
Shares represent with respect to the shares of Restricted Stock beneficially
owned by the Selling Restricted Stockholder immediately prior to the Transfer of
the Offered Shares. Each Investor which desires to accept the Purchase Offer (a
"Selling Investor") shall notify the Offeree in writing of its acceptance and
the number of shares of Company Securities it elects to sell within twenty (20)
days from receipt of the Investor Purchase Offer.
3.6.1.2 Reduction in Offered Shares. In the event that the
Offeree does not wish to purchase all of the Offered Shares and the Company
Securities that the Investors have elected to sell under Section 3.6.1, the
Selling Restricted Stockholder shall reduce the number of Offered Shares to be
sold to the Offeree to the extent necessary so that the Selling Restricted
Stockholder and the Selling Investors shall sell Restricted Stock and Company
Securities, respectively, pro rata, to the Offeree. For purposes of this Section
3.6.1.2, the pro rata share of the Selling Restricted Stockholder shall be based
upon the ratio that the number of Offered Shares bears to the aggregate number
of Offered Shares and the number of shares of Company Securities equal to the
Sale Percentage of Company Securities entitled to be sold under Section 3.6.1
(the "Total Purchase Shares"), and the pro rata share of the Selling Investors
shall be based upon the ratio that the number of shares of Company Securities
equal to the Sale Percentage of Company Securities entitled to be sold under
Section 3.6.1 bears to the Total Purchase Shares.
3.6.1.3 Failure to Consummate Transfer.
(a) In the event that none of the Investors elect to participate in
the Transfer to the Offeree, the Selling Restricted Stockholder shall be free to
Transfer all or less than the number of shares of Restricted Stock to the
Offeree at a purchase price per share at or less than the Offering Price and on
the other terms and conditions set forth in the Offer; provided, that in the
event
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of any increase in purchase price or any change in other terms and conditions,
the Selling Restricted Stockholder shall again comply with the requirements of
Section 3.6.1.
(b) If the Transfer of the Offered Shares and the shares of Company
Securities to be Transferred from Selling Investors as set forth in any notices
provided under Section 3.6.1.1 is not consummated within sixty (60) days of
receipt of the Sale Notice, then the Selling Restricted Stockholder shall be
required to cause the Offeree to again comply with the provisions of this
Section 3.6 as to any proposed Transfer; provided, that, if the Transfer of
Company Securities from any Selling Investor is not so consummated due to any
action or failure to act on the part of such Investor then the Offeree shall not
be required to purchase such Selling Investor's allocable share of Company
Securities or again comply with the provisions of this Section 3.6 with respect
to such Investor.
3.6.1.4 Right to Abandon Transfer. The Selling Restricted
Stockholder reserves the right not to proceed with any proposed Transfer to an
Offeree for any reason whatsoever. The Selling Restricted Stockholder also
reserves the right to seek an increase from the Offeree in the number of shares
of Restricted Stock that the Offeree is willing to purchase or more favorable
terms and conditions; provided, that in the event of any such increase or change
in terms and conditions the Selling Restricted Stockholder shall again comply
with the requirements of Section 3.6.1.
3.6.1.5 Provisions Inapplicable to Section 3.5 Transfers.
Notwithstanding anything contained herein to the contrary, the provisions of
this Section 3.6.1 shall not apply with respect to the Principal Stockholders to
(i) any Transfer to the Company or an Investor as a result of the exercise by
the Company or an Investor of the Company First Refusal Right or the Investor
Purchase Right pursuant to Section 3.5 or through the Stock Repurchases (as
defined in the Stock Purchase Agreement), (ii) any Transfers to (a) a charitable
organization described in Section 501(c)(3) of the Internal Revenue Code of
1986, as amended (the "Code"), (b) a charitable remainder trust under the Code
and the applicable regulations thereunder or (c) the spouses or lineal
descendants of the transferor or (iii) any transfer by will or by the laws of
intestacy (collectively, "Permitted Stockholder Transferees"), even if such
Transfer would result in a Transfer of Restricted Stock in excess of the
Permitted Sale Amount (provided that all Transfers of Restricted Stock to
Transferees other than Permitted Stockholder Transferees of the Principal
Stockholders and all Transfers of Restricted Stock by Permitted Stockholder
Transferees of the Principal Stockholders to Transferees other than Permitted
Stockholder Transferees shall be subject to the provisions of this Section
3.6.1). No Transfer of Restricted Stock
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by a Restricted Person shall be effective unless the Transferee shall have
executed a counterpart to this Agreement, as amended or supplemented.
3.6.1.6 Closing of Purchase. In the case of a purchase of
Restricted Stock by an Offeree pursuant to this Section 3.6, the parties to such
purchase shall mutually determine a closing date which shall not be later than
60 days after the anticipated closing date set forth in the Sale Notice (or on
the first business day after the expiration of such 60 day period if expiration
occurs on a day other than a business day). The closing shall be held at 11:00
a.m. local time, at the principal executive office of the Company or at such
other time or place as the Offeree may require. The Offeree shall deliver to the
Selling Investor(s) the purchase price for the securities being purchased in
cash by wire transfer (or if agreed to by the selling Investor(s), by certified
or cashier's check), or if other than cash, in the form of consideration to be
delivered by the Offeree.
3.6.2 Definition. Proposed "Transferee" means a person or group of
persons, as defined in Section 13(d)(3) of the Exchange Act, to whom Restricted
Stock is proposed to be Transferred pursuant to the terms of this Agreement;
provided that two or more Restricted Persons shall not be deemed a "group" for
purposes of this definition solely because they are parties to this Agreement.
3.7 Form of Consideration for Stock. No offer from any proposed Transferee
shall be deemed to be a valid or bona fide offer under any Section of this
Article III unless the purchase price of such offer is payable in cash or
marketable securities that can be readily valued by reference to quoted trading
prices. In determining whether consideration offered under any Section of this
Article III is greater than, less than, or equal to the purchase price in a
proposed Transfer or Transfer, only the per share value of the cash
consideration or such marketable securities shall be considered.
3.8 Merger Transaction. The Company may enter into any agreement of merger
to merge with or into any other corporation or adopt any other plan of
recapitalization, consolidation, reorganization or other restructuring
transaction, if approved by (i) a majority vote of the entire Board, and (ii)
the holders of more than fifty percent (50%) of the outstanding shares of each
class of stock then outstanding entitled to vote pursuant to the terms of the
Company's Amended and Restated Certificate of Incorporation (the "Voting
Classes"). In such event, Sections 3.4, 3.5 and 3.6 of this Agreement shall not
be applicable to the Transfer, conversion or exchange in such merger or other
plan for such consideration as approved by the Board, and the Voting
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Classes; provided that, in the event that the Investors continue to hold shares
of Common Stock of the Company or capital stock of any other entity succeeding
thereto or surviving such merger or other plan representing a majority of the
voting power of the Company or such entity, this Agreement shall remain in full
force and effect and shall be applicable to any shares of capital stock
(including common stock into or for which securities may be convertible,
exchangeable or exercisable) of the Company or other entity issued with respect
to, upon conversion of, or in exchange for, the shares of stock in connection
with such merger or other plan.
3.9 Issuance of New Securities. Until the completion of a Qualified Public
Offering, the Investor Group shall have the right to purchase, pro rata, all (or
any part) of any New Securities (as defined in this Section 3.9) which the
Company may, from time to time, sell or issue. The pro rata share of the
Investor Group shall be determined by multiplying the number of shares of New
Securities to be issued or sold by the Company by a fraction, the numerator of
which is the number of Conversion Shares beneficially owned by all the Investors
and the denominator of which is the sum of (i) the number of shares of Common
Stock (including Issued Conversion Shares) then outstanding plus (ii) the number
of shares of Common Stock issuable upon the conversion or exchange of all
securities convertible into or exchangeable for shares of Common Stock
(including Series B Preferred Stock) and upon the exercise of all options,
rights or warrants to purchase shares of Common Stock then outstanding (the "Pro
Rata Amount"). The pro rata share of each Investor shall be equal to the
Proportionate Share of the Pro Rata Amount as determined in Section 3.5.3 (as if
the Pro Rata Amount were the Investor First Refusal Shares) at the time of sale
or issuance. Each Investor shall have a right of over-allotment such that if any
Investor fails to exercise its right hereunder to purchase its pro rata portion
of the Pro Rata Amount of New Securities, the other Investors may purchase the
non-purchasing Investor's portion on a pro rata basis in the same manner as
provided in Section 3.5.3 (as if the Pro Rata Amount were the Investor First
Refusal Shares) within seven (7) days from the date such non-purchasing Investor
fails to exercise its right to purchase its pro rata share of the Pro Rata
Amount of New Securities.
3.9.1 Definitions. "New Securities" shall mean any capital stock
(including the Common Stock or the preferred stock) of the Company whether now
authorized or not, and rights, options or warrants to purchase capital stock,
and securities of any type whatsoever that are, or may become, convertible or
exercisable into or exchangeable for capital stock; provided that the term "New
Securities" does not include: (i) Series B Preferred Stock purchased under the
Stock Purchase Agreement; (ii) the Conversion Shares; (iii) securities offered
to the public pursuant
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to a registration statement filed pursuant to the Securities Act of 1933, as
amended; (iv) securities issued pursuant to the acquisition of another
corporation by the Company by merger, purchase of substantially all the assets
or other reorganization whereby either the Company owns, or the stockholders of
the Company existing immediately prior to such acquisition own, in the
aggregate, not less than fifty-one percent (51%) of the voting power of such
corporation; (v) securities described in Section 4(f)(iii) of the Company's
Certificate of Designations, Preferences and Other Rights of the Series B
Preferred Stock; (vi) options, warrants or rights to purchase Company Securities
granted or issued after the date hereof to current or former directors,
officers, employees or consultants of the Company or of any subsidiary of the
Company (other than those individuals listed on Schedule B attached hereto,
unless the grant or issuance to such listed individuals has been approved or
recommended by a majority of the disinterested directors serving on the
Compensation Committee of the Board) pursuant to any stock option, purchase or
bonus plan or similar plans or arrangements, and any Company Securities issued
or issuable pursuant to such options, warrants or rights; or (vii) Common Stock
issued to the ESOP, provided such issuance is approved or recommended by a
majority of disinterested directors serving on the Compensation Committee of the
Board.
3.9.2 Notice. In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Investor written notice of its
intention, describing the type of New Securities, the price, the general terms
upon which the Company proposes to issue the same and the number of shares
allocable to such Investor. Such notice shall be given no more than ninety (90)
days before the date for the issuance or sale of New Securities. Each Investor
shall have ten (10) business days from the date of receipt of any such notice to
agree in writing to purchase, in whole or in part, the Investor's pro rata share
of such New Securities for the price and upon the general terms specified in the
notice by giving written notice to the Company and stating therein the quantity
of New Securities to be purchased.
3.9.3 Closing. The Investors shall purchase and pay for the New
Securities at the time and place the Company sells the New Securities not being
purchased by such Investors pursuant to agreements which are substantially
identical in form and substance. In the event the Company sells such New
Securities in a series of transactions, the Investors will purchase and pay for
such of their respective portions of New Securities sold by the Company at each
such seriatim transaction at the time and place of each such seriatim
transaction.
3.10 Conflict. If the provisions of this Article III conflict with any
provisions contained in any agreements executed
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between the Company and Westbrook and Carole Westbrook (including under any
stock option plan or agreement adopted by the Board of Directors of the
Company), the provisions of this Agreement shall control.
3.11 Agreement on File. A copy of this Agreement shall be filed with the
Secretary of the Company and kept with the records of the Company.
ARTICLE IV
INFORMATION RIGHTS
4.1 Investor Financial Information. From and after the date hereof until
the Company becomes a reporting company pursuant to Section 12 of the Exchange
Act, the Company shall deliver to each Investor so long as such Investor
continues to beneficially own at least 5,000 Conversion Shares, except for the
annual statements referred to in Section 4.1.2 below, which shall be delivered
to each Investor as long as such Investor owns any shares of Common Stock:
4.1.1 Quarterly Statements. As soon as practicable, and in any event
within 45 days after the close of each of the first three fiscal quarters of
each fiscal year of the Company, a consolidated balance sheet, statement of
income and statement of changes in cash flow of the Company and its subsidiaries
as of the close of such quarter and the portion of the Company's fiscal year
ending on the last day of such quarter, all in reasonable detail and prepared in
accordance with generally accepted accounting principles, consistently applied,
subject to audit and normal year-end adjustments, setting forth in each case in
comparative form the figures for the comparable period of the previous year.
4.1.2 Annual Statements. As soon as practicable after the end of
each fiscal year of the Company, and in any event within 90 days thereafter, a
copy of the consolidated balance sheet and consolidated statement of income,
stockholders' equity and changes in cash flow of the Company and its
subsidiaries for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and accompanied
by an opinion thereon of independent certified public accountants of recognized
national standing selected by the Company.
4.1.3 Other Reports. Promptly upon their becoming available, one
copy of each financial statement, report,
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notice or proxy statement sent by the Company to its stockholders generally, of
each financial statement, report, notice or proxy statement sent by the Company
or any of its subsidiaries to the Securities and Exchange Commission or any
successor agency, if applicable (the "Commission"), of any registration
statement, prospectus or written communication (other than transmittal letters)
in respect thereof filed by the Company or any of its subsidiaries with any
securities exchange or the Commission, and of any press release issued by the
Company or any of its subsidiaries.
4.2 Director Materials. The Company shall prepare and deliver to each
director of the Company:
4.2.1 Monthly Financial Statements. As soon as practicable, and in
any event within 20 days after the close of each month of each fiscal year of
the Company, a consolidated balance sheet, statement of income and statement of
changes in cash flow of the Company and its subsidiaries as of the close of such
month and the portion of the Company's fiscal year ending on the last day of
such month, all in reasonable detail and prepared in accordance with generally
accepted accounting principles, consistently applied, subject to audit and
normal year-end adjustments, setting forth in each case in comparative form the
figures for the comparable period of the previous year.
4.2.2 Business Plan; Projections. As promptly as practicable
consistent with past practices but in no event later than sixty (60) days after
the end of the prior fiscal year of the Company, an annual business plan of the
Company and projections of operating results, prepared on a monthly basis.
Within 45 days of the close of each fiscal quarter of the Company, the Company
shall provide its directors with a comparison of actual year-to-date results
with the corresponding budgeted figures.
4.2.3 Audit Reports. As soon as practicable after the receipt
thereof, one copy of each other financial report and internal control letter
submitted to the Company by its independent certified public accountants in
connection with any annual, interim or special audit made by them of the books
of the Company and its subsidiaries.
4.2.4 Requested Information. With reasonable promptness, the Company
shall furnish each director with such other data and information as from time to
time may be reasonably requested.
ARTICLE V
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REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS
5.1 Representations of the Investors. Each Investor hereby severally
represents and warrants as follows: (a) the Investor has the requisite power and
authority to enter into this Agreement, and this Agreement is a valid, binding
and enforceable obligation of the Investor enforceable in accordance with its
terms, except as (i) the enforceability thereof may be limited by bankruptcy,
reorganization, insolvency or similar laws affecting the enforcement of
creditors' rights generally and (ii) the availability of equitable remedies may
be limited by equitable principles of general applicability; (b) the Investor is
acquiring the Series B Preferred Stock (and, if it converts the Series B
Preferred Stock, will be acquiring the Conversion Shares) for investment
purposes only and not for the purpose or effect of changing or influencing the
control of the Company or in connection with or as a participant in any
transaction having such purpose or effect; and (c) the statements contained in
this Article V pertaining to the Investor are true and correct as of the date
hereof in all respects.
5.2 Representation of the Company. The Company represents and warrants
that it has the power and authority to enter into this Agreement, and that this
Agreement is a valid, binding and enforceable obligation of the Company,
enforceable in accordance with its terms, except as (i) the enforceability
thereof may be limited by bankruptcy, reorganization, insolvency or similar laws
affecting the enforcement of creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
5.3 Additional Covenants of the Investors. Each Investor severally agrees
that neither such Investor nor any of his or its associates or affiliates (a)
until completion of a Qualified Public Offering will announce, publicly propose
or solicit any person or company to acquire, offer to acquire or agree to
acquire by merger, tender offer, purchase or otherwise, the Company or a
substantial portion of its assets or more than ten percent (10%) of the Common
Stock; (b) for as long as the Investor Group has Voting Power of less than
fifty-one percent (51%) of the Outstanding Votes, (i) will have or seek to have
any designee of the Investor Group serve as the Chairman of the Board, (ii) will
propose a director or directors in opposition to the nominees proposed by the
management of the Company or the Board, other than as permitted in this
Agreement, or (iii) except in the course of performing duties by the Investor
Group's designees as members of the Board, will exercise or attempt to exercise,
directly or indirectly, control or controlling influence over the management,
policies or business operations of the Company. Each Investor further severally
agrees that as long as this Agreement is in effect, the Investor and his
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<PAGE>
or its associates and affiliates will not act in concert with any person or
entity or assist, aid or abet any associate or affiliate to act, or act in
concert, with any person or entity, in a manner which is inconsistent with the
terms hereof or which attempts to evade any provision or requirement of this
Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Term. This Agreement shall terminate on the date when any of the
following events first occurs: (a) upon the closing date of a Qualified Public
Offering, (b) upon the mutual written agreement by the Company and the
Investors, or (c) the tenth (10th) anniversary of the date of this Agreement.
6.2 Injunctive Relief. It is acknowledged that it will be impossible to
measure in money the damages that would be suffered if the parties fail to
comply with any of the obligations herein imposed on them and that in the event
of any such failure, an aggrieved person will be irreparably damaged and will
not have an adequate remedy at law. Any such person shall, therefore, be
entitled to injunctive relief, including specific performance, to enforce such
obligations, and if any action shall be brought in equity to enforce any of the
provisions of this Agreement, none of the parties hereto shall raise the defense
that there is an adequate remedy at law.
6.3 Notices. All notices, statements, instructions or other documents
required to be given hereunder shall be in writing (including telex or fax) and
shall be given either personally, or by mailing the same in a sealed envelope,
first-class mail, postage prepaid and either certified or registered, return
receipt requested, addressed as follows:
If to the Company: Vitas Healthcare Corporation
100 South Biscayne Blvd.
Suite 1500
Miami, Florida 33131
Attention: Chairman of the Board
With a copy (which
shall not constitute
notice) to: Hogan & Hartson
555 13th Street, N.W.
Washington, D.C. 20004
Att: Robert J. Waldman, Esq.
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<PAGE>
If to Westbrook or Vitas Healthcare Corporation
Carole Westbrook: 100 South Biscayne Blvd.
Suite 1500
Miami, Florida 33131
Attention: Chairman of the Board
With a copy (which Greenberg, Traurig, Hoffman,
shall not constitute Lipoff, Rosen & Quentel, P.A.
notice) to: 1221 Brickell Avenue
Miami, Florida 33131
Attention: Martin Kalb, Esq.
If to an Investor: To such Investor at the address specified
below its name on the signature pages hereof
With a copy (which Lowenthal, Landau, Fischer & Bring, P.C.
shall not constitute 250 Park Avenue
notice) to: New York, New York 10177
Att: George N. Abrahams, Esq.
Each party, by written notice given to the Company in accordance with this
Section 6.3, may change the address to which notices, statements, instructions
or other documents are to be sent to such party. All notices, statements,
instructions and other documents hereunder shall be deemed to have been given
(i) on the date of delivery, if delivered personally; (ii) on the same day as
dispatch if by telex or fax; (iii) one business day after delivery to a
nationally recognized courier service if marked for next business day delivery;
or (iv) three (3) days after the date of mailing, if mailed.
6.4 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties and their respective successors and assigns.
If any party or any Transferee of any party shall acquire any Company Securities
or Restricted Stock, as applicable, in any manner, whether by operation of law
or otherwise, such Company Securities or Restricted Stock shall be held subject
to all of the terms of this Agreement, and by taking and holding such Company
Securities or Restricted Stock such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement.
6.5 Governing Law. Regardless of the place of execution, this Agreement
shall be governed by, and construed in accordance
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<PAGE>
with, the laws of the State of Delaware (excluding choice of law provisions
thereof).
6.6 Headings; Schedules. Section headings are inserted herein for
convenience only and do not form a part of this Agreement. Unless otherwise
indicated, references in this Agreement to a Section shall be deemed to refer to
such Section of this Agreement, and a reference to a Schedule shall be to such
Schedule, if any, to this Agreement which Schedule is incorporated herein by
reference.
6.7 Gender; Number. Unless the context of this Agreement otherwise
requires, the masculine, feminine or neuter gender each shall include the other
genders, and the singular shall include the plural.
6.8 Entire Agreement; Modification. This Agreement, the Stock purchase
Agreement (including all exhibits and schedules thereto), a certain letter dated
the date of the Stock purchase Agreement and delivered therewith, the
Registration Rights Agreement and the letter agreements related to
confidentiality between Furman Selz Incorporated and Galen Associates, Harvest
Ventures Inc., and Warburg, Pincus Ventures, Inc. dated October 29, 1992,
November 2, 1992 and February 22, 1993, respectively, as deemed amended by and
as provided in the Stock Purchase Agreement (the "Confidentiality Agreements"),
set forth the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and the purchase of the Series B Preferred
Stock and merges and supersedes any and all prior discussions, agreements and
understandings between or among them with respect thereto, and no party shall be
bound by any condition, definition, warranty or representation, other than those
expressly set forth or provided for in this Agreement, the Stock Purchase
Agreement, that certain letter, the Registration Rights Agreement and the
Confidentiality Agreements or in any document or instrument delivered pursuant
to such agreements, or as may be set forth in writing and signed by the party or
parties to be bound thereby on or subsequent to the date hereof. This Agreement
may not be changed or modified, except by an agreement in writing executed by
the Company, the Principal Stockholders and the Investors beneficially owning
two-thirds (2/3) of the Conversion Shares. This Agreement, and the rights and
obligations hereunder, may not be assigned to any person or entity except as
otherwise specifically permitted herein.
6.9 Certain Definitions. For purposes of this Agreement, the terms
"affiliate," "associate" and "control" shall have the meanings ascribed to such
terms in Rule 12b-2 under the Exchange Act.
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<PAGE>
6.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed or caused to be duly
executed this Agreement on the date first written above
VITAS HEALTHCARE CORPORATION
By: /s/ Earl M. Collier, Jr.
-------------------------------------
President
/s/ Hugh A. Westbrook
-----------------------------------------
HUGH A. WESTBROOK
/s/ Carole S. Westbrook
-----------------------------------------
CAROLE S. WESTBROOK
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<PAGE>
GALEN PARTNERS II, L.P.
By GWW Partners, L.P.
(its General Partner)
By: /s/ Bruce F. Wesson
-------------------------------------
General Partner
Address: 666 Third Avenue
New York, New York 10017
GALEN PARTNERS INTERNATIONAL II, L.P.
By GWW Partners, L.P.
(its General Partner)
By: /s/ Bruce F. Wesson
-------------------------------------
General Partner
Address: 666 Third Avenue
New York, New York 10017
GALEN ASSOCIATES
By: Wesson Enterprises, Inc.
By: /s/ Bruce F. Wesson
-------------------------------------
President
Address: 666 Third Avenue
New York, New York 10017
WARBURG, PINCUS INVESTORS, L.P.
By: Warburg Pincus & Co.
(its General Partner)
By:
-------------------------------------
Partner
Address: 466 Lexington Avenue
New York, New York 10017
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<PAGE>
GALEN PARTNERS II, L.P.
By GWW Partners, L.P.
(its General Partner)
By:
-------------------------------------
General Partner
Address: 666 Third Avenue
New York, New York 10017
GALEN PARTNERS INTERNATIONAL II, L.P.
By GWW Partners, L.P.
(its General Partner)
By:
-------------------------------------
General Partner
Address: 666 Third Avenue
New York, New York 10017
GALEN ASSOCIATES
By: Wesson Enterprises, Inc.
By:
-------------------------------------
President
Address: 666 Third Avenue
New York, New York 10017
WARBURG, PINCUS INVESTORS, L.P.
By: Warburg Pincus & Co.
(its General Partner)
By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------------
Partner
Address: 466 Lexington Avenue
New York, New York 10017
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<PAGE>
HARVEST PARTNERS INTERNATIONAL, L.P.
By: Harvest Associates International,
L.P.
(its General Partner)
By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------------
General Partner
Address: 767 Third Avenue
7th Floor New
York, New York 10017
DEUTSCHE BETEILIGUNGSGESELLSCHAFT
By:
-------------------------------------
Managing Director
Address: Bockenheimer Landstrasse 42
D-6000 Frankfurt am Main 1
Germany 841
FRANKLIN CAPITAL ASSOCIATES II L.P.
By: Franklin Ventures II L.P.
(its General Partner)
By: Franklin Venture Capital Inc.
(its General Partner)
By:
--------------------------------------
Vice President
Address: 237 Second Avenue South
Franklin, TN 37064
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<PAGE>
HARVEST PARTNERS INTERNATIONAL, L.P.
By: Harvest Associates International,
L.P.
(its General Partner)
By:
-------------------------------------
General Partner
Address: 767 Third Avenue
7th Floor New
York, New York 10017
DEUTSCHE BETEILIGUNGSGESELLSCHAFT
By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------------
Managing Director
Address: Bockenheimer Landstrasse 42
D-6000 Frankfurt am Main 1
Germany 841
FRANKLIN CAPITAL ASSOCIATES II L.P.
By: Franklin Ventures II L.P.
(its General Partner)
By: Franklin Venture Capital Inc.
(its General Partner)
By:
--------------------------------------
Vice President
Address: 237 Second Avenue South
Franklin, TN 37064
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<PAGE>
HARVEST PARTNERS INTERNATIONAL, L. P.
By: Harvest Associates International,
L.P.
(its General Partner)
By:
-------------------------------------
General Partner
Address: 767 Third Avenue
7th Floor New
York, New York 10017
DEUTSCHE BETEILIGUNGSGESELLSCHAFT
By:
-------------------------------------
Managing Director
Address: Bockenheimer Landstrasse 42
D-6000 Frankfurt am Main 1
Germany 841
FRANKLIN CAPITAL ASSOCIATES II L.P.
By: Franklin Ventures II L.P.
(its General Partner)
By: Franklin Venture Capital Inc.
(its General Partner)
By: /s/ [SIGNATURE ILLEGIBLE]
------------------------------------
Vice President
Address: 237 Second Avenue South
Franklin, TN 37064
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<PAGE>
HLM PARTNERS II L.P.
By: HLM Associates, II, L.P.
(its General Partner)
By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------------
General Partner
Address: 222 Berkeley Street
Boston, MA 02116
THE FORMANEK INVESTMENT TRUST
By:
--------------------------------------
Peter R. Formanek, Trustee
Address: 3030 Poplar Avenue
Memphis, TN 38111
-----------------------------------------
HOWARD E. COX, JR.
Address: Greylock
One Federal Street
26th Floor
Boston, MA 02110
-----------------------------------------
DAVID BELLET
Address: 125 East 72nd Street
New York, New York 10021
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<PAGE>
HLM PARTNERS II L.P.
By: HLM Associates, II, L.P.
(its General Partner)
By:
-------------------------------------
General Partner
Address: 222 Berkeley Street
Boston, MA 02116
THE FORMANEK INVESTMENT TRUST
By: /s/ Peter R. Formanek
--------------------------------------
Peter R. Formanek, Trustee
Address: 3030 Poplar Avenue
Memphis, TN 38111
-----------------------------------------
HOWARD E. COX, JR.
Address: Greylock
One Federal Street
26th Floor
Boston, MA 02110
-----------------------------------------
DAVID BELLET
Address: 125 East 72nd Street
New York, New York 10021
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<PAGE>
HLM PARTNERS II L.P.
By: HLM Associates, II, L.P.
(its General Partner)
By:
-------------------------------------
General Partner
Address: 222 Berkeley Street
Boston, MA 02116
THE FORMANEK INVESTMENT TRUST
By:
--------------------------------------
Peter R. Formanek, Trustee
Address: 3030 Poplar Avenue
Memphis, TN 38111
/s/ Howard E. Cox, Jr.
-----------------------------------------
HOWARD E. COX, JR.
Address: Greylock
One Federal Street
26th Floor
Boston, MA 02110
-----------------------------------------
DAVID BELLET
Address: 125 East 72nd Street
New York, New York 10021
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<PAGE>
HLM PARTNERS II L.P.
By: HLM Associates, II, L.P.
(its General Partner)
By:
-------------------------------------
General Partner
Address: 222 Berkeley Street
Boston, MA 02116
THE FORMANEK INVESTMENT TRUST
By:
--------------------------------------
Peter R. Formanek, Trustee
Address: 3030 Poplar Avenue
Memphis, TN 38111
-----------------------------------------
HOWARD E. COX, JR.
Address: Greylock
One Federal Street
26th Floor
Boston, MA 02110
/s/ David Bellet
-----------------------------------------
DAVID BELLET
Address: 125 East 72nd Street
New York, New York 10021
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<PAGE>
SCHEDULE A
INVESTORS
Galen Partners II, L.P.
Galen Partners International II, L.P.
Galen Associates
Warburg, Pincus Investors, L.P.
Harvest Partners International, L.P.
Deutsche Beteiligungsgesellschaft
Franklin Capital Associates II L.P.
HLM Partners II L.P.
The Formanek Investment Trust
Howard E. Cox, Jr.
David Bellet
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<PAGE>
SCHEDULE B
NON-EXEMPT INDIVIDUALS
Hugh A. Westbrook
Esther T. Colliflower
Donald E. Gaetz
Earl M. Collier, Jr.
J.R. Williams
<PAGE>
SCHEDULE 1
Exceptions to Certain Company Representations
1. Section 16 of the Company's Employee Stock Ownership Plan (the "Plan")
provides that to the extent the Company is entitled to a right of first
refusal with respect to proposed transfers of Company Stock (as defined in
the Plan) by ESOP participants, such right must be exercised during a
period not exceeding fourteen (14) days after receipt of a written offer
from the ESOP participant proposing to transfer Company Stock.
2. Under the terms of Stock Option Agreements entered into pursuant to the
Company's Management Equity Incentive Plan (the "MEIP"), the Company may
assign its right of first refusal to (i) any stockholder of the Company
who owns stock or securities having more than 35% of the combined voting
power of all classes of stock of the Company, (ii) certain employee
benefit plans (as defined therein), and (iii) an affiliate (as defined
therein) of the Company.
<PAGE>
SCHEDULE 2
(a) The phrase "to the best knowledge of such Investor" shall be
deleted.
(b) The phrase "an indirect ownership interest (as that term is
defined" shall be deleted and the phrase "a direct or indirect ownership
interest (as those terms are defined" shall be substituted therefor.
<PAGE>
Exhibit 10.7
AGREEMENT
THIS AGREEMENT ("Agreement") dated as of September 18, 1997 among VITAS
HEALTHCARE CORPORATION, a Delaware corporation ("Vitas"), CHEMED CORPORATION,
a Delaware corporation ("Chemed"), and OCR HOLDING COMPANY, a Nevada
corporation and a wholly owned subsidiary of Chemed ("OCR").
WHEREAS, OCR is the holder of (i) 270,000 shares of 9.0% Cumulative
Nonconvertible Preferred Stock, par value $1.00 per share ("9% Preferred
Stock"), of Vitas, (ii) Warrant No. A-1 dated December 17, 1991 to purchase
2,556,153 shares of the common stock, par value $.001 per share ("Common
Stock"), of Vitas, at an initial exercise price of $4.55 per share ("Warrant
A"), and (iii) Warrant No. B-1 dated December 17, 1991 to purchase 1,396,805
shares of Common Stock of Vitas, at an initial exercise price of $4.56 per
share ("Warrant B", and together with Warrant A, the "Chemed Warrants");
WHEREAS, the number of shares of Common Stock issuable under each Chemed
Warrant and the exercise price thereof has been adjusted pursuant to that
certain Acknowledgment, Stipulation and Waiver dated as of July 18, 1997
executed by each of Chemed and OCR (the "AS&W");
WHEREAS, Vitas is currently contemplating an initial public offering of
its Common Stock that, if consummated, would qualify as a "Qualified Initial
Public Offering" as such term is defined in Warrant A (the "Contemplated
Offering");
WHEREAS, in connection with the Contemplated Offering, Vitas has
requested that OCR and Chemed (i) consent to certain amendments to the
Certificate of Designation, Preferences and Other Rights of 9.0% Cumulative
Nonconvertible Preferred Stock of Vitas (the "9% Certificate of Designation")
as described in the form of Certificate of Amendment to Amended and Restated
Certificate of Incorporation of Vitas Healthcare Corporation attached as
Exhibit A hereto (the "Certificate of Amendment") and (ii) agree to waive
certain rights under, and take certain actions with respect to, each of the
Chemed Warrants, as more fully described herein;
WHEREAS, as an inducement to OCR's and Chemed's consent to the amendments
set forth in the Certificate of Amendment and OCR's and Chemed's agreement to
waive certain rights under, and take certain actions with respect to, each of
the Chemed Warrants as more fully described herein, OCR and Chemed have
requested that Vitas agree to take certain actions with respect to, and/or
modify the terms and provisions of, the 9% Preferred Stock and each of the
Chemed Warrants, as more fully described herein.
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NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained and other good and valuable consideration given
and received by each party, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Certificate of Amendment. OCR and Chemed hereby agree to execute and
deliver all consents, waivers or approvals required to be executed by either
or both of them in connection with the Certificate of Amendment. Chemed and
OCR hereby acknowledge that Vitas intends to file the Certificate of
Amendment with the Secretary of State of Delaware as soon as practicable
following Vitas' receipt of all consents, waivers or approvals required to be
obtained for the execution, delivery and filing thereof.
2. Waiver of Adjustments. OCR and Chemed hereby agree that
notwithstanding the terms of the Chemed Warrants, OCR and Chemed hereby waive
any adjustment to the number of shares of Common Stock issuable under each
Chemed Warrant and any adjustment to the Purchase Price per share (as such
term is defined in the Chemed Warrants) as a result of the issuance of a new
warrant to NationsBank, N.A. ("NationsBank") to purchase up to 291,918 shares
of the Corporation's Common Stock (the "NationsBank Warrants") pursuant to an
amendment to the Corporation's existing credit facility with NationsBank.
Vitas, OCR and Chemed hereby agree that promptly following the issuance of
the NationsBank Warrants, and in any event no later than 20 days following
the date of such issuance, Vitas, OCR and Chemed shall enter into a mutually
acceptable acknowledgment, stipulation and waiver as to the effect on the
Chemed Warrants of such NationsBank Warrants becoming exercisable, if at all,
such acknowledgment, stipulation and waiver to be in a form substantially
similar to the AS&W.
3. Redemption of 9% Preferred Stock. Vitas hereby agrees to redeem all
of the issued and outstanding shares of 9% Preferred Stock held by OCR
immediately upon and subject to the closing of the Contemplated Offering
using a portion of the net proceeds thereof, such redemption to be effected
by Vitas pursuant to the terms of the 9% Certificate of Designation, as
amended by the Certificate of Amendment.
4. Exercise of Warrant A. (a) OCR and Chemed hereby agree that
immediately prior and subject to the closing of the Contemplated Offering,
OCR shall exercise, and Chemed shall cause OCR to exercise, Warrant A, for
cash or by delivery of shares of 9% Preferred Stock in accordance with the
terms thereof, for such number of shares of Common Stock, at the then-current
exercise price therefor, such that the aggregate exercise price for such
shares paid to Vitas by OCR in respect of such shares equals at least
$3,000,000.
(b) OCR and Chemed hereby agree to notify Vitas in writing as soon as
practicable, and in any event at least three (3) business days prior to the
date Amendment No. 1 to the Registration Statement on Form S-1 is filed by
Vitas with the
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Securities and Exchange Commission with respect to the Contemplated Offering
(which is expected to occur on or about October 20, 1997), in the event OCR
intends to exercise Warrant A for a number of shares of Common Stock in
excess of the minimum number required to be exercised by OCR pursuant to the
terms of Section 4(a) of this Agreement. OCR and Chemed hereby agree that
notwithstanding the terms of Warrant A, the terms of Section 4(a) of this
Agreement or anything else to the contrary, in no event shall OCR be entitled
to exercise Warrant A for such number of shares of Common Stock, at the
then-current exercise price therefor, such that the aggregate exercise price
for such shares paid to Vitas by OCR in respect of such shares exceeds
$5,000,000 until the earlier of (1) a decision by the Board of Directors of
Vitas to abandon the Contemplated Offering and (2) April 1, 1998, unless
pursuant to Section 6 of Warrant A Vitas provides or is required to provide a
notice to the holder of Warrant A of a transaction of the type described in
Section 6 of Warrant A or as Vitas may otherwise approve in writing.
(c) OCR and Chemed acknowledge that pursuant to the terms of Section
2(c) of Warrant A, as modified by Section 6(a) below, Warrant A shall expire
upon the closing of the Contemplated Offering to the extent not exercised
prior to its expiration.
5. Payment in Respect of Warrant B. Vitas, Chemed and OCR hereby agree
that notwithstanding the terms of Warrant B, immediately prior and subject to
the closing of the Contemplated Offering (i) Vitas (using a portion of the
net proceeds of the Contemplated Offering) shall repurchase Warrant B from
OCR, and OCR shall sell Warrant B to Vitas, for an amount equal to the
greater of (x) (A) the spread value (if a positive number) as measured by the
difference of (I) the offering price to the public of a share of Common Stock
in the Contemplated Offering minus (II) the then-current exercise price of a
share of Common Stock pursuant to Warrant B, multiplied by (B) the number of
shares of Common Stock for which Warrant B is exercisable as of the closing
of the Contemplated Offering, and (y) $700,000, and (ii) upon such payment,
OCR shall surrender, and Chemed shall cause OCR to surrender, to Vitas
Warrant B for cancellation. Chemed and OCR hereby further agree that
notwithstanding the terms of Warrant B, OCR shall not be entitled exercise
Warrant B until the earlier of (1) a decision by the Board of Directors of
Vitas to abandon the Contemplated Offering and (2) April 1, 1998, unless
pursuant to Section 6 of Warrant B Vitas provides or is required to provide a
notice to the holder of Warrant B of a transaction of the type described in
Section 6 of Warrant B or as Vitas may otherwise approve in writing.
6. Amendment of Chemed Warrants. (a) Vitas, Chemed and OCR hereby agree
that Warrant A hereby is amended by deleting in its entirety Section 2(c)
thereof and replacing it with the following:
"(c) Expiration of Warrant. Subject to the terms and conditions
hereof, including Sections 6 and 7 hereof, this Warrant, or any portion
of this Warrant then outstanding, shall expire at the earlier of (1)
eight years from the date it is first issued, as set forth on page 1
above (the "Expiration
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Date")(provided that if all of the issued and outstanding shares of the
Company's 9% Preferred Stock have not been redeemed on or prior to March
31, 1998, the Expiration Date shall automatically be extended by that
number of days equal to the number of days beyond March 31, 1998 that all
or any portion of the issued and outstanding shares of the 9% Preferred
Stock remain outstanding, but in no event shall the Expiration Date be
extended beyond December 16, 2005), or (2) upon the closing of a public
offering of the Company's Common Stock resulting in gross proceeds of not
less than $12 million and at a total market capitalization of the common
equity of the Company at that time of not less than $60 million (a
"Qualified Initial Public Offering")."
(b) Vitas, Chemed and OCR hereby agree that Warrant B hereby is amended
by deleting in its entirety Section 2(c) thereof and replacing it with the
following:
"(c) Expiration of Warrant. Subject to the terms and conditions
hereof, including Sections 6 and 7 hereof, this Warrant, or any portion
of this Warrant then outstanding, shall expire, unless it is exercised
in full prior to its expiration, eight years from the date it is first
issued, as set forth on page 1 above (the "Expiration Date")(provided
that if all of the issued and outstanding shares of the Company's 9%
Preferred Stock have not been redeemed on or prior to March 31, 1998,
the Expiration Date shall automatically be extended by that number of
days equal to the number of days beyond March 31, 1998 that all or any
portion of the issued and outstanding shares of the 9% Preferred Stock
remain outstanding, but in no event shall the Expiration Date be
extended beyond December 16, 2005)."
7. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with, the laws of the State of Delaware (excluding the
choice of law provisions thereof).
8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be considered an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to
be duly executed and delivered on its behalf as of the date set first set
forth above.
VITAS HEALTHCARE CORPORATION
By: /s/ Hugh A. Westbrook
-----------------------------
Name: Hugh A. Westbrook
Title: Chairman and Chief
Executive Officer
CHEMED CORPORATION
By: /s/ Timothy S. O'Toole
-----------------------------
Name: Timothy S. O'Toole
Title: Executive Vice President
& Treasurer
OCR HOLDING COMPANY
By: /s/ Kevin J. McNamara
-----------------------------
Name: Kevin J. McNamara
Title: Vice President
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Exhibit A
VITAS AGREES TO PROVIDE A COPY OF THIS EXHIBIT TO THE COMMISSION UPON REQUEST.
<PAGE>
EXHIBIT 10.31
VITAS HEALTHCARE CORPORATION
MANAGEMENT EQUITY INCENTIVE PLAN
VITAS HEALTHCARE CORPORATION, a Delaware corporation (formerly named
Hospice Care International) (the "Corporation"), sets forth herein the terms of
this Management Equity Incentive Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to advance the interests of the Corporation and
any "subsidiary corporation" thereof within the meaning of Section 424(f) of the
Internal Revenue Code of 1986 (a "Subsidiary") by providing eligible individuals
(as designated pursuant to Section 4 below) with incentives to improve business
results, by providing an opportunity to acquire or increase a proprietary
interest in the Corporation, which thereby will create a stronger incentive to
expend maximum effort for the growth and success of the Corporation and its
Subsidiaries, and will encourage such eligible individuals to continue to serve
the Corporation and its Subsidiaries, whether as an employee, as a director, as
an independent contractor or in some other capacity. To this end, the Plan
provides for the grant of stock options, as set out herein.
This Plan provides for the grant of stock options (each of which is
an "Option") in accordance with the terms of the Plan. An Option may be an
incentive stock option (an "ISO") intended to satisfy the applicable
requirements under Section 422 of the Internal Revenue Code of 1986, as amended
from time to time, or the corresponding provision of any subsequently-enacted
tax statute (the "Code"), or a nonqualified stock option (an "NSO"). An Option
is an NSO to the extent that the Option would exceed the limitations set forth
in Section 7 below. An Option is also an NSO if either (i) the Option is
specifically designated at the time of grant as not being an ISO or (ii) the
Option does not otherwise satisfy the requirements of Code Section 422 at the
time of grant. Each Option shall be evidenced by a written agreement between the
Corporation and the recipient individual that sets out the terms and conditions
of the grant as further described in Section 8.
2. ADMINISTRATION
(a) Board. The Plan shall be administered by the Board of Directors
of the Corporation (the "Board"), which shall have the full power and authority
to take all actions and
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to make all determinations required or provided for under the Plan or any
Option granted or Option Agreement (as defined in Section 8 below) entered into
hereunder and all such other actions and determinations not inconsistent with
the specific terms and provisions of the Plan deemed by the Board to be
necessary or appropriate to the administration of the Plan or any Option granted
or Option Agreement entered into hereunder. The interpretation and construction
by the Board of any provision of the Plan or of any Option granted or Option
Agreement entered into hereunder shall be final and conclusive.
(b) Action by Committee. The Board may from time to time appoint a
Stock Option Committee (the "Committee") consisting of two or more members of
the Board of Directors who, in the sole discretion of the Board, may be the same
Directors who serve on the Compensation Committee, subject to Section 2(d). The
Board, in its sole discretion, may provide that the role of the Committee shall
be limited to making recommendations to the Board concerning any determinations
to be made and actions to be taken by the Board pursuant to or with respect to
the Plan, or the Board may delegate to the Committee such powers and authorities
related to the administration of the Plan, as set forth in Section 2(a) above,
as the Board shall determine, consistent with the Certificate of Incorporation
and By-laws of the Corporation and applicable law. In the event that the Plan or
any Option granted or Option Agreement entered into hereunder provides for any
action to be taken by or determination to be made by the Board, such action may
be taken by or such determination may be made by the Committee if the power and
authority to do so has been delegated to the Committee by the Board as provided
for in this Section. Unless otherwise expressly determined by the Board, any
such action or determination by the Committee shall be final and conclusive.
(c) No Liability. No member, of the Board or of the Committee shall
be liable for any action or determination made in good faith with respect to the
Plan or any Option granted or Option Agreement entered into hereunder.
(d) Applicability of Rule 16b-3. Those provisions of the Plan that
make express reference to Rule 16b-3 shall apply to the Corporation only at such
time as the Corporation's Stock (as defined in Section 3) is registered under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and then
only to such persons as are required to file reports under Section 16(a) of the
Exchange Act (each of whom is a "Reporting Person"). From and after such time as
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the Corporation's Stock is registered under the Exchange Act (the "Registration
Date"), the Board may act under the Plan (i) only if all members of the Board
are "disinterested persons" as defined in Rule 16b-3 or (ii) by the
determination of the Committee constituted as set forth in the following
sentence. From and after the Registration Date, the Committee appointed pursuant
to Section 2(b) shall consist of not fewer than two members of the Board none of
whom, during the period of service on such Committee, and the twelve months
prior thereto, shall have been granted or awarded an Option under this Plan or
been granted or awarded an option or other security under any plan of the
Corporation other than as permitted under Rule 16b-3(c)(2)(i), and each of whom
shall qualify (at the time of appointment to the Committee and during all
periods of service on the Committee) in all respects as a "disinterested person"
as defined in Rule 16b-3.
3. STOCK
The stock that may be issued pursuant to Options under the Plan
shall be shares of common stock, par value $.00l per share, of the Corporation
(the "Stock"), which shares may be treasury shares or authorized but unissued
shares. The number of shares of Stock that may be issued pursuant to Options
under the Plan shall not exceed, in the aggregate, One Million Two Hundred
Eighty-Two Thousand (1,282,000) shares. If any Option expires, terminates, or is
terminated or cancelled for any reason prior to exercise, the shares of Stock
that were subject to the unexercised, forfeited, terminated or cancelled portion
of such Option shall be available immediately for future grants of Options under
the Plan; provided, however, shares of Stock that were subject to an Option that
has been purchased pursuant to Section 11(c) shall not be available for future
grants of Options under the Plan.
4. ELIGIBILITY
(a) Designated Recipients. Subject to the next sentence, Options may
be granted under the Plan to (i) any full-time employee of the Corporation or
any Subsidiary (including any such individual who is an officer or director of
the Corporation or any Subsidiary) as the Board shall determine and designate
from time to time or (ii) any other individual (including a non-employee
director of, or independent contractor providing services to, the Corporation or
any Subsidiary) whose participation in the Plan is determined by the Board to be
in the best interests of the Corporation and is
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so designated by the Board. Options granted to a full-time employee shall be
either ISOs or NSOs, as determined in the sole discretion of the Board, and
Options granted to any other individual shall be NSOs.
(b) Successive Grants. An individual may hold more than one Option,
subject to such restrictions as are provided herein.
5. EFFECTIVE DATE AND TERM OF THE PLAN
(a) Effective Date. The Plan shall be effective as of the date of
adoption by the Board, subject to approval of the Plan within one year of such
effective date by the affirmative vote of holders of a majority of the
outstanding Stock entitled to vote, voting either in person or by proxy, at a
duly held meeting of the stockholders or by written consent as permitted by law
and in a manner that satisfies the requirements of Rule 16b-3(b) of the Exchange
Act. Upon approval of the Plan by the stockholders of the Corporation as set
forth above, however, all Options granted under the Plan on or after the
effective date shall be fully effective as if the stockholders of the
Corporation had approved the Plan on the Plan's effective date. If the
stockholders fail to approve the Plan within one year of such effective date,
any Options granted hereunder shall be null and void and of no effect.
(b) Term. The Plan shall have no termination date, but no grant of
an ISO may occur after the date that is ten years after the effective date.
6. GRANT OF OPTIONS
Options. Subject to the terms and conditions of the Plan, the Board
may, at any time and from time to time, grant to such eligible individuals as
the Board may determine (each of the whom is an "Optionee"), Options to purchase
such number of shares of Stock on such terms and conditions as the Board may
determine, including any terms or conditions that may be necessary to qualify
such Options as ISOs under Section 422 of the Code. Such authority specifically
includes the authority, in order to effectuate the purposes of the Plan but
without amending the Plan, to modify grants to eligible individuals who are
foreign nationals or are individuals who are employed outside the United States
to recognize differences in local law, tax policy, or custom.
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7. LIMITATIONS ON INCENTIVE STOCK OPTIONS
(a) Price and Dollar Limitations. An Option that is designated as
being one that is intended to qualify as an ISO shall qualify for treatment as
an ISO only to the extent that the aggregate fair market value (determined at
the time the Option is granted) of the Stock with respect to which all options
that are intended to constitute "incentive stock options," within the meaning of
Code Section 422, are exercisable for the first time by any Optionee during any
calendar year (under the Plan and all other plans of the Optionee's employer
corporation and its parent and subsidiary corporations within the meaning of
Section 422(d) of the Code) does not exceed $100,000.
(b) Parachute Limitations. Notwithstanding any other provision of
this Plan or of any other agreement, contract, or understanding heretofore or
hereafter entered into by the Optionee with the Corporation, except an
agreement, contract, or understanding hereafter entered into that expressly
modifies or excludes application of this paragraph (an "Other Agreement"), and
notwithstanding any formal or informal plan or other arrangement for the direct
or indirect provision of compensation to the Optionee (including groups or
classes of participants or beneficiaries of which the Optionee is a member),
whether or not such compensation is deferred, is in cash, or is in the form of a
benefit to or for the Optionee (a "Benefit Arrangement"), if the Optionee is a
"disqualified individual," as defined in Section 280G(c) of the Code, any Option
held by that Optionee and any right to receive any payment or other benefit
under this Plan shall not become exercisable or vested (i) to the extent that
such right to exercise, vesting, payment, or benefit, taking into account all
other rights, payments, or benefits to or for the Optionee under this Plan, all
Other Agreements, and all Benefit Arrangements, would cause any payment or
benefit to the Optionee under this Plan to be considered a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code as then in effect (a
"Parachute Payment") and (ii) if, as a result of receiving a Parachute Payment,
the aggregate after-tax amounts received by the Optionee from the Corporation
under this Plan, all Other Agreements, and all Benefit Arrangements would be
less than the maximum after-tax amount that could be received by him without
causing any such payment or benefit to be considered a Parachute Payment. In the
event that the receipt of any such right to exercise, vesting, payment, or
benefit under this Plan, in conjunction with all other rights, payments, or
benefits to or for the Optionee under any Other Agreement or any Benefit
Arrangement would cause the Optionee
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to be considered to have received a Parachute Payment under this Plan that would
have the effect of decreasing the after-tax amount received by the Optionee as
described in clause (ii) of the preceding sentence, then the Optionee shall have
the right, in the Optionee's sole discretion, to designate those rights,
payments, or benefits under this Plan, any Other Agreements, and any Benefit
Arrangements that should be reduced or eliminated so as to avoid having the
payment or benefit to the Optionee under this Plan be deemed to be a Parachute
Payment.
8. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by
agreements ("Option Agreements"), to be executed by the Corporation and by the
Optionee, in such form or forms as the Board shall from time to time determine.
Option Agreements covering Options granted from time to time or at the same
time need not contain similar provisions; provided, however, that all such
Option Agreements shall comply with all terms of the Plan.
9. OPTION PRICE
The purchase price of each share of the Stock subject to an Option
(the "Option Price") shall be fixed by the Board and stated in each Option
Agreement. In the case of an Option intended to constitute an ISO, the Option
Price shall be not less than the greater of par value or 100 percent of the fair
market value of a share of Stock on the date on which the Option is granted (as
determined in good faith by the Board); provided, however, that in the event the
Optionee would otherwise be ineligible to receive an ISO by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to stock
ownership of more than ten percent), the Option Price of an Option that is
intended to be an ISO shall not be less than the greater of par value or 110
percent of the fair market value of a share of Stock at the time such Option is
granted. In the event that the Stock is listed on an established national or
regional stock exchange, is admitted to quotation on the National Association of
Securities Dealers Automated Quotation System, or is publicly traded in an
established securities market, in determining the fair market value of the
Stock, the Board shall use the closing price of the Stock on such exchange or
system or in such market (the highest such closing price if there is more than
one such exchange or market) on the trading date immediately before the
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Option is granted (or, if there is no such closing price, then the Board shall
use the mean between the highest bid and lowest asked prices or between the high
and low prices on such date), or, if no sale of the Stock has been made on such
day, on the next preceding day on which any such sale shall have been made. In
the case of an Option that is an NSO, the Option Price shall not be less than
par value.
10. TERM AND EXERCISE OF OPTIONS
(a) Term. Upon the expiration of ten years from the date on which an
ISO is granted or on such date prior thereto as may be fixed by the Board and
stated in the Option Agreement relating to such Option, that ISO shall be
ineligible for treatment as an "incentive stock option," as defined in Section
422 of the Code, and shall be exercisable only as an NSO. In the event the
Optionee otherwise would be ineligible to receive an "incentive stock option" by
reason of the provisions of Sections 422(b)(6) and 424(d) of the Code (relating
to stock ownership of more than 10 percent), such ten year restriction on
exercisability as an ISO shall be read to impose a five year restriction on such
exercisability. If an Optionee shall terminate employment prior to the ten-year
or five-year limitation described in the immediately preceding sentences, any
outstanding ISO shall be ineligible for treatment as an "incentive stock
option," as defined in Section 422 of the Code, and shall be exercisable only as
an NSO, unless exercised within three months after such termination or, in the
case of termination on account of "permanent and total disability" (within the
meaning of Section 22(e)(3) of the Code), within one year after such
termination.
(b) Option Period and Limitations on Exercise. Each Option granted
under the Plan shall be exercisable, in whole or in part, at any time and from
time to time, over a period commencing on or after the date of grant and, to the
extent that the Board determines and sets forth a termination date for such
Option in the Option Agreement (including any amendment thereto), ending upon
the stated expiration or termination date. The Board in its sole discretion may
specify events or circumstances, including the giving of notice, which will
cause an Option to terminate as set forth in the Option Agreement or in this
Plan. No Option granted to a Reporting Person shall be exercisable during the
first six months after the date of grant. Without limiting the foregoing but
subject to the terms and conditions of the Plan, the Board may in its sole
discretion provide that an Option may not be exercised in
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whole or in part for any period or periods of time during which such Option is
outstanding and may condition exercisability of an Option upon the attainment of
performance objectives, upon continued service, upon certain events or
transactions, or a combination of one or more of such factors, or otherwise, as
set forth in the Option Agreement. Subject to the parachute payment restrictions
under Section 7(b), however, the Board, in its sole discretion, may rescind,
modify, or waive any such limitation or condition on the exercise of an Option
contained in any Option Agreement, so as to accelerate the time at which the
Option may be exercised. Notwithstanding any other provisions of the Plan, no
Option granted to an Optionee under the Plan shall be exerisable in whole or in
part prior to the date on which the stockholders of the Corporation approve the
Plan, as provided in Section 5 above.
(c) Method of Exercise. An Option that is exercisable hereunder may
be exercised by delivery to the Corporation on any business day, at the
Corporation's principal office, addressed to the attention of the President, of
written notice of exercise, which notice shall specify the number of shares with
respect to which the Option is being exercised and shall be accompanied by
payment in full of the Option Price of the shares for which the Option is being
exercised. The minimum number of shares of Stock with respect to which an Option
may be exercised, in whole or in part, at any time shall be the lesser of (i)
100 shares or such lesser number set forth in the applicable Option Agreement
and (ii) the maximum number of shares available for purchase under the Option at
the time of exercise. Payment of the Option Price for the shares of Stock
purchased pursuant to the exercise of an Option shall be made (i) in cash or in
cash equivalents; (ii) to the extent permitted by applicable law and under the
terms of the Option Agreement with respect to such Option, through the tender to
the Corporation of shares of Stock, which shares shall be valued, for purposes
of determining the extent to which the Option Price has been paid thereby, at
their fair market value (determined in accordance with Section 9) on the date of
exercise; (iii) to the extent permitted by applicable law and under the terms
of the Option Agreement with respect to such Option, by the delivery of a
promissory note of the person exercising the Option to the Corporation on such
terms as shall be set out in such Option Agreement; (iv) to the extent permitted
by applicable law and under the terms of the Option Agreement with respect to
such Option, by causing the Corporation to withhold shares of Stock otherwise
issuable pursuant to the exercise of an Option equal in value to the Option
Price or portion thereof to be satisfied pursuant to this clause (iv); or (v) by
a combination of the methods
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described in (i), (ii), (iii), and (iv). An attempt to exercise any Option
granted hereunder other than as set forth above shall be invalid and of no force
and effect. Promptly after the exercise of an Option and the payment in full of
the Option Price of the shares of Stock covered thereby, the individual
exercising the Option shall be entitled to the issuance of a Stock certificate
or Stock certificates evidencing his ownership of such shares. A separate Stock
certificate or separate Stock certificates shall be issued for any shares
purchased pursuant to the exercise of an Option that is an ISO, which
certificate or certificates shall not include any shares that were purchased
pursuant to the exercise of an Option that is an NSO. Unless otherwise stated in
the applicable Option Agreement, an individual holding or exercising an Option
shall have none of the rights of a stockholder (for example, the right to
receive cash or stock dividend payments attributable to the subject shares or to
direct the voting of the subject shares) until the shares of Stock covered
thereby are fully paid and issued to him. Except as provided in Section 16
below, no adjustment shall be made for dividends or other rights for which the
record date is prior to the date of such issuance. Shares issued pursuant to the
exercise of any Option shall be subject to the applicable restrictions set out
in Section 11 hereof.
(d) Date of Grant. The date of grant of an Option under this Plan
shall be the later of (i) the date as of which the Board approves the grant and
(ii) the date as of which the Optionee and the Corporation or Subsidiary enter
the relationship resulting in the Optionee being eligible for grants.
11. TRANSFERABILITY OF STOCK AND OPTIONS
(a) Limitations on Transfer. During the lifetime of an Optionee,
only such Optionee (or, in the event of legal incapacity or incompetency, the
guardian or legal representative of the Optionee) may exercise the Option,
except as otherwise specifically permitted by this Section 11(a). No ISO shall
be assignable or transferable other than by will, in accordance with the laws
of descent and distribution. Subject to the terms of the applicable Option
Agreement, and to the extent the transfer is in compliance with the requirements
of Rule 16b-3 and any other applicable restrictions on transfers, an Optionee
who is not a Reporting Person may transfer an NSO to a family member of the
Optionee (defined as an individual who is related to the Optionee by blood or
adoption), to a trust established and maintained for the benefit of the
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Optionee or a family member of the Optionee (as determined under applicable
state law and the Code), or to a charitable organization to which contributions
are deductible under Code Section 170 (without regard to any percentage
limitations thereon).
(b) Repurchase Rights. In the Board's sole discretion, the Board may
provide in an Option Agreement that upon the termination of an Optionee's
employment or other relationship with the Corporation or a Subsidiary (whether
as an employee, a director, an independent contractor providing services to the
Corporation or a Subsidiary, or otherwise), the Corporation shall have the
right, for a period of up to twelve months following such termination, to
repurchase any or all of the shares acquired by the individual pursuant to this
Plan under an Option (including shares that were previously transferred pursuant
to Section 11(d) below, unless otherwise specified in the Option Agreement), at
a price equal to the fair market value of such shares on the date of termination
(or at such other price or the fair market value on such other date as shall
have been specified by the Board at the time of grant and set out in the
appropriate Option Agreement with respect to the grant). In the Board's sole
discretion and pursuant to the terms of Section 12, the Board may also provide
in an Option Agreement that upon the exercise of an Option following termination
of an Optionee's employment or other relationship with the Corporation or a
Subsidiary (whether as an employee, a director, an independent contractor
providing services to the Corporation or a Subsidiary, or otherwise), the
Corporation shall have the right, for a period of up to twelve months following
such exercise, to repurchase any or all such shares of Stock acquired by the
Optionee pursuant to such exercise of such Option at a price that is equal to
the fair market value of such shares (including shares that were previously
transferred pursuant to Section 11(d) below, unless otherwise specified in the
Option Agreement) on the date of exercise (or at such other price or the fair
market value on such other date as shall have been specified by the Board at the
time of grant and set out in the appropriate Option Agreement with respect to
the grant). In the event that the Corporation determines that it cannot or will
not exercise its rights to purchase Stock under this Section 11(b) and the
applicable Option Agreement, in whole or in part, the Corporation may assign its
rights, in whole or in part, to (i) any stockholder of the Corporation who owns
stock or securities of the Corporation having more than 35 percent of the
combined voting power of all classes of stock of the Corporation (a
"Stockholder"), (ii) any employee benefit plan (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended)
maintained
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by the Corporation or a Subsidiary for the benefit of employees of the
Corporation or a Subsidiary (a "Benefit Plan"), or (iii) any corporation or
other trade or business that is controlled by or under common control with the
Corporation (determined in accordance with the principles of Sections 414(b) and
(c) of the Code and regulations thereunder) (an "Affiliate"). The Corporation
shall give reasonable written notice to the individual of any assignment of its
rights. "Fair market value," for purposes of this Section 11(b), shall be
determined by the Board in the same manner used by it in good faith to determine
fair market value for purposes of determining the Option Price pursuant to
Section 9.
(c) Purchase of Options. In the Board's sole discretion, the Board
may provide in an Option Agreement that upon or after the termination of an
Optionee's employment or other relationship with the Corporation or a Subsidiary
(whether as an employee, a director, an independent contractor providing
services to the Corporation or a Subsidiary, or otherwise), the Corporation
shall have the right, at all times before the Option is exercised, to purchase
in whole or in part each Option held by the Optionee (and each Option
transferred by the Optionee pursuant to Section 11(a) above unless otherwise
specified in the Option Agreement), at a price equal to the value of such Option
on the date the Corporation delivers to the Optionee a notice that it is
exercising such purchase rights. For this purpose, the value of the Option (or
portion thereof being purchased) is equal to the excess (if any) of the fair
market value of the shares of Stock that are subject to the Option, (determined
by the Board in the same manner used by it in good faith to determine fair
market value for purposes of determining the Option Price pursuant to Section 9)
as of the date of such notice, over the aggregate Option Price of such shares.
Upon payment (or tender of payment) of the applicable amount to the Optionee (or
transferee of the Option), the Option shall be terminated and, if payment has
been tendered but not made, shall only represent the right to receive such
payment without interest.
(d) Nontransferability of Shares. In the Board's sole discretion,
the Board may provide in an Option Agreement that an Optionee (or such other
individual who is entitled to exercise an Option) shall not sell, pledge,
assign, gift, transfer, or otherwise dispose of any shares of Stock acquired
pursuant to an Option to anyone without first offering such shares to the
Corporation for purchase on the same terms and conditions as those offered the
proposed transferee. If such a restriction applies to an individual pursuant to
an Option Agreement, an individual who proposes such a transfer
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(the "Transferor") shall notify the Corporation, in writing, of the identity of
the proposed transferee and the terms and conditions of such proposed transfer.
The Corporation may exercise its right of first refusal within 90 days after
receiving such notice of the proposed transfer. The Corporation may assign its
right of first refusal under this Section 11(d), in whole or in part, to a
Stockholder, a Benefit Plan, or an Affiliate. The Corporation shall give
reasonable written notice to the Transferor of any such assignment of its
rights. If the Corporation (or its permitted assignee) fails to exercise such
right of first refusal during this 90-day period, the Transferor may proceed
with the proposed transfer at any time within the next 45 days, and if he does
not do so, the restrictions of this Section 11(d) shall re-apply. The Option
Agreement may provide that the restrictions of this Section 11(d) re-apply to
any person to whom Stock that was originally acquired pursuant to an Option is
sold, pledged, assigned, bequeathed, gifted, transferred or otherwise disposed
of, without regard to the number of such subsequent transferees or the manner in
which they acquire the Stock, but the Option Agreement may provide that the
restrictions of this Section 11(d) do not apply to a transfer of Stock that
occurs as a result of the death of the Transferor or of any subsequent
transferee (but shall apply to the executor, the administrator or personal
representative, the estate, and the legatees, beneficiaries and assigns
thereof).
(e) Legend. In order to enforce the restrictions imposed upon shares
of Stock under this Plan or as provided in an Option Agreement, the Board may
cause a legend or legends to be placed on any certificate representing shares
issued pursuant to this Plan that complies with the applicable securities laws
and regulations and makes appropriate reference to the restrictions imposed
under it.
(f) Put Rights. The Board, by inclusion of appropriate language in
the Option Agreement, may grant the person acquiring shares of Stock thereunder
the right to put such shares to the Corporation at the fair market value of such
shares (as determined hereunder) at the time of exercise of such put, or at such
other value as shall be specified in the Option Agreement, subject to such
further terms and conditions as the Board shall include in the Option Agreement.
12. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP OF OPTIONEE
In the Board's sole discretion, the Board may include language in an
Option Agreement providing for the termination
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<PAGE>
of any unexercised Option in whole or in part upon or at any time after the
termination of employment or other relationship of the Optionee with the
Corporation or a Subsidiary (whether as an employee, a director, an independent
contractor providing services to the Corporation or a Subsidiary, or otherwise).
Whether a leave of absence or leave on military or government service shall
constitute a termination of employment or other relationship of the Optionee
with the Corporation or a Subsidiary for purposes of the Plan shall be
determined by the Board, which determination shall be final and conclusive.
13. USE OF PROCEEDS
The proceeds received by the Corporation from the sale of Stock
pursuant to the exercise of Options granted under the Plan shall constitute
general funds of the Corporation.
14. REQUIREMENTS OF LAW
The Corporation shall not be required to sell or issue any shares of
Stock under any Option if the sale or issuance of such shares would constitute a
violation by the Optionee, the individual exercising the Option, or the
Corporation of any provisions of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations. If at any time the Corporation shall determine, in its discretion,
that the listing, registration, or qualification of any shares subject to the
Option upon any securities exchange or under any state or federal law, or the
consent or approval of any government regulatory or self-regulatory body is
necessary or desirable as a condition of, or in connection with, the issuance or
purchase of shares, the Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Corporation,
and any delay caused thereby shall in no way affect the date of termination of
the Option. Specifically in connection with the Securities Act of 1933 (as now
in effect or as hereafter amended), upon the exercise of any Option, unless a
registration statement under such Act is in effect with respect to the shares of
Stock covered thereby, the Corporation shall not be required to sell or issue
such shares unless the Board has received evidence satisfactory to it that the
holder of such Option may acquire such shares pursuant to an exemption from
registration under such Act. Any determination in this connection by the Board
shall be final, binding, and conclusive. The Corporation may,
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but shall in no event be obligated to, register any securities covered hereby
pursuant to the Securities Act of 1933 (as now in effect or as hereafter
amended). The Corporation shall not be obligated to take any affirmative action
in order to cause the exercise of an Option or the issuance of shares pursuant
thereto to comply with any law or regulation of any governmental authority. As
to any jurisdiction that expressly imposes the requirement that an Option shall
not be exercisable unless and until the shares of Stock covered by such Option
are registered or are subject to an available exemption from registration, the
exercise of such Option (under circumstances in which the laws of such
jurisdiction apply) shall be deemed conditioned upon the effectiveness of such
registration or the availability of such an exemption.
15. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Options have not been
granted; provided, however, that no amendment by the Board shall, without
approval by the affirmative vote of stockholders who hold at least a majority of
the outstanding shares of stock of the Corporation entitled to vote thereon and
who vote in person or by proxy at a duly constituted stockholders' meeting, or
by consent as permitted by law, cause the Plan to not comply with Rule 16b-3 (or
any successor rule or other regulatory requirements) or the Code. The
Corporation, however, may retain the right in an Option Agreement to convert an
ISO into an NSO. The Corporation may also retain the right in an Option
Agreement to cause a forfeiture of the shares or gain realized by a holder of an
Option on account of the holder taking actions in "competition with the
Corporation," as defined in the applicable Option Agreement. Furthermore, the
Corporation may, in the Option Agreement, retain the right to annul the grant of
an Option, if the holder of such grant was an employee of the Corporation or a
Subsidiary and is terminated "for cause," as defined in the applicable Option
Agreement. Except as permitted under this Section 15 or Section 16 hereof, no
amendment, suspension, or termination of the Plan shall, without the consent of
the holder of the Option, alter or impair rights or obligations under any Option
theretofore granted under the Plan.
16. EFFECT OF CHANGES IN CAPITALIZATION
(a) Changes in Stock. If the number of outstanding shares of Stock
is increased or decreased or the
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shares of Stock are changed into or exchanged for a different number or kind of
shares or other securities of the Corporation on account of any
recapitalization, reclassification, stock split-up, combination of shares,
exchange of shares, stock dividend or other distribution payable in capital
stock, or other increase or decrease in such shares effected without receipt of
consideration by the Corporation, occurring after the effective date of the
Plan, the number and kind of shares for the acquisition of which Options may be
granted under the Plan shall be adjusted proportionately and accordingly by the
Corporation. In addition, the number and kind of shares for which Options are
outstanding shall be adjusted proportionately and accordingly so that the
proportionate interest of the holder of the Option immediately following such
event shall, to the extent practicable, be the same as immediately before such
event. Any such adjustment in outstanding Options shall not change the
aggregate Option Price payable with respect to shares that are subject to the
unexercised portion of the Option outstanding but shall include a corresponding
proportionate adjustment in the Option Price per share.
(b) Reorganization in Which the Corporation Is the Surviving
Corporation. Subject to Subsection (c)(iv) hereof, if the Corporation shall be
the surviving corporation in any reorganization, merger, or consolidation of the
Corporation with one or more other corporations, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger, or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger, or consolidation.
(c) Dissolution, Liquidation, Sale of Assets, Reorganization in
which the Corporation Is Not the Surviving Corporation, Etc. The Plan and all
Options outstanding hereunder shall terminate (i) upon the dissolution or
liquidation of the Corporation, or (ii) upon a merger, consolidation, or
reorganization of the Corporation with one or more other corporations in which
the Corporation is not the surviving corporation, or (iii) upon a sale of
substantially all of the assets of the Corporation to another person or entity,
or (iv) upon a merger, consolidation or reorganization (or other transaction if
so determined by the Board in its sole discretion) in which the Corporation is
the surviving
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<PAGE>
corporation, that is approved by the Board and that results in any person or
entity (other than persons who are holders of Stock of the Corporation at the
time the Plan is approved by the stockholders and other than an Affiliate)
owning 80 percent or more of the combined voting power of all classes of stock
of the Corporation, except to the extent provision is made in writing in
connection with any such transaction covered by clauses (i) through (iv) for the
continuation of the Plan or the assumption of such Options theretofore granted,
or for the substitution for such Options of new options covering the stock of a
successor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and exercise prices, in which
event the Plan and Options theretofore granted shall continue in the manner and
under the terms so provided. In the event of any such termination of the Plan,
each individual holding an Option shall have the right (subject to the general
limitations on exercise set forth in Section 10(b) above), during such period
occurring before such termination as the Board in its sole discretion shall
determine and designate, and in any event immediately before the occurrence of
such termination, to exercise such Option in whole or in part, to the extent
that such Option was otherwise exercisable at the time such termination occurs,
except that, by inclusion of appropriate language in an Option Agreement, the
Board may provide that the Option may be exercised before termination without
regard to any installment limitation or other condition on exercise imposed
pursuant to Section 10(b) above. The Corporation shall send written notice of a
transaction or event that will result in such a termination to all individuals
who hold Options not later than the time at which the Corporation gives notice
thereof to its stockholders.
(d) Adjustments. Adjustments under this Section 16 related to stock
or securities of the Corporation shall be made by the Board, whose determination
in that respect shall be final, binding, and conclusive. No fractional shares of
Stock or units of other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share or unit.
(e) No Limitations on Corporation. The grant of an Option pursuant
to the Plan shall not affect or limit in any way the right or power of the
Corporation to make adjustments, reclassifications, reorganizations, or changes
of its capital or business structure or to merge, consolidate, dissolve, or
liquidate, or to sell or transfer all or any part of its business or assets.
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<PAGE>
17. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option
Agreement entered into pursuant to the Plan shall be construed to confer upon
any individual the right to remain in the employ or service of or to maintain a
relationship with the Corporation or any Subsidiary, or to interfere in any way
with any contractual or other right or authority of the Corporation or any
Subsidiary either to increase or decrease the compensation or other payments to
any individual at any time, or to terminate any employment or other relationship
between any individual and the Corporation or any Subsidiary. The obligation of
the Corporation to pay any benefits pursuant to this Plan shall be interpreted
as a contractual obligation to pay only those amounts described herein, in the
manner and under the conditions prescribed herein. The Plan shall in no way be
interpreted to require the Corporation to transfer any amounts to a third party
trustee or otherwise hold any amounts in trust or escrow for payment to any
participant or beneficiary under the terms of the Plan.
18. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to
the stockholders of the Corporation for approval shall be construed as creating
any limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
19. CAPTIONS
The use of captions in this Plan or any Option Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Option Agreement.
20. DISQUALIYING DISPOSITIONS
If Stock acquired by exercise of an ISO granted under this Plan is
disposed of within two years following the date of grant of the ISO or one year
following the transfer of the
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subject Stock to the Optionee (a "disqualifying disposition"), the holder of the
Stock shall, immediately prior to such disqualifying disposition, notify the
Corporation in writing of the date and terms of such disposition and provide
such other information regarding the disposition as the Corporation may
reasonably require.
21. WITHHOLDING TAXES
(a) The Corporation shall have the right to deduct from payments of
any kind otherwise due to an Optionee any Federal, state, or local taxes of any
kind required by law to be withheld with respect to any shares issued upon the
exercise of an Option under the Plan. At the time of exercise, the Optionee
shall pay to the Corporation any amount that the Corporation may reasonably
determine to be necessary to satisfy such withholding obligation. The Board in
its sole discretion may provide in the Option Agreement that, subject to the
prior approval of the Corporation, which may be withheld by the Corporation in
its sole discretion, the Optionee may elect to satisfy such obligations, in
whole or in part, (i) by causing the Corporation to withhold shares of Stock
otherwise issuable pursuant to the exercise of an Option or (ii) by delivering
to the Corporation shares of Stock already owned by the Optionee. The shares so
delivered or withheld shall have a fair market value equal to such withholding
obligations. The fair market value of the shares used to satisfy such
withholding obligation shall be determined by the Corporation as of the date
that the amount of tax to be withheld is to be determined. An Optionee who has
made an election pursuant to this Section 21(a) may only satisfy his or her
withholding obligation with shares of Stock that are not subject to any
repurchase, forfeiture, unfulfilled vesting, or other similar requirements.
(b) Notwithstanding the foregoing, in the case of a Reporting Person,
no election to use shares for the payment of withholding taxes shall be
effective unless made in compliance with any applicable requirements under Rule
16b-3(e) or any successor rule under the Exchange Act.
22. OTHER PROVISIONS
Each Option granted under the Plan may be subject to, and the Option
Agreement relating to such Option may contain, such other terms and conditions
not inconsistent with the Plan as may be determined by the Board, in its sole
discretion. Notwithstanding the foregoing, each ISO granted under the Plan
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shall include those terms and conditions that are necessary to qualify the ISO
as an "incentive stock option" within the meaning of the Section 422 of the Code
or the regulations thereunder and shall not include any terms or conditions that
are inconsistent therewith.
23. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall
include the plural form, the masculine gender shall include the feminine
gender, etc., as the context requires.
24. SEVERABILITY
If any provision of the Plan or any Option Agreement shall be
determined to be illegal or unenforceable by any court of law in any
jurisdiction, the remaining provisions hereof and thereof shall be severable and
enforceable in accordance with their terms, and all provisions shall remain
enforceable in any other jurisdiction.
25. GOVERNING LAW
The validity and construction of this Plan and the instruments
evidencing the Options granted hereunder shall be governed by the laws of the
State of Delaware (excluding its choice of law rules).
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The Plan was duly adopted and approved by the Board of Directors of
the Corporation on the 30th day of June, 1992.
----------------------------
Secretary of the Corporation
This Plan was duly approved by the Stockholders of the Corporation
on the _______ day of _____, 1992.
----------------------------
Secretary of the Corporation
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FORM EXHIBIT 10.32
VITAS HEALTHCARE CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Option Agreement") is made as of June
30, 1992, by and between Vitas Healthcare Corporation, a Delaware corporation
(the "Corporation"), and ____________, an individual who is employed by or
otherwise has a relationship with the Corporation or its subsidiaries (the
"Optionee").
WHEREAS, the Board of Directors of the Corporation has duly adopted and
approved the Vitas Healthcare Corporation Management Equity Incentive Plan (the
"Plan"), subject to approval by the stockholders of the Corporation, which Plan
authorizes the Corporation to grant to eligible individuals options for the
purchase of shares of the Corporation's common stock, par value $.001 per share,
(the "Stock"); and
WHEREAS, the Corporation has determined that it is desirable and in its
best interests to grant to the Optionee, pursuant to the Plan (including Section
4(a) of the Plan), an option to purchase a certain number of shares of Stock, in
order to provide the Optionee with an incentive to advance the interests of the
Corporation and any "subsidiary corporation" thereof within the meaning of
Section 424(f) of the Internal Revenue Code of 1986 (a "Subsidiary"), all
according to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto do hereby agree as follows:
1. Grant of Option. Subject to the terms of the Plan (attached hereto as
Exhibit A), and to the requisite approval of the Plan by the stockholders of the
Corporation, the Corporation hereby grants to the Optionee the right and option
(the "Option") to purchase from the Corporation, on the terms and subject to the
conditions set forth in the Plan and in this Option Agreement, ___________ (___)
shares of Stock. This Option shall not constitute an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). The date of grant of this Option is June 30, 1992, the
date on which the grant of the Option was approved by the Board of Directors of
the Corporation (the "Board").
<PAGE>
2. Terms of Plan. The Option granted pursuant to this Option Agreement is
granted subject to the terms and conditions set forth in the Plan. All terms and
conditions of the Plan, as it may be amended from time to time, are hereby
incorporated into this Option Agreement by reference and shall be deemed to be
part of this Option Agreement, without regard to whether such terms and
conditions are not otherwise set forth in this Option Agreement. In the event
that there is any inconsistency between the provisions of this Option Agreement
and of the Plan, the provisions of the Plan shall govern.
3. Price. The purchase price (the "Option Price") for the shares of Stock
subject to the Option granted by this Option Agreement is $3.90 per share.
4. Vesting in Options. The Option becomes vested (i.e., nonforfeitable) as
to 25% of the shares of Stock purchasable pursuant to the Option on or after
June 30, 1993 (the "Anniversary Date"), if Optionee has been providing services
to the Corporation or a Subsidiary continuously from the date of grant to the
Anniversary Date. Thereafter, so long as continuous service has not been
interrupted, the Option becomes vested (i.e., nonforfeitable) as to an
additional 25% of the shares of Stock subject to the Option on or after each of
the next three anniversaries of the Anniversary Date. Service for this purpose
includes service as an employee, director or independent contractor providing
services to the Corporation or a Subsidiary. For purposes of the Option
Agreement, termination of service would not be deemed to occur if the Optionee,
after terminating service in one capacity, continues to provide service to the
Corporation or any Subsidiary in another capacity. Termination of service is
sometimes also referred to herein as termination of employment or other
relationship with the Corporation or its Subsidiaries. Termination of service
(regardless of whether with or without cause or by reason of death, disability
or voluntary resignation) results in forfeiture of that portion of the Option
(if any) that has not yet vested (i.e., become nonforfeitable) but does not
affect the exercisability of that portion of the Option (if any) that has vested
and which continues to be subject to the limitations on exercise set forth in
this Option Agreement and the Plan.
5. Exercise of Option. Except as otherwise provided herein, and subject to
the provisions of the Plan, the Option granted pursuant to this Option Agreement
shall be subject to exercise as follows:
(a) Time of Exercise of Option. The Optionee may exercise the Option
(subject to the limitations on exercise set forth in this Option Agreement and
in the Plan), to the extent the Option is vested (i.e., nonforfeitable) and has
not terminated under Section 5(b), on the earliest of the following: (i) nine
years and ten months after the date of grant; (ii) the closing of a bona fide,
firm commitment underwritten public offering of the Common Stock of the
Corporation pursuant to a registration statement declared effective under the
Securities Act of
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1933, as amended, and (iii) receipt by the Optionee of notice from the
Corporation that the Corporation has entered into a definitive agreement or the
Board has adopted definitive resolutions calling for the Corporation, subject to
certain terms and conditions, to effect a transaction or event described in
Section 7(c). No single exercise of the Option shall be for less than 100 shares
of Stock, unless the number of shares purchased is the total number at the time
available for purchase under this Option.
(b) Termination of Option. The Option shall terminate upon the
earliest of (i) the expiration of a period of ten years from the date of grant
of the Option, as set forth in Section 1 above, (ii) the occurrence of a
transaction or event described in Section 7(c) which causes termination of the
Option, (iii) the Optionee's termination of employment or other relationship
with the Corporation or a Subsidiary to the extent the Option has not become
vested (i.e., nonforfeitable) in accordance with Section 4 or (iv) the purchase
of the Option by the Corporation pursuant to Section 6(d).
(c) Limitations on Exercise of Option. Notwithstanding the foregoing
Subsections, in no event may the Option be exercised, in whole or in part, prior
to the date the Plan is approved by the stockholders of the Corporation and in
the event the stockholders fail to approve the Plan within one year of the date
of its adoption by the Board, the Option shall be null and void and of no
effect.
(d) Method of Exercise of Option. Subject to the terms and
conditions of this Option Agreement, the Option may be exercised by delivering
written notice of exercise to the Corporation, at its principal office,
addressed to the attention of the President, which notice shall specify the
number of shares for which the Option is being exercised, and shall be
accompanied by payment in full of the Option Price of the shares of Stock for
which the Option is being exercised. Payment of the Option Price for the shares
of Stock purchased pursuant to the exercise of the Option shall be made in cash
or by certified check payable to the order of the Corporation. If the person
exercising the Option is not the Optionee, such person shall also deliver with
the notice of exercise appropriate proof of his or her right to exercise the
Option. An attempt to exercise the Option granted hereunder other than as set
forth above shall be invalid and of no force and effect. Promptly after exercise
of the Option as provided for above, the Corporation shall deliver to the person
exercising the Option a certificate or certificates for the shares of Stock
being purchased.
(e) Parachute Limitations. Notwithstanding any other provision of
this Option Agreement or of any other agreement, contract, or understanding
heretofore or hereafter entered into by the Optionee with the Corporation or any
Subsidiary or Affiliate (as defined in Section 6(b)), except an agreement,
contract, or understanding hereafter entered into that expressly
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modifies or excludes application of this Section (the "Other Agreements"), and
notwithstanding any formal or informal plan or other arrangement heretofore or
hereafter adopted by the Corporation (or any such Subsidiary or Affiliate) for
the direct or indirect compensation of the Optionee (including groups or classes
of participants or beneficiaries of which the Optionee is a member), whether or
not such compensation is deferred, is in cash, or is in the form of a benefit to
or for the Optionee (a "Benefit Arrangement"), if the Optionee is a
"disqualified individual," as defined in Section 280G(c) of the Code, the Option
and any right to receive any payment or other benefit under the Plan shall not
become exercisable or vested (i) to the extent that such right to exercise,
vesting, payment, or benefit, taking into account all other rights, payments, or
benefits to or for Optionee under the Plan, all Other Agreements, and all
Benefit Arrangements, would cause any payment or benefit to the Optionee under
this Option to be considered a "parachute payment" within the meaning of Section
280G(b)(2) of the Code as then in effect (a "Parachute Payment") and (ii) if,
as a result of receiving a Parachute Payment, the aggregate after-tax amounts
received by the Optionee from the Corporation under this Plan, all Other
Agreements, and all Benefit Arrangements would be less than the maximum
after-tax amount that could be received by Optionee without causing any such
payment or benefit to be considered a Parachute Payment. In the event that the
receipt of any such right to exercise, vesting, payment, or benefit under this
Option, in conjunction with all other rights, payments, or benefits to or for
the Optionee under the Plan, any Other Agreement or any Benefit Arrangement
would cause the Optionee to be considered to have received a Parachute Payment
under the Option that would have the effect of decreasing the after-tax amount
received by the Optionee as described in clause (ii) of the preceding sentence,
then the Optionee shall have the right, in the Optionee's sole discretion, to
designate those rights, payments, or benefits under the Option, the Plan, any
Other Agreements, and any Benefit Arrangements that should be reduced or
eliminated so as to avoid having the payment or benefit to the Optionee under
the Option be deemed to be a Parachute Payment.
6. Transferability.
(a) Transferability of Options. During the lifetime of an Optionee,
only such Optionee (or, in the event of legal incapacity or incompetency, the
Optionee's guardian or legal representative) may exercise the Option. No Option
shall be assignable or transferable by the Optionee to whom it is granted, other
than by will or the laws of descent and distribution.
(b) Nontransferability of Shares. An Optionee (or any other person
who is entitled to exercise an Option pursuant to the terms of the Plan and this
Option Agreement) shall not sell, pledge, assign, gift, transfer or otherwise
dispose of any shares of Stock acquired pursuant to an Option to anyone without
first offering such Stock to the Corporation for purchase on the same terms and
conditions as those offered to the proposed transferee. Any individual who
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proposes such a transfer (the "Transferor") shall notify the Corporation, in
writing, of the identity of the proposed transferee and the terms and conditions
of such proposed transfer. The Corporation may exercise its right of first
refusal under this Subsection within 90 days after receiving such notice of the
proposed transfer. The Corporation may assign its right of first refusal under
this Subsection, in whole or in part, to (1) any stockholder of the Corporation
who owns stock or securities of the Corporation having more than 35% of the
combined voting power of all classes of stock of the Corporation (a
"Stockholder"), (2) any employee benefit plan (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended)
maintained by the Corporation or a Subsidiary for the benefit of employees of
the Corporation or a Subsidiary (a "Benefit Plan"), or (3) any corporation or
other trade or business that is controlled by or under common control with the
Corporation (determined in accordance with the principles of Section 414(b) and
Section 414(c) of the Code and the regulations thereunder) (an "Affiliate"). The
Corporation shall give reasonable written notice to the Transferor of any such
assignment of its rights. If the Corporation (or its permitted assignee) fails
to exercise such right of first refusal during this 90-day period, the
Transferor may proceed with the proposed transfer at any time within the next 45
days, and if he does not do so, the restrictions of this Subsection shall
re-apply. These restrictions also shall re-apply to any person to whom Stock
that was originally acquired pursuant to an Option is sold, pledged, assigned,
bequeathed, gifted, transferred or otherwise disposed of without regard to the
number of such subsequent transferees or the manner in which they acquire the
Stock. Notwithstanding the foregoing, the restrictions of this Subsection shall
not apply to a transfer of Stock that occurs as a result of the death of the
Transferor or of any subsequent transferee but such restrictions shall apply to
the executor, administrator or personal representative, the estate and the
legatees, beneficiaries and assigns thereof.
(c) Repurchase Rights. Upon the termination of employment or other
relationship of the Optionee with the Corporation or a Subsidiary, the
Corporation shall have the right, for a period of twelve months following such
termination, to repurchase any or all of the shares of Stock acquired pursuant
to such Option, at a price equal to the fair market value of such shares on the
date the Corporation delivers to the Optionee, or other holder of such shares of
Stock, notice that it is exercising its repurchase rights. Upon the exercise of
the Option granted hereunder following the termination of employment or other
relationship of the Optionee with the Corporation or a Subsidiary, the
Corporation shall have the right, for a period of twelve months following such
exercise, to repurchase any or all of the shares of Stock acquired by the
Optionee pursuant to such exercise of such Option, at a price equal to the fair
market value of such shares on the date the Corporation delivers to the
Optionee, or other holder of such shares of Stock, notice that it is exercising
its repurchase rights. In the event that the Corporation determines that it
cannot or will not exercise its rights to purchase Stock pursuant to this
Subsection, in whole or in part, the Corporation may assign its rights
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hereunder, in whole or in part, to a Stockholder, a Benefit Plan or an
Affiliate. The Corporation shall give reasonable written notice to the Optionee
of any assignment of its rights. "Fair market value", for purposes of this
Subsection, shall be determined by the Board in the same manner specified in the
Plan for determining the Option Price. A notice of repurchase given pursuant to
this Subsection shall specify the price and date of closing of such repurchase,
which shall be no later than 30 days from the date of such notice. In the event
any such repurchase rights are exercised in accordance with this Subsection, the
holder of the Stock being repurchased shall be obligated to sell such Stock
pursuant to the exercise of such rights.
(d) Purchase of Option. Upon the termination of employment or other
relationship of the Optionee with the Corporation or a Subsidiary, the
Corporation shall have the right, at all times before the Option is exercised,
to purchase the vested (i.e., nonforfeitable) portion of the Option, in whole or
in part, at a price equal to the value of such Option on the date the
Corporation delivers to the Optionee (or transferee of the Option pursuant to
Section 6(a)), notice that it is exercising such purchase rights. For this
purpose, the value of the Option is equal to the excess (if any) of the fair
market value of the shares of Stock that are subject to the Option, determined
by the Board in the same manner specified in the Plan for determining the Option
Price as of the date of notice, over the aggregate Option Price of such shares.
Upon payment (or tender of payment) in the applicable amount to the Optionee (or
transferee of the Option), the vested (i.e. nonforfeitable) portion of the
Option shall be terminated and, if payment has been tendered but not made, shall
only represent the right to receive such payment without interest. A notice of
purchase given pursuant to this Subsection shall specify the price and date of
closing of such purchase which shall be no later than 30 days from the date of
such notice. In the event any such purchase right is exercised in accordance
with this Subsection, the Optionee (or holder of the Option) being purchased
shall be obligated to sell such Option pursuant to the exercise of such rights.
(e) Publicly Traded Stock. If the Stock is listed on an established
national or regional stock exchange or is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System, or is publicly
traded in an established securities market, the foregoing restrictions, purchase
and repurchase rights of Sections 6(b), 6(c) and 6(d) shall terminate as of the
first date that the Stock is so listed, quoted or publicly traded.
(f) Installment Payments. In the case of any purchase of Stock or an
Option under this Section 6, at the option of the Corporation or its permitted
assignee the Corporation or its permitted assignee may pay the Optionee,
transferee of the Option or other registered owner of the Stock the purchase
price in three or fewer annual installments. Interest shall be credited on the
installments at the applicable federal rate (as determined for purposes of
Section
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1274 of the Code) in effect on the date on which the purchase is made. The
Corporation or its permitted assignee shall pay at least one-third of the total
purchase price each year, plus interest on the unpaid balance, with the first
payment being made on or before the 60th day after the purchase.
(g) Legend Describing Restrictions and Obligations. The Board may
cause a legend to be placed prominently on certificates representing Stock
issued pursuant to this Plan in order to give notice of the transferability
restrictions, repurchase rights and other obligations imposed by this Section.
7. Effect of Changes in Capitalization
(a) Changes in Stock. If the number of outstanding shares of Stock
is increased or decreased or the shares of Stock are changed into or exchanged
for a different number or kind of shares or other securities of the Corporation
on account of any recapitalization, reclassification, stock split-up,
combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Corporation, occurring after the date of
grant of the Option, the number and kind of shares of Stock for which the Option
was granted shall be adjusted proportionately and accordingly so that the
proportionate interest of the Optionee immediately following such event shall,
to the extent practicable, be the same as immediately before such event. Any
such adjustment in the Option shall not change the aggregate Option Price
payable with respect to shares that are subject to the unexercised portion of
the Option but shall include a corresponding proportionate adjustment in the
Option Price per share.
(b) Reorganization in Which the Corporation Is the Surviving
Corporation. Subject to Subsection 7(c)(iv) hereof, if the Corporation shall be
the surviving corporation in any reorganization, merger, or consolidation of the
Corporation with one or more other corporations, the Option shall pertain to and
apply to the securities to which a holder of the number of shares of Stock
subject to the Option would have been entitled immediately following such
reorganization, merger, or consolidation, with a corresponding proportionate
adjustment of the Option Price per share so that the aggregate Option Price
thereafter shall be the same as the aggregate Option Price of the shares
remaining subject to the Option immediately prior to such reorganization,
merger, or consolidation.
(c) Dissolution, Liquidation, Sale of Assets, Reorganization in
Which the Corporation Is Not the Surviving Corporation, Etc. The Option shall
terminate (i) upon the dissolution or liquidation of the Corporation, or (ii)
upon a merger, consolidation, or reorganization of the Corporation with one or
more other corporations in which the Corporation is not the surviving
corporation,
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or (iii) upon a sale of substantially all of the assets of the Corporation to
another person or entity, or (iv) upon a merger, consolidation or reorganization
(or other transaction if so determined by the Board in its sole discretion) in
which the Corporation is the surviving corporation, that is approved by the
Board and that results in any person or entity (other than persons who are
holders of Stock of the Corporation at the time the Plan is approved by the
stockholders and other than an Affiliate) owning 80 percent or more of the
combined voting power of all classes of stock of the Corporation, except to the
extent provision is made in writing in connection with any such transaction
covered by clauses (i) through (iv) for the assumption of the Option or for the
substitution for the Option of a new option(s) covering the stock of a successor
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and exercise prices, in which event the Option
theretofore granted shall continue in the manner and under the terms so
provided. In the event of any such termination of the Option, the Optionee shall
have the right (subject to the general limitations on exercise set forth in
Section 5), during such period occurring before such termination as the Board in
its sole discretion shall determine and designate, and in any event immediately
before the occurrence of such termination, to exercise such Option in whole or
in part, to the extent that such Option was otherwise exercisable at the time
such termination occurs. The Corporation shall send written notice of a
transaction or event that will result in such a termination to Optionee not
later than the time at which the Corporation gives notice thereof to its
stockholders.
(d) Adjustments. Adjustments under this Section 7 related to stock
or securities of the Corporation shall be made by the Board, whose determination
in that respect shall be final, binding, and conclusive. No fractional shares of
Stock or units of other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share or unit.
(e) No Limitations on Corporation. The grant of the Option shall not
affect or limit in any way the right or power of the Corporation to make
adjustments, reclassifications, reorganizations, or changes of its capital or
business structure or to merge, consolidate, dissolve, or liquidate, or to sell
or transfer all or any part of its business or assets.
8. Requirements of Law. The Corporation shall not be required to sell or
issue any shares of Stock under the Option if the sale or issuance of such
shares would constitute a violation by the Optionee, the individual exercising
the Option, or the Corporation of any provisions of any law or regulation of any
governmental authority, including without limitation any federal or state
securities laws or regulations. If at any time the Corporation shall determine,
in its discretion, that the listing, registration, or qualification of any
shares subject to the Option upon any securities exchange or under any state or
federal law, or the
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consent or approval of any government regulatory or self-regulatory body is
necessary or desirable as a condition of, or in connection with the issuance or
purchase of shares, the Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Corporation,
and any delay caused thereby shall in no way affect the date of termination of
the Option. Specifically in connection with the Securities Act of 1933 (as now
in effect or as hereafter amended), upon the exercise of any Option, unless a
registration statement under such Act is in effect with respect to the shares of
Stock covered thereby, the Corporation shall not be required to sell or issue
such shares unless the Board has received evidence satisfactory to it that the
holder of such Option may acquire such shares pursuant to an exemption from
registration under such Act. Any determination in this connection by the Board
shall be final, binding, and conclusive. The Corporation may, but shall in no
event be obligated to, register any securities covered hereby pursuant to the
Securities Act of 1933 (as now in effect or as hereafter amended). The
Corporation shall not be obligated to take any affirmative action in order to
cause the exercise of an Option or the issuance of shares pursuant thereto to
comply with any law or regulation of any governmental authority. As to any
jurisdiction that expressly imposes the requirement that an Option shall not be
exercisable unless and until the shares of Stock covered by such Option are
registered or are subject to an available exemption from registration, the
exercise of such Option (under circumstances in which the laws of such
jurisdiction apply) shall be deemed conditioned upon the effectiveness of such
registration or the availability of such an exemption.
9. Rights as Stockholder. Neither the Optionee nor any executor,
administrator, distributee or legatee of the Optionee's estate shall be, or have
any of the rights or privileges of, a stockholder of the Corporation in respect
of any shares of Stock issuable hereunder unless and until such shares have been
fully paid and certificates representing such shares have been endorsed,
transferred and delivered, and the name of the Optionee (or of such personal
representative, administrator, distributee or legatee of the Optionee's estate)
has been entered as the stockholder of record on the books of the Corporation.
10. Withholding of Taxes. The parties hereto recognize that the
Corporation or a Subsidiary may be obligated to withhold federal, state and
local income taxes and Social Security taxes to the extent that the Optionee
realizes ordinary income in connection with the exercise of the Option or in
connection with a disposition of any shares of Stock acquired by exercise of the
Option. The Optionee agrees that the Corporation or a Subsidiary may withhold
amounts needed to cover such taxes from payments otherwise due and owing to the
Optionee, and also agrees that upon demand the Optionee will promptly pay to the
Corporation or a Subsidiary having such obligation any additional amounts as may
be necessary to satisfy such withholding tax obligation. Such payment shall
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be made in cash or by certified check payable to the order of the Corporation or
a Subsidiary.
11. Disclaimer of Rights. No provision in this Option Agreement shall be
construed to confer upon the Optionee the right to remain in the employ or
service of or to maintain a relationship with the Corporation or any Subsidiary,
or to interfere in any way with any contractual or other right or authority of
the Corporation or any Subsidiary either to increase or decrease the
compensation of the Optionee at any time, or to terminate any employment or
other relationship between the Optionee and the Corporation or any Subsidiary.
12. Interpretation of this Option Agreement. All decisions and
interpretations made by the Board or the Stock Option Committee thereof with
regard to any question arising under the Plan or this Option Agreement shall be
binding and conclusive on the Corporation and the Optionee and any other person
entitled to exercise the Option as provided for herein.
13. Governing Law. This Option Agreement shall be governed by the laws of
the State of Delaware (excluding its choice of law rules).
14. Approval by Stockholders. This Option Agreement and the issuance of
any shares under it are expressly subject to the approval of the Plan by the
stockholders of the Corporation as provided for therein. The Option shall not in
any event be exercisable in whole or in part prior to the date the Plan is
approved by the stockholders of the Corporation as provided for therein.
15. Binding Effect. Subject to all restrictions provided for in this
Option Agreement, the Plan and by applicable law limiting assignment and
transfer of this Option Agreement and the Option provided for herein, this
Option Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, successors, and
assigns.
16. Notice. Any notice hereunder by the Optionee to the Corporation shall
be in writing and shall be deemed duly given if mailed or delivered to the
Corporation at its principal office, addressed to the attention of the
President, or if so mailed or delivered to such other address as the Corporation
may hereafter designate by notice to the Optionee. Any notice hereunder by the
Corporation to the Optionee shall be in writing and shall be deemed duly given
if mailed or delivered to the Optionee at the address specified below by the
Optionee for such purpose, or if so mailed or delivered to such other address as
the Optionee may hereafter designate by written notice given to the Corporation.
17. Entire Agreement. This Option Agreement and the Plan together
constitute the entire agreement and supersede all prior understandings and
agreements, written or oral, of the parties hereto with respect to the subject
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matter hereof. Neither this Option Agreement nor any term hereof may be amended,
waived, discharged or terminated except by a written instrument signed by the
Corporation and the Optionee; provided, however, that the Corporation
unilaterally may waive any provision hereof in writing to the extent that such
waiver does not adversely affect the interests of the Optionee hereunder, but no
such waiver shall operate as or be construed to be a subsequent waiver of the
same provision or a waiver of any other provision hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this Option
Agreement, or caused this Option Agreement to be duly executed in their name and
on their behalf, as of the day and year first above written.
VITAS HEALTHCARE CORPORATION
By:
---------------------------------
Title:
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OPTIONEE:
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ADDRESS FOR NOTICE TO OPTIONEE:
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Number Street
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City State Zip Code
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EXHIBIT 10.33
VITAS HEALTHCARE CORPORATION
1994 MANAGEMENT EQUITY INCENTIVE PLAN
VITAS HEALTHCARE CORPORATION, a Delaware corporation (the
"Corporation"), sets forth herein the terms of this 1994 Management Equity
Incentive Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to advance the interests of the Corporation and
any "subsidiary corporation" thereof within the meaning of Section 424(f) of the
Internal Revenue Code of 1986 (a "Subsidiary") by providing eligible individuals
(as designated pursuant to Section 4 below) with incentives to improve business
results, by providing an opportunity to acquire or increase a proprietary
interest in the Corporation, which thereby will create a stronger incentive to
expend maximum effort for the growth and success of the Corporation and its
Subsidiaries, and will encourage such eligible individuals to continue to serve
the Corporation and its Subsidiaries, whether as an employee, as a director, as
an independent contractor or in some other capacity. To this end, the Plan
provides for the grant of stock options, as set out herein.
This Plan provides for the grant of stock options (each of which is
an "Option") in accordance with the terms of the Plan. An Option may be an
incentive stock option (an "ISO") intended to satisfy the applicable
requirements under Section 422 of the Internal Revenue Code of 1986, as amended
from time to time, or the corresponding provision of any subsequently-enacted
tax statute (the "Code"), or a nonqualified stock option (an "NS0"). An Option
is an NSO to the extent that the Option would exceed the limitations set forth
in Section 7 below. An Option is also an NSO if either (i) the Option is
specifically designated at the time of grant as an NSO or not being an ISO or
(ii) the Option does not otherwise satisfy the requirements of Code Section 422
at the time of grant. Each Option shall be evidenced by a written agreement
between the Corporation and the recipient individual that sets out the terms and
conditions of the grant as further described in Section 8.
<PAGE>
2. ADMINISTRATION
(a) Board. The Plan shall be administered by the Board of Directors
of the Corporation (the "Board"), which shall have the full power and authority
to take all actions and to make all determinations required or provided for
under the Plan or any Option granted or Option Agreement (as defined in Section
8 below) entered into hereunder and all such other actions and determinations
not inconsistent with the specific terms and provisions of the Plan deemed by
the Board to be necessary or appropriate to the administration of the Plan or
any Option granted or Option Agreement entered into hereunder. The
interpretation and construction by the Board of any provision of the Plan or of
any Option granted or Option Agreement entered into hereunder shall be final and
conclusive.
(b) Action by Committee. The Board from time to time may appoint a
Stock Option Committee consisting of two or more members of the Board of
Directors who, in the sole discretion of the Board, may be the same Directors
who serve on the Compensation Committee, subject to Section 2(d), or may appoint
the Compensation Committee to serve as the Stock Option Committee (the
"Committee"), subject to Section 2(d). The Board, in its sole discretion, may
provide that the role of the Committee shall be limited to making
recommendations to the Board concerning any determinations to be made and
actions to be taken by the Board pursuant to or with respect to the Plan, or the
Board may delegate to the Committee such powers and authorities related to the
administration of the Plan, as set forth in Section 2(a) above, as the Board
shall determine, consistent with the Certificate of Incorporation and By-laws of
the Corporation and applicable law. In the event that the Plan or any Option
granted or Option Agreement entered into hereunder provides for any action to be
taken by or determination to be made by the Board, such action may be taken by
or such determination may be made by the Committee if the power and authority to
do so has been delegated to the Committee by the Board as provided for in this
Section. Unless otherwise expressly determined by the Board, any such action or
determination by the Committee shall be final and conclusive.
(c) No Liability. No member of the Board or of the Committee shall
be liable for any action or determination made in good faith with respect to the
Plan or any Option granted or Option Agreement entered into hereunder.
(d) Applicability of Rule 16b-3. Those provisions of the Plan that
make express reference to Rule 16b-3 shall apply to the Corporation only at such
time as the Corporation's Stock (as defined in Section 3) or any other equity
security of the Corporation is registered under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and then only to such persons as
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are required to file reports under Section 16(a) of the Exchange Act (each of
whom is a "Reporting Person"). From and after such time as the Corporation's
Stock or any other equity security of the Corporation is registered under the
Exchange Act (the "Registration Date"), the Board may act under the Plan (i)
only if all members of the Board are "disinterested persons" as defined in Rule
16b-3 or (ii) by the determination of the Committee constituted as set forth in
the following sentence. From and after the Registration Date, the Committee
appointed pursuant to Section 2(b) shall consist of not fewer than two members
of the Board each of whom shall qualify (at the time of appointment to the
Committee and during all periods of service on the Committee) in all respects as
a "disinterested person" as defined in Rule 16b-3.
3. STOCK
The stock that may be issued pursuant to Options under the Plan
shall be shares of common stock, par value $.001 per share, of the Corporation
(the "Stock"), which shares may be treasury shares or authorized but unissued
shares. The number of shares of Stock that may be issued pursuant to Options
under the Plan shall not exceed, in the aggregate, one million (1,000,000)
shares. If any Option expires, terminates, or is terminated or cancelled for any
reason prior to exercise, the shares of Stock that were subject to the
unexercised, forfeited, terminated or cancelled portion of such Option shall be
available immediately for future grants of Options under the Plan; provided,
however, shares of Stock that were subject to an Option that has been purchased
pursuant to Section 11(c) shall not be available for future grants of Options
under the Plan.
4. ELIGIBILITY
(a) Designated Recipients. Subject to the next sentence, Options may
be granted under the Plan to (i) any full-time employee of the Corporation or
any Subsidiary (including any such individual who is an officer or director of
the Corporation or any Subsidiary) as the Board shall determine and designate
from time to time or (ii) any other individual (including a non-employee
director of, or independent contractor providing services to, the Corporation or
any Subsidiary) whose participation in the Plan is determined by the Board to be
in the best interests of the Corporation and is so designated by the Board.
Options granted to a full-time employee shall be either ISOs or NSOs, as
determined in the sole discretion of the Board, and Options granted to any other
individual shall be NSOs.
(b) Successive Grants. An individual may hold more than one Option,
subject to such restrictions as are provided herein.
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5. EFFECTIVE DATE AND TERM OF THE PLAN
(a) Effective Date. The Plan shall be effective as of the date of
adoption by the Board, subject to approval of the Plan within one year of such
effective date by the affirmative vote of stockholders who hold more than fifty
percent (50%) of the combined voting power of the outstanding shares of voting
stock of the Corporation present or represented, and entitled to vote thereon at
a duly constituted stockholders' meeting, or by consent as permitted by law and
in a manner that satisfies the requirements of Rule 16b-3(b) of the Exchange
Act. Upon approval of the Plan by the stockholders of the Corporation as set
forth above, however, all Options granted under the Plan on or after the
effective date shall be fully effective as if the stockholders of the
Corporation had approved the Plan on the Plan's effective date. If the
stockholders fail to approve the Plan within one year of such effective date,
any Options granted hereunder shall be null and void and of no effect.
(b) Term. The Plan shall have no termination date, but no grant of
an ISO may occur after the date that is ten years after the effective date.
6. GRANT OF OPTIONS
(a) General. Subject to the terms and conditions of the Plan, the
Board may, at any time and from time to time, grant to such eligible individuals
as the Board may determine (each of the whom is an "Optionee"), Options to
purchase such number of shares of Stock on such terms and conditions as the
Board may determine, including any terms or conditions that may be necessary to
qualify such Options as ISOs under Section 422 of the Code. Such authority
specifically includes the authority, in order to effectuate the purposes of the
Plan but without amending the Plan, to modify grants to eligible individuals who
are foreign nationals or are individuals who are employed outside the United
States to recognize differences in local law, tax policy, or custom.
(b) Limitation on Grants of Options. The maximum number of shares
subject to Options that can be granted under the Plan to any executive officer
of the Company or a Subsidiary, or to any other person eligible for a grant of
an Option under Section 4, is 500,000 shares during the first ten years after
the effective date of the Plan and 50,000 shares per year thereafter.
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7. LIMITATIONS ON INCENTIVE STOCK OPTIONS
(a) Price and Dollar Limitations. An Option that is designated as
being one that is intended to qualify as an ISO shall qualify for treatment as
an ISO only to the extent that the aggregate fair market value (determined at
the time the Option is granted) of the Stock with respect to which all options
that are intended to constitute "incentive stock options," within the meaning of
Code Section 422, are exercisable for the first time by any Optionee during any
calendar year (under the Plan and all other plans of the Optionee's employer
corporation and its parent and subsidiary corporations within the meaning of
Section 422(d) of the Code) does not exceed $100,000.
(b) Parachute Limitations. Notwithstanding any other provision of
this Plan or of any other agreement, contract, or understanding heretofore or
hereafter entered into by the Optionee with the Corporation, except an
agreement, contract, or understanding hereafter entered into that expressly
modifies or excludes application of this paragraph (an "Other Agreement"), and
notwithstanding any formal or informal plan or other arrangement for the direct
or indirect provision of compensation to the Optionee (including groups or
classes of participants or beneficiaries of which the Optionee is a member),
whether or not such compensation is deferred, is in cash, or is in the form of a
benefit to or for the Optionee (a "Benefit Arrangement"), if the Optionee is a
"disqualified individual," as defined in Section 280G(c) of the Code, any Option
held by that Optionee and any right to receive any payment or other benefit
under this Plan shall not become exercisable or vested (i) to the extent that
such right to exercise, vesting, payment, or benefit, taking into account all
other rights, payments, or benefits to or for the Optionee under this Plan, all
Other Agreements, and all Benefit Arrangements, would cause any payment or
benefit to the Optionee under this Plan to be considered a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code as then in effect (a
"Parachute Payment") and (ii) if, as a result of receiving a Parachute Payment,
the aggregate after-tax amounts received by the Optionee from the Corporation
under this Plan, all Other Agreements, and all Benefit Arrangements would be
less than the maximum after-tax amount that could be received by him without
causing any such payment or benefit to be considered a Parachute Payment. In the
event that the receipt of any such right to exercise, vesting, payment, or
benefit under this Plan, in conjunction with all other rights, payments, or
benefits to or for the Optionee under any Other Agreement or any Benefit
Arrangement would cause the Optionee to be considered to have received a
Parachute Payment under this Plan that would have the effect of decreasing the
after-tax amount received by the Optionee as described in clause (ii) of the
preceding sentence, then the Optionee shall have the right, in the Optionee's
sole discretion, to designate those rights, payments, or benefits under this
Plan, any Other Agreements, and any Benefit Arrangements that should be reduced
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or eliminated so as to avoid having the payment or benefit to the Optionee under
this Plan be deemed to be a Parachute Payment.
8. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by
agreements ("Option Agreements"), to be executed by the Corporation and by the
Optionee, in such form or forms as the Board shall from time to time determine.
Option Agreements covering Options granted from time to time or at the same time
need not contain similar provisions; provided, however, that all such Option
Agreements shall comply with all terms of the Plan.
9. OPTION PRICE
The purchase price of each share of the Stock subject to an Option
(the "Option Price") shall be fixed by the Board and stated in each Option
Agreement. In the case of an Option intended to constitute an ISO, the Option
Price shall be not less than the greater of par value or 100 percent of the fair
market value of a share of Stock on the date on which the Option is granted (as
determined in good faith by the Board); provided, however, that in the event the
Optionee would otherwise be ineligible to receive an ISO by reason of the
provisions of Sections 422(b) and 424(d) of the Code (relating to stock
ownership of more than ten percent), the Option Price of an Option that is
intended to be an ISO shall not be less than the greater of par value or 110
percent of the fair market value of a share of Stock at the time such Option is
granted. In the event that the Stock is listed on an established national or
regional stock exchange, is admitted to quotation on the National Association of
Securities Dealers Automated Quotation System, or is publicly traded in an
established securities market, in determining the fair market value of the
Stock, the Board shall use the closing price of the Stock on such exchange or
system or in such market (the highest such closing price if there is more than
one such exchange or market) on the trading date immediately before the Option
is granted (or, if there is no such closing price, then the Board shall use the
mean between the highest bid and lowest asked prices or between the high and low
prices on such date), or, if no sale of the Stock has been made on such day, on
the next preceding day on which any such sale shall have been made. In the case
of an Option that is an NSO, the Option Price shall not be less than par value.
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10. TERM AND EXERCISE OF OPTIONS
(a) Term. Upon the expiration of ten years from the date on which an
ISO is granted or on such date prior thereto as may be fixed by the Board and
stated in the Option Agreement relating to such Option, that ISO shall be
ineligible for treatment as an "incentive stock option," as defined in Section
422 of the Code, and shall be exercisable only as an NSO. In the event the
Optionee otherwise would be ineligible to receive an "incentive stock option" by
reason of the provisions of Sections 422(b)(6) and 424(d) of the Code (relating
to stock ownership of more than 10 percent), such ten year restriction on
exercisability as an ISO shall be read to impose a five year restriction on such
exercisability. If an Optionee shall terminate employment prior to the ten-year
or five-year limitation described in the immediately preceding sentences, any
outstanding ISO shall be ineligible for treatment as an "incentive stock
option," as defined in Section 422 of the Code, and shall be exercisable only as
an NSO, unless exercised within three months after such termination or, in the
case of termination on account of "permanent and total disability" (within the
meaning of Section 22(e)(3) of the Code), within one year after such
termination.
(b) Option Period and Limitations on Exercise. Each Option granted
under the Plan shall be exercisable, in whole or in part, at any time and from
time to time, over a period commencing on or after the date of grant and, to the
extent that the Board determines and sets forth a termination date for such
Option in the Option Agreement (including any amendment thereto), ending upon
the stated expiration or termination date. The Board in its sole discretion may
specify events or circumstances, including the giving of notice, which will
cause an Option to terminate as set forth in the Option Agreement or in this
Plan. No Option granted to a Reporting Person shall be exercisable during the
first six months after the date of grant. Without limiting the foregoing but
subject to the terms and conditions of the Plan, the Board may in its sole
discretion provide that an Option may not be exercised in whole or in part for
any period or periods of time during which such Option is outstanding and may
condition exercisability (or vesting i.e., non-forfeiture) of an Option upon the
attainment of performance objectives, upon continued service, upon certain
events or transactions, or a combination of one or more of such factors, or
otherwise, as set forth in the Option Agreement. Subject to the parachute
payment restrictions under Section 7(b), however, the Board, in its sole
discretion, may rescind, modify, or waive any such limitation or condition on
the exercise of an Option contained in any Option Agreement, so as to accelerate
the time at which the Option may be exercised. Notwithstanding any other
provisions of the Plan, no Option granted to an Optionee under the Plan shall be
exercisable in whole or in part prior to the date on which the stockholders of
the Corporation approve the Plan, as provided in Section 5 above.
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(c) Method of Exercise. An Option that is exercisable hereunder may
be exercised by delivery to the Corporation on any business day, at the
Corporation's principal office, addressed to the attention of the President, of
written notice of exercise, which notice shall specify the number of shares with
respect to which the Option is being exercised and shall be accompanied by
payment in full of the Option Price of the shares for which the Option is being
exercised. The minimum number of shares of Stock with respect to which an Option
may be exercised, in whole or in part, at any time shall be the lesser of (i)
100 shares or such lesser number set forth in the applicable Option Agreement
and (ii) the maximum number of shares available for purchase under the Option at
the time of exercise. Payment of the Option Price for the shares of Stock
purchased pursuant to the exercise of an Option shall be made (i) in cash or in
cash equivalents; (ii) to the extent permitted by applicable law and under the
terms of the Option Agreement with respect to such Option, through the tender to
the Corporation of shares of Stock, which shares shall be valued, for purposes
of determining the extent to which the Option Price has been paid thereby, at
their fair market value (determined in accordance with Section 9) on the date of
exercise; (iii) to the extent permitted by applicable law and under the terms of
the Option Agreement with respect to such Option, by the delivery of a
promissory note of the person exercising the Option to the Corporation on such
terms as shall be set out in such Option Agreement; (iv) to the extent permitted
by applicable law and under the terms of the Option Agreement with respect to
such Option, by causing the Corporation to withhold shares of Stock otherwise
issuable pursuant to the exercise of an Option equal in value to the Option
Price or portion thereof to be satisfied pursuant to this clause (iv); or (v) by
a combination of the methods described in (i), (ii), (iii), and (iv). An attempt
to exercise any Option granted hereunder other than as set forth above shall be
invalid and of no force and effect. Promptly after the exercise of an Option and
the payment in full of the Option Price of the shares of Stock covered thereby,
the individual exercising the Option shall be entitled to the issuance of a
Stock certificate or Stock certificates evidencing his ownership of such shares.
A separate Stock certificate or separate Stock certificates shall be issued for
any shares purchased pursuant to the exercise of an Option that is an ISO, which
certificate or certificates shall not include any shares that were purchased
pursuant to the exercise of an Option that is an NSO. Unless otherwise stated in
the applicable Option Agreement, an individual holding or exercising an Option
shall have none of the rights of a stockholder (for example, the right to
receive cash or stock dividend payments attributable to the subject shares or to
direct the voting of the subject shares) until the shares of Stock covered
thereby are fully paid and issued to him. Except as provided in Section 16
below, no adjustment shall be made for dividends or other rights for which the
record date is prior to the date of such issuance. Shares issued pursuant to the
exercise of any Option shall be subject to the applicable restrictions set out
in Section 11 hereof.
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(d) Date of Grant. The date of grant of an Option under this Plan
shall be the later of (i) the date as of which the Board approves the grant and
(ii) the date as of which the Optionee and the Corporation or Subsidiary enter
the relationship resulting in the Optionee being eligible for grants.
11. TRANSFERABILITY OF STOCK AND OPTIONS
(a) Limitations on Transfer. During the lifetime of an Optionee,
only such Optionee (or, in the event of legal incapacity or incompetency, the
guardian or legal representative of the Optionee) may exercise the Option,
except as otherwise specifically permitted by this Section 11(a). No Option
shall be assignable or transferable other than by will, in accordance with the
laws of descent and distribution; provided, however, subject to the terms of the
applicable Option Agreement, and to the extent the transfer is in compliance
with any applicable restrictions on transfers, an Optionee who is not, and
during the preceding six months has not been, a Reporting Person may transfer an
NSO to a family member of the Optionee (defined as an individual who is related
to the Optionee by blood or adoption), to a trust established and maintained for
the benefit of the Optionee or a family member of the Optionee (as determined
under applicable state law and the Code), or to a charitable organization to
which contributions are deductible under Code Section 170 (without regard to any
percentage limitations thereon).
(b) Repurchase Rights. In the Board's sole discretion, the Board may
provide in an Option Agreement that upon the termination of an Optionee's
employment or other relationship with the Corporation or a Subsidiary (whether
as an employee, a director, an independent contractor providing services to the
Corporation or a Subsidiary, or otherwise), the Corporation shall have the
right, for a period of up to twelve months following such termination, to
repurchase any or all of the shares acquired by the individual pursuant to this
Plan under an Option (including shares that were previously transferred pursuant
to Section 11(d) below, unless otherwise specified in the Option Agreement), at
a price equal to the fair market value of such shares on the date of termination
(or at such other price or the fair market value on such other date as shall
have been specified by the Board at the time of grant and set out in the
appropriate Option Agreement with respect to the grant). In the Board's sole
discretion and pursuant to the terms of Section 12, the Board may also provide
in an Option Agreement that upon the exercise of an Option following termination
of an Optionee's employment or other relationship with the Corporation or a
Subsidiary (whether as an employee, a director, an independent contractor
providing services to the Corporation or a Subsidiary, or otherwise), the
Corporation shall have the right, for a period of up to twelve months following
such exercise, to repurchase any or all such shares of Stock acquired by the
Optionee pursuant to such exercise of such
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Option at a price that is equal to the fair market value of such shares
(including shares that were previously transferred pursuant to Section 11(d)
below, unless otherwise specified in the Option Agreement) on the date of
exercise (or at such other price or the fair market value on such other date as
shall have been specified by the Board at the time of grant and set out in the
appropriate Option Agreement with respect to the grant). In the event that the
Corporation determines that it cannot or will not exercise its rights to
purchase Stock under this Section 11(b) and the applicable Option Agreement, in
whole or in part, the Corporation may assign its rights, in whole or in part, to
(i) any holder of stock or securities of the Corporation (a "Stockholder"), (ii)
any employee benefit plan (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended) maintained by the
Corporation or a Subsidiary for the benefit of employees of the Corporation or a
Subsidiary (a "Benefit Plan"), or (iii) any corporation or other trade or
business that is controlled by or under common control with the Corporation
(determined in accordance with the principles of Sections 414(b) and (c) of the
Code and regulations thereunder) (an "Affiliate"). The Corporation shall give
reasonable written notice to the individual of any assignment of its rights.
"Fair market value," for purposes of this Section 11(b), shall be determined by
the Board in the same manner used by it in good faith to determine fair market
value for purposes of determining the Option Price pursuant to Section 9.
(c) Purchase of Options. In the Board's sole discretion, the Board
may provide in an Option Agreement that upon or after the termination of an
Optionee's employment or other relationship with the Corporation or a Subsidiary
(whether as an employee, a director, an independent contractor providing
services to the Corporation or a Subsidiary, or otherwise), the Corporation
shall have the right, at all times before the Option is exercised, to purchase
in whole or in part each Option held by the Optionee (and each Option
transferred by the Optionee pursuant to Section 11(a) above unless otherwise
specified in the Option Agreement), at a price equal to the value of such Option
on the date the Corporation delivers to the Optionee a notice that it is
exercising such purchase rights. For this purpose, the value of the Option (or
portion thereof being purchased) is equal to the excess (if any) of the fair
market value of the shares of Stock that are subject to the Option, (determined
by the Board in the same manner used by it in good faith to determine fair
market value for purposes of determining the Option Price pursuant to Section 9)
as of the date of such notice, over the aggregate Option Price of such shares.
Upon payment (or tender of payment) of the applicable amount to the Optionee (or
transferee of the Option), the Option shall be terminated and, if payment has
been tendered but not made, shall only represent the right to receive such
payment without interest.
(d) Nontransferability of Shares. In the Board's sole discretion,
the Board may provide in an Option Agreement that an Optionee (or such other
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individual who is entitled to exercise an Option) shall not sell, pledge,
assign, gift, transfer, or otherwise dispose of any shares of Stock acquired
pursuant to an Option to anyone without first offering such shares to the
Corporation for purchase on the same terms and conditions as those offered the
proposed transferee. If such a restriction applies to an individual pursuant to
an Option Agreement, an individual who proposes such a transfer (the
"Transferor") shall notify the Corporation, in writing, of the identity of the
proposed transferee and the terms and conditions of such proposed transfer. The
Corporation may exercise its right of first refusal within 90 days after
receiving such notice of the proposed transfer. The Corporation may assign its
right of first refusal under this Section 11(d), in whole or in part, to a
Stockholder, a Benefit Plan, or an Affiliate. The Corporation shall give
reasonable written notice to the Transferor of any such assignment of its
rights. If the Corporation (or its permitted assignee) fails to exercise such
right of first refusal during this 90-day period, the Transferor may proceed
with the proposed transfer at any time within the next 45 days, and if he does
not do so, the restrictions of this Section 11(d) shall re-apply. The Option
Agreement may provide that the restrictions of this Section 11(d) re-apply to
any person to whom Stock that was originally acquired pursuant to an Option is
sold, pledged, assigned, bequeathed, gifted, transferred or otherwise disposed
of, without regard to the number of such subsequent transferees or the manner in
which they acquire the Stock, but the Option Agreement may provide that the
restrictions of this Section 11(d) do not apply to a transfer of Stock that
occurs as a result of the death of the Transferor or of any subsequent
transferee (but shall apply to the executor, the administrator or personal
representative, the estate, and the legatees, beneficiaries and assigns
thereof).
(e) Legend. In order to enforce the restrictions imposed upon shares
of Stock under this Plan or as provided in an Option Agreement, the Board may
cause a legend or legends to be placed on any certificate representing shares
issued pursuant to this Plan that complies with the applicable securities laws
and regulations and makes appropriate reference to the restrictions imposed
under it.
(f) Put Rights. The Board, by inclusion of appropriate language in
the Option Agreement, may grant the person acquiring shares of Stock thereunder
the right to put such shares to the Corporation at the fair market value of such
shares (as determined hereunder) at the time of exercise of such put, or at such
other value as shall be specified in the Option Agreement, subject to such
further terms and conditions as the Board shall include in the Option Agreement.
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12. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP OF OPTIONEE
In the Board's sole discretion, the Board may include language in an
Option Agreement providing for the termination of any unexercised Option in
whole or in part upon or at any time after the termination of employment or
other relationship of the Optionee with the Corporation or a Subsidiary (whether
as an employee, a director, an independent contractor providing services to the
Corporation or a Subsidiary, or otherwise). Whether a leave of absence or leave
on military or government service shall constitute a termination of employment
or other relationship of the Optionee with the Corporation or a Subsidiary for
purposes of the Plan shall be determined by the Board, which determination shall
be final and conclusive.
13. USE OF PROCEEDS
The proceeds received by the Corporation from the sale of Stock
pursuant to the exercise of Options granted under the Plan shall constitute
general funds of the Corporation.
14. REQUIREMENTS OF LAW
The Corporation shall not be required to sell or issue any shares of
Stock under any Option if the sale or issuance of such shares would constitute a
violation by the Optionee, the individual exercising the Option, or the
Corporation of any provisions of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations. If at any time the Corporation shall determine, in its discretion,
that the listing, registration, or qualification of any shares subject to the
Option upon any securities exchange or under any state or federal law, or the
consent or approval of any government regulatory or self-regulatory body is
necessary or desirable as a condition of, or in connection with, the issuance or
purchase of shares, the Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Corporation,
and any delay caused thereby shall in no way affect the date of termination of
the Option. Specifically in connection with the Securities Act of 1933 (as now
in effect or as hereafter amended), upon the exercise of any Option, unless a
registration statement under such Act is in effect with respect to the shares of
Stock covered thereby, the Corporation shall not be required to sell or issue
such shares unless the Board has received evidence satisfactory to it that the
holder of such Option may acquire such shares pursuant to an exemption from
registration under
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such Act. Any determination in this connection by the Board shall be final,
binding, and conclusive. The Corporation may, but shall in no event be obligated
to, register any securities covered hereby pursuant to the Securities Act of
1933 (as now in effect or as hereafter amended). The Corporation shall not be
obligated to take any affirmative action in order to cause the exercise of an
Option or the issuance of shares pursuant thereto to comply with any law or
regulation of any governmental authority. As to any jurisdiction that expressly
imposes the requirement that an Option shall not be exercisable unless and until
the shares of Stock covered by such Option are registered or are subject to an
available exemption from registration, the exercise of such Option (under
circumstances in which the laws of such jurisdiction apply) shall be deemed
conditioned upon the effectiveness of such registration or the availability of
such an exemption.
15. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Options have not been
granted; provided, however, that any amendment by the Board which, if not
approved by the Corporation's stockholders in accordance with Rule 16b-3, would
cause the Plan to not comply with Rule 16b-3 (or any successor rule or other
regulatory requirements) or the Code shall not be effective unless approved by
the affirmative vote of stockholders who hold more than fifty percent (50%) of
the combined voting power of the outstanding shares of voting stock of the
Corporation present or represented, and entitled to vote thereon at a duly
constituted stockholders' meeting, or by consent as permitted by law. The
Corporation, however, may retain the right in an Option Agreement to convert an
ISO into an NSO. The Corporation may also retain the right in an Option
Agreement to cause a forfeiture of the shares or gain realized by a holder of an
Option on account of the holder taking actions in "competition with the
Corporation," as defined in the applicable Option Agreement. Furthermore, the
Corporation may, in the Option Agreement, retain the right to annul the grant of
an Option, if the holder of such grant was an employee of the Corporation or a
Subsidiary and is terminated "for cause," as defined in the applicable Option
Agreement. Except as permitted under this Section 15 or Section 16 hereof, no
amendment, suspension, or termination of the Plan shall, without the consent of
the holder of the Option, alter or impair rights or obligations under any Option
theretofore granted under the Plan.
16. EFFECT OF CHANGES IN CAPITALIZATION
(a) Changes in Stock. If the number of outstanding shares of Stock
is increased or decreased or the shares of Stock are changed into or
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exchanged for a different number or kind of shares or other securities of the
Corporation on account of any recapitalization, reclassification, stock
split-up, combination of shares, exchange of shares, stock dividend or other
distribution payable in capital stock, or other increase or decrease in such
shares effected without receipt of consideration by the Corporation, occurring
after the effective date of the Plan, the number and kind of shares for the
acquisition of which Options may be granted under the Plan shall be adjusted
proportionately and accordingly by the Corporation. In addition, the number and
kind of shares for which Options are outstanding shall be adjusted
proportionately and accordingly so that the proportionate interest of the holder
of the Option immediately following such event shall, to the extent practicable,
be the same as immediately before such event. Any such adjustment in outstanding
Options shall not change the aggregate Option Price payable with respect to
shares that are subject to the unexercised portion of the Option outstanding but
shall include a corresponding proportionate adjustment in the Option Price per
share.
(b) Reorganization in Which the Corporation Is the Surviving
Corporation. Subject to Subsection (c) (iv) hereof, if the Corporation shall be
the surviving corporation in any reorganization, merger, or consolidation of the
Corporation with one or more other corporations, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger, or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger, or consolidation.
(c) Dissolution, Liquidation, Sale of Assets, Reorganization in
Which the Corporation Is Not the Surviving Corporation, Etc. The Plan and all
Options outstanding hereunder shall terminate (i) upon the dissolution or
liquidation of the Corporation, or (ii) upon a merger, consolidation, or
reorganization of the Corporation with one or more other corporations in which
the Corporation is not the surviving corporation, or (iii) upon a sale of
substantially all of the assets of the Corporation to another person or entity,
or (iv) upon a merger, consolidation or reorganization (or other transaction if
so determined by the Board in its sole discretion) in which the Corporation is
the surviving corporation, that is approved by the Board and that results in any
person or entity (other than persons who are holders of Stock of the Corporation
at the time the Plan is approved by the stockholders and other than an
Affiliate) owning 80 percent or more of the combined voting power of all classes
of stock of the Corporation, except to the extent provision is made in writing
in connection with any such transaction covered by clauses (i) through (iv) for
the continuation of the Plan or the assumption of such Options theretofore
granted, or for the substitution for such Options of new options
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covering the stock of a successor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of shares and
exercise prices, in which event the Plan and Options theretofore granted shall
continue in the manner and under the terms so provided. In the event of any such
termination of the Plan, each individual holding an Option shall have the right
(subject to the general limitations on exercise set forth in Section 10(b)
above), during such period occurring before such termination as the Board in its
sole discretion shall determine and designate, and in any event immediately
before the occurrence of such termination, to exercise such Option in whole or
in part, to the extent that such Option was otherwise exercisable at the time
such termination occurs, except that, by inclusion of appropriate language in an
Option Agreement, the Board may provide that the Option may be exercised before
termination without regard to any installment limitation or other condition on
exercise imposed pursuant to Section 10(b) above. The Corporation shall send
written notice of a transaction or event that will result in such a termination
to all individuals who hold Options not later than the time at which the
Corporation gives notice thereof to its stockholders.
(d) Adjustments. Adjustments under this Section 16 related to stock
or securities of the Corporation shall be made by the Board, whose determination
in that respect shall be final, binding, and conclusive. No fractional shares of
Stock or units of other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share or unit.
(e) No Limitations on Corporation. The grant of an Option pursuant
to the Plan shall not affect or limit in any way the right or power of the
Corporation to make adjustments, reclassifications, reorganizations, or changes
of its capital or business structure or to merge, consolidate, dissolve, or
liquidate, or to sell or transfer all or any part of its business or assets.
17. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option
Agreement entered into pursuant to the Plan shall be construed to confer upon
any individual the right to remain in the employ or service of or to maintain a
relationship with the Corporation or any Subsidiary, or to interfere in any way
with any contractual or other right or authority of the Corporation or any
Subsidiary either to increase or decrease the compensation or other payments to
any individual at any time, or to terminate any employment or other relationship
between any individual and the Corporation or any Subsidiary. The obligation of
the Corporation to pay any benefits pursuant to this Plan shall be interpreted
as a contractual obligation to pay only those amounts
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described herein, in the manner and under the conditions prescribed herein. The
Plan shall in no way be interpreted to require the Corporation to transfer any
amounts to a third party trustee or otherwise hold any amounts in trust or
escrow for payment to any participant or beneficiary under the terms of the
Plan.
18. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to
the stockholders of the Corporation for approval shall be construed as creating
any limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
19. CAPTIONS
The use of captions in this Plan or any Option Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Option Agreement.
20. DISQUALIFYING DISPOSITIONS
If Stock acquired by exercise of an ISO granted under this Plan is
disposed of within two years following the date of grant of the ISO or one year
following the transfer of the subject Stock to the Optionee (a "disqualifying
disposition"), the holder of the Stock shall, immediately prior to such
disqualifying disposition, notify the Corporation in writing of the date and
terms of such disposition and provide such other information regarding the
disposition as the Corporation may reasonably require.
21. WITHHOLDING TAXES
(a) The Corporation shall have the right to deduct from payments of
any kind otherwise due to an Optionee any Federal, state, or local taxes of any
kind required by law to be withheld with respect to any shares issued upon the
exercise of an Option under the Plan. At the time of exercise, the Optionee
shall pay to the Corporation any amount that the Corporation may reasonably
determine to be necessary to satisfy such withholding obligation. The Board in
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its sole discretion may provide in the Option Agreement that, subject to the
prior approval of the Corporation, which may be withheld by the Corporation in
its sole discretion, the Optionee may elect to satisfy such obligations, in
whole or in part, (i) by causing the Corporation to withhold shares of Stock
otherwise issuable pursuant to the exercise of an Option or (ii) by delivering
to the Corporation shares of Stock already owned by the Optionee. The shares so
delivered or withheld shall have a fair market value equal to such withholding
obligations. The fair market value of the shares used to satisfy such
withholding obligation shall be determined by the Corporation as of the date
that the amount of tax to be withheld is to be determined. An Optionee who has
made an election pursuant to this Section 21(a) may only satisfy his or her
withholding obligation with shares of Stock that are not subject to any
repurchase, forfeiture, unfulfilled vesting, or other similar requirements.
(b) Notwithstanding the foregoing, in the case of a Reporting
Person, no election to use shares for the payment of withholding taxes shall be
effective unless made in compliance with any applicable requirements under Rule
16b-3(e) or any successor rule under the Exchange Act.
22. OTHER PROVISIONS
Each Option granted under the Plan may be subject to, and the Option
Agreement relating to such Option may contain, such other terms and conditions
not inconsistent with the Plan as may be determined by the Board, in its sole
discretion. Notwithstanding the foregoing, each ISO granted under the Plan shall
include those terms and conditions that are necessary to qualify the ISO as an
"incentive stock Option" within the meaning of the Section 422 of the Code or
the regulations thereunder and shall not include any terms or conditions that
are inconsistent therewith.
23. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall
include the plural form, the masculine gender shall include the feminine gender,
etc., as the context requires.
24. SEVERABILITY
If any provision of the Plan or any Option Agreement shall be
determined to be illegal or unenforceable by any court of law in any
jurisdiction, the remaining provisions hereof and thereof shall be severable and
enforceable in accordance with their terms, and all provisions shall remain
enforceable in any other jurisdiction.
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25. GOVERNING LAW
The validity and construction of this Plan and the instruments
evidencing the Options granted hereunder shall be governed by the laws of the
State of Delaware (excluding its choice of law rules).
* * *
The Plan was duly adopted and approved by the Board of Directors of
the Corporation on the 25th day of January, 1994.
/s/ Mark Ohlendorf
----------------------------
Secretary of the Corporation
This Plan was duly approved by the stockholders of the Corporation
on the 28th day of February, 1994.
/s/ Mark Ohlendorf
----------------------------
Secretary of the Corporation
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<PAGE>
EXHIBIT 10.34
VITAS HEALTHCARE CORPORATION
1994 MANAGEMENT EQUITY INCENTIVE PLAN
NON-INCENTIVE STOCK OPTION AGREEMENT
[Performance Vesting]
<PAGE>
VITAS HEALTHCARE CORPORATION
1994 MANAGEMENT EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
TABLE OF CONTENTS
1. Grant of Option ...................................................... 1
2. Terms of Plan ........................................................ 2
3. Price ................................................................ 2
4. Vesting in Options ................................................... 2
5. Exercise of Option ................................................... 2
5(a) Time of Exercise of Option ...................................... 2
5(b) Termination of Option ........................................... 3
5(c) Limitations on Exercise of Option ............................... 3
5(d) Method of Exercise of Option .................................... 3
5(e) Parachute Limitations ........................................... 3
6. Transferability ...................................................... 4
6(a) Transferability of Options ...................................... 4
6(b) Nontransferability of Shares .................................... 4
6(c) Repurchase Rights ............................................... 5
6(d) Purchase of Option .............................................. 6
6(e) Publicly Traded Stock ........................................... 6
6(f) Installment Payments ............................................ 6
6(g) Legend Describing Restrictions and
Obligations ................................................... 7
7. Effect of Changes in Capitalization .................................. 7
7(a) Changes in Stock ................................................ 7
7(b) Reorganization in Which the Corporation
Is the Surviving Corporation .................................. 7
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8. Requirements of Law .................................................. 9
9. Rights as Stockholder ................................................ 10
10. Withholding of Taxes ................................................. 10
11. Disclaimer of Rights ................................................. 10
12. Interpretation of this Option Agreement .............................. 10
13. Governing Law ........................................................ 11
14. Approval by Stockholders ............................................. 11
15. Binding Effect ....................................................... 11
16. Notice ............................................................... 11
17. Entire Agreement ..................................................... 11
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Performance
Vesting
VITAS HEALTHCARE CORPORATION
1994 MANAGEMENT EQUITY INCENTIVE PLAN
NON-INCENTIVE STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Option Agreement") is made as of January
25, 1994, by and between Vitas Healthcare Corporation, a Delaware corporation
(the "Corporation"), and ______________, an individual who is employed by or
otherwise has a relationship with the Corporation or its subsidiaries (the
"Optionee").
WHEREAS, the Board of Directors of the Corporation has duly adopted and
approved the Vitas Healthcare Corporation 1994 Management Equity Incentive Plan
(the "Plan"), subject to approval by the stockholders of the Corporation, which
Plan authorizes the Corporation to grant to eligible individuals options for the
purchase of shares of the Corporation's common stock, par value $.001 per share,
(the "Stock"); and
WHEREAS, the Corporation has determined that it is desirable and in its
best interests to grant to the Optionee, pursuant to the Plan (including Section
4(a) of the Plan), an option to purchase a certain number of shares of Stock, in
order to provide the Optionee with an incentive to advance the interests of the
Corporation and any "subsidiary corporation" thereof within the meaning of
Section 424(f) of the Internal Revenue Code of 1986 (a "Subsidiary"), all
according to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto do hereby agree as follows:
1. Grant of Option. Subject to the terms of the Plan (attached hereto as
Exhibit A), and to the requisite approval of the Plan by the stockholders of the
Corporation, the Corporation hereby grants to the Optionee the right and option
(the "Option") to purchase from the Corporation, on the terms and subject to the
conditions set forth in the Plan and in this Option Agreement, ____________
(____) shares of Stock. This Option shall not constitute an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). The date of grant of this Option is January 25, 1994,
the date on which the grant of the Option was approved by the Compensation
Committee (the "Committee") of the Board of Directors of the Corporation (the
"Board").
<PAGE>
2. Terms of Plan. The Option granted pursuant to this Option Agreement is
granted subject to the terms and conditions set forth in the Plan. All terms and
conditions of the Plan, as it may be amended from time to time, are hereby
incorporated into this Option Agreement by reference and shall be deemed to be
part of this Option Agreement, without regard to whether such terms and
conditions are not otherwise set forth in this Option Agreement. In the event
that there is any inconsistency between the provisions of this Option Agreement
and of the Plan, the provisions of the Plan shall govern.
3. Price. The purchase price (the "Option Price") for the shares of Stock
subject to the Option granted by this Option Agreement is $____ per share.
4. Vesting in Options.
(a) General. The Option becomes vested (i.e., nonforfeitable) upon
the earlier of satisfying the service requirements contained in (b) or any of
the performance target determinations in (c), as set forth in this Section 4, as
follows:
(b) Service Requirement. The Option becomes vested (i.e.,
nonforfeitable) as to 25% of the shares of Stock purchasable pursuant to the
Option on or after January 25, 1996: (the "Anniversary Date"), if Optionee has
been providing services to the Corporation or a Subsidiary continuously from the
date of grant to the Anniversary Date. Thereafter, so long as continuous service
has not been interrupted, the Option becomes vested (i.e., nonforfeitable) as to
an additional 25% of the shares of Stock subject to the Option on or after each
of the next three anniversaries of the Anniversary Date. Service for this
purpose includes service as an employee, director or independent contractor
providing services to the Corporation or a Subsidiary. For purposes of the
Option Agreement, termination of service would not be deemed to occur if the
Optionee, after terminating service in one capacity, continues to provide
service to the Corporation or any Subsidiary in another capacity. Termination of
service is sometimes also referred to herein as termination of employment or
other relationship with the Corporation or its Subsidiaries. Termination of
service (regardless of whether with or without cause or by reason of death,
disability or voluntary resignation) results in forfeiture of that portion of
the Option (if any) that has not yet vested (i.e., become nonforfeitable) but
does not affect the exercisability of that portion of the Option (if any) that
has vested and which continues to be subject to the limitations on exercise set
forth in this Option Agreement and the Plan.
(c) Performance Targets. The Option becomes vested (i.e.,
nonforfeitable) as to 100% of the shares of Stock purchasable pursuant to the
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Option on the date that the Committee, or if there is no duly constituted
Committee, the Board determines that (a) the Corporation's consolidated net
income before provision for income taxes for the fiscal year ending September
30, 1994 is at least $11.4 million, (b) the Corporation's consolidated net
income before provision for income taxes for the fiscal year ending September
30, 1995 is at least $13.7 million or (c) the Corporation's consolidated net
income before provision for income taxes for the fiscal year ending September
30, 1996 is at least $16.4 million. Such determination shall be made based on
the audited financial statements of the Corporation and its Subsidiaries no
later than 120 days after the end of each such fiscal year, or if there are no
such audited financial statements for such fiscal year, based on the unaudited
financial statements of the Corporation and its Subsidiaries, as certified by
the Chief Executive Officer or Chief Financial Officer of the Corporation. In
making such determination, the Committee or the Board, as the case may be, shall
have the authority to determine if such performance targets have been satisfied
or deemed satisfied after taking into account such accounting adjustments or
other factors that are considered by the Committee or the Board, as the case may
be, to be appropriate under then existing circumstances.
5. Exercise of Option. Except as otherwise provided herein, and subject to
the provisions of the Plan, the Option granted pursuant to this Option Agreement
shall be subject to exercise as follows:
(a) Time of Exercise of Option. The Optionee may exercise the Option
(subject to the limitations on exercise set forth in this Option Agreement and
in the Plan), to the extent the Option is vested (i.e., nonforfeitable) and has
not terminated under Section 5(b), on the earliest of the following: (i) nine
years and ten months after the date of grant; (ii) the closing of a bona fide,
firm commitment underwritten public offering of the Common Stock of the
Corporation pursuant to a registration statement declared effective under the
Securities Act of 1933, as amended, and (iii) receipt by the Optionee of notice
from the Corporation that the Corporation has entered into a definitive
agreement or the Board has adopted definitive resolutions calling for the
Corporation, subject to certain terms and conditions, to effect a transaction or
event described in Section 7(c). No single exercise of the Option shall be for
less than 100 shares of Stock, unless the number of shares purchased is the
total number at the time available for purchase under this Option.
(b) Termination of Option. The Option shall terminate upon the
earliest of (i) the expiration of a period of ten years from the date of grant
of the Option, as set forth in Section 1 above, (ii) the occurrence of a
transaction or event described in Section 7(c) which causes termination of the
Option, (iii) the Optionee's termination of employment or other relationship
with the Corporation or a Subsidiary to the extent the Option has not become
vested (i.e., nonforfeitable) in accordance with Section 4 or (iv) the purchase
of the Option by the Corporation pursuant to Section 6(d).
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(c) Limitations on Exercise of Option. Notwithstanding the foregoing
Subsections, in no event may the Option be exercised, in whole or in part, prior
to the date the Plan is approved by the stockholders of the Corporation and in
the event the stockholders fail to approve the Plan within one year of the date
of its adoption by the Board, the Option shall be null and void and of no
effect.
(d) Method of Exercise of Option. Subject to the terms and
conditions of this Option Agreement, the Option may be exercised by delivering
written notice of exercise to the Corporation, at its principal office,
addressed to the attention of the President, which notice shall specify the
number of shares for which the Option is being exercised, and shall be
accompanied by payment in full of the Option Price of the shares of Stock for
which the Option is being exercised. Payment of the Option Price for the shares
of Stock purchased pursuant to the exercise of the Option shall be made in cash
or by certified check payable to the order of the Corporation. If the person
exercising the Option is not the Optionee, such person shall also deliver with
the notice of exercise appropriate proof of his or her right to exercise the
Option. An attempt to exercise the Option granted hereunder other than as set
forth above shall be invalid and of no force and effect. Promptly after exercise
of the Option as provided for above, the Corporation shall deliver to the person
exercising the Option a certificate or certificates for the shares of Stock
being purchased.
(e) Parachute Limitations. Notwithstanding any other provision of
this Option Agreement or of any other agreement, contract, or understanding
heretofore or hereafter entered into by the Optionee with the Corporation or any
Subsidiary or Affiliate (as defined in Section 6(b)), except an agreement,
contract, or understanding hereafter entered into that expressly modifies or
excludes application of this Section (the "Other Agreements"), and
notwithstanding any formal or informal plan or other arrangement heretofore or
hereafter adopted by the Corporation (or any such Subsidiary or Affiliate) for
the direct or indirect compensation of the Optionee (including groups or classes
of participants or beneficiaries of which the Optionee is a member), whether or
not such compensation is deferred, is in cash, or is in the form of a benefit to
or for the Optionee (a "Benefit Arrangement"), if the Optionee is a
"disqualified individual," as defined in Section 280G(c) of the Code, the Option
and any right to receive any payment or other benefit under the Plan shall not
become exercisable or vested (i) to the extent that such right to exercise,
vesting, payment, or benefit, taking into account all other rights, payments, or
benefits to or for Optionee under the Plan, all Other Agreements, and all
Benefit Arrangements, would cause any payment or benefit to the Optionee under
this Option to be considered a "parachute payment" within the meaning of Section
280G(b)(2) of the Code as then in effect (a "Parachute Payment") and (ii) if, as
a result of receiving a Parachute Payment, the aggregate after-tax amounts
received by the Optionee from the
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Corporation under this Plan, all Other Agreements, and all Benefit Arrangements
would be less than the maximum after-tax amount that could be received by
Optionee without causing any such payment or benefit to be considered a
Parachute Payment. In the event that the receipt of any such right to exercise,
vesting, payment, or benefit under this Option, in conjunction with all other
rights, payments, or benefits to or for the Optionee under the Plan, any Other
Agreement or any Benefit Arrangement would cause the Optionee to be considered
to have received a Parachute Payment under the Option that would have the effect
of decreasing the after-tax amount received by the Optionee as described in
clause (ii) of the preceding sentence, then the Optionee shall have the right,
in the Optionee's sole discretion, to designate those rights, payments, or
benefits under the Option, the Plan, any Other Agreements, and any Benefit
Arrangements that should be reduced or eliminated so as to avoid having the
payment or benefit to the Optionee under the Option be deemed to be a Parachute
Payment.
6. Transferability.
(a) Transferability of Options. During the lifetime of the Optionee,
only such Optionee (or, in the event of legal incapacity or incompetency, the
Optionee's guardian or legal representative) may exercise the Option. No Option
shall be assignable or transferable by the Optionee to whom it is granted, other
than by will or the laws of descent and distribution.
(b) Nontransferability of Shares. The Optionee (or any other person
who is entitled to exercise an Option pursuant to the terms of the Plan and this
Option Agreement) shall not sell, pledge, assign, gift, transfer or otherwise
dispose of any shares of Stock acquired pursuant to the Option to anyone without
first offering such Stock to the Corporation for purchase on the same terms and
conditions as those offered to the proposed transferee. Any individual who
proposes such a transfer (the "Transferor") shall notify the Corporation, in
writing, of the identity of the proposed transferee and the terms and conditions
of such proposed transfer. The Corporation may exercise its right of first
refusal under this Subsection within 90 days after receiving such notice of the
proposed transfer. The Corporation may assign its right of first refusal under
this Subsection, in whole or in part, to (1) any stockholder of the Corporation
who owns stock or securities of the Corporation (a "Stockholder"), (2) any
employee benefit plan (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended) maintained by the
Corporation or a Subsidiary for the benefit of employees of the Corporation or a
Subsidiary (a "Benefit Plan"), or (3) any corporation or other trade or business
that is controlled by or under common control with the Corporation (determined
in accordance with the principles of Section 414(b) and Section 414(c) of the
Code and the regulations thereunder) (an "Affiliate"). The Corporation shall
give reasonable written notice to the Transferor of any such assignment of its
rights. If the Corporation (or its permitted assignee) fails to exercise such
right of first refusal during this 90-day
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period, the Transferor may proceed with the proposed transfer at any time within
the next 45 days, and if he does not do so, the restrictions of this Subsection
shall re-apply. These restrictions also shall re-apply to any person to whom
Stock that was originally acquired pursuant to an Option is sold, pledged,
assigned, bequeathed, gifted, transferred or otherwise disposed of without
regard to the number of such subsequent transferees or the manner in which they
acquire the Stock. Notwithstanding the foregoing, the restrictions of this
Subsection shall not apply to a transfer of Stock that occurs as a result of the
death of the Transferor or of any subsequent transferee but such restrictions
shall apply to the executor, administrator or personal representative, the
estate and the legatees, beneficiaries and assigns thereof.
(c) Repurchase Rights. Upon the termination of employment or other
relationship of the Optionee with the Corporation or a Subsidiary, the
Corporation shall have the right, for a period of twelve months following such
termination, to repurchase any or all of the shares of Stock acquired pursuant
to such Option, at a price equal to the fair market value of such shares on the
date the Corporation delivers to the Optionee, or other holder of such shares of
Stock, notice that it is exercising its repurchase rights. Upon the exercise of
the Option granted hereunder following the termination of employment or other
relationship of the Optionee with the Corporation or a Subsidiary, the
Corporation shall have the right, for a period of twelve months following such
exercise, to repurchase any or all of the shares of Stock acquired by the
Optionee pursuant to such exercise of such Option, at a price equal to the fair
market value of such shares on the date the Corporation delivers to the
Optionee, or other holder of such shares of Stock, notice that it is exercising
its repurchase rights. In the event that the Corporation determines that it
cannot or will not exercise its rights to purchase Stock pursuant to this
Subsection, in whole or in part, the Corporation may assign its rights
hereunder, in whole or in part, to a Stockholder, a Benefit Plan or an
Affiliate. The Corporation shall give reasonable written notice to the Optionee
of any assignment of its rights. "Fair market value", for purposes of this
Subsection, shall be determined by the Board in the same manner specified in the
Plan for determining the Option Price. A notice of repurchase given pursuant to
this Subsection shall specify the price and date of closing of such repurchase,
which shall be no later than 30 days from the date of such notice. In the event
any such repurchase rights are exercised in accordance with this Subsection, the
holder of the Stock being repurchased shall be obligated to sell such Stock
pursuant to the exercise of such rights.
(d) Purchase of Option. Upon the termination of employment or other
relationship of the Optionee with the Corporation or a Subsidiary, the
Corporation shall have the right, at all times before the Option is exercised,
to purchase the vested (i.e., nonforfeitable) portion of the Option, in whole or
in part, at a price equal to the value of such Option on the date the
Corporation delivers to the Optionee (or transferee of the Option pursuant to
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Section 6(a)), notice that it is exercising such purchase rights. For this
purpose, the value of the Option is equal to the excess (if any) of the fair
market value of the shares of Stock that are subject to the Option, determined
by the Board in the same manner specified in the Plan for determining the Option
Price as of the date of notice, over the aggregate Option Price of such shares.
Upon payment (or tender of payment) in the applicable amount to the Optionee (or
transferee of the Option), the vested (i.e. nonforfeitable) portion of the
Option shall be terminated and, if payment has been tendered but not made, shall
only represent the right to receive such payment without interest. A notice of
purchase given pursuant to this Subsection shall specify the price and date of
closing of such purchase which shall be no later than 30 days from the date of
such notice. In the event any such purchase right is exercised in accordance
with this Subsection, the Optionee (or holder of the Option being purchased)
shall be obligated to sell such Option pursuant to the exercise of such rights.
(e) Publicly Traded Stock. If the Stock is listed on an established
national or regional stock exchange or is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System, or is publicly
traded in an established securities market, the foregoing restrictions, purchase
and repurchase rights of Sections 6(b), 6(c) and 6(d) shall terminate as of the
first date that the Stock is so listed, quoted or publicly traded.
(f) Installment Payments. In the case of any purchase of Stock or an
Option under this Section 6, at the option of the Corporation or its permitted
assignee the Corporation or its permitted assignee may pay the Optionee,
transferee of the Option or other registered owner of the Stock the purchase
price in three or fewer annual installments. Interest shall be credited on the
installments at the applicable federal rate (as determined for purposes of
Section 1274 of the Code) in effect on the date on which the purchase is made.
The Corporation or its permitted assignee shall pay at least one-third of the
total purchase price each year, plus interest on the unpaid balance, with the
first payment being made on or before the 60th day after the purchase.
(g) Legend Describing Restrictions and Obligations. The Board or
Committee may cause a legend to be placed prominently on certificates
representing Stock issued pursuant to this Plan in order to give notice of the
transferability restrictions, repurchase rights and other obligations imposed by
this Section.
7. Effect of Changes in Capitalization
(a) Changes in Stock. If the number of outstanding shares of Stock
is increased or decreased or the shares of Stock are changed into or exchanged
for a different number or kind of shares or other securities of the Corporation
on account of any recapitalization, reclassification, stock split-up,
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combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Corporation, occurring after the date of
grant of the Option, the number and kind of shares of Stock for which the Option
was granted shall be adjusted proportionately and accordingly so that the
proportionate interest of the Optionee immediately following such event shall,
to the extent practicable, be the same as immediately before such event. Any
such adjustment in the Option shall not change the aggregate Option Price
payable with respect to shares that are subject to the unexercised portion of
the Option but shall include a corresponding proportionate adjustment in the
Option Price per share.
(b) Reorganization in Which the Corporation Is the Surviving
Corporation. Subject to Subsection 7(c)(iv) hereof, if the Corporation shall be
the surviving corporation in any reorganization, merger, or consolidation of the
Corporation with one or more other corporations, the Option shall pertain to and
apply to the securities to which a holder of the number of shares of Stock
subject to the Option would have been entitled immediately following such
reorganization, merger, or consolidation, with a corresponding proportionate
adjustment of the Option Price per share so that the aggregate Option Price
thereafter shall be the same as the aggregate Option Price of the shares
remaining subject to the Option immediately prior to such reorganization,
merger, or consolidation.
(c) Dissolution, Liquidation, Sale of Assets, Reorganization in
Which the Corporation Is Not the Surviving Corporation, Etc. The Option shall
terminate (i) upon the dissolution or liquidation of the Corporation, or (ii)
upon a merger, consolidation, or reorganization of the Corporation with one or
more other corporations in which the Corporation is not the surviving
corporation, or (iii) upon a sale of substantially all of the assets of the
Corporation to another person or entity, or (iv) upon a merger, consolidation or
reorganization (or other transaction if so determined by the Board in its sole
discretion) in which the Corporation is the surviving corporation, that is
approved by the Board and that results in any person or entity (other than
persons who are holders of Stock of the Corporation at the time the Plan is
approved by the stockholders and other than an Affiliate) owning 80 percent or
more of the combined voting power of all classes of stock of the Corporation,
except to the extent provision is made in writing in connection with any such
transaction covered by clauses (i) through (iv) for the assumption of the Option
or for the substitution for the Option of a new option(s) covering the stock of
a successor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and exercise prices, in which
event the Option theretofore granted shall continue in the manner and under the
terms so provided. In the event of any such termination of the Option, the
Optionee shall have the right (subject to the general limitations on exercise
set forth in Section 5), during
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such period occurring before such termination as the Board in its sole
discretion shall determine and designate, and in any event immediately before
the occurrence of such termination, to exercise such Option in whole or in part,
to the extent that such Option was otherwise exercisable at the time such
termination occurs. The Corporation shall send written notice of a transaction
or event that will result in such a termination to Optionee not later than the
time at which the Corporation gives notice thereof to its stockholders.
(d) Adjustments. Adjustments under this Section 7 related to stock
or securities of the Corporation shall be made by the Board, whose determination
in that respect shall be final, binding, and conclusive. No fractional shares of
Stock or units of other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share or unit.
(e) No Limitations on Corporation. The grant of the Option shall not
affect or limit in any way the right or power of the Corporation to make
adjustments, reclassifications, reorganizations, or changes of its capital or
business structure or to merge, consolidate, dissolve, or liquidate, or to sell
or transfer all or any part of its business or assets.
8. Requirements of Law. The Corporation shall not be required to sell or
issue any shares of Stock under the Option if the sale or issuance of such
shares would constitute a violation by the Optionee, the individual exercising
the Option, or the Corporation of any provisions of any law or regulation of any
governmental authority, including without limitation any federal or state
securities laws or regulations. If at any time the Corporation shall determine,
in its discretion, that the listing, registration, or qualification of any
shares subject to the Option upon any securities exchange or under any state or
federal law, or the consent or approval of any government regulatory or self-
regulatory body is necessary or desirable as a condition of, or in connection
with the issuance or purchase of shares, the Option may not be exercised in
whole or in part unless such listing, registration, qualification, consent, or
approval shall have been effected or obtained free of any conditions not
acceptable to the Corporation, and any delay caused thereby shall in no way
affect the date of termination of the Option. Specifically in connection with
the Securities Act of 1933 (as now in effect or as hereafter amended), upon the
exercise of any Option, unless a registration statement under such Act is in
effect with respect to the shares of Stock covered thereby, the Corporation
shall not be required to sell or issue such shares unless the Board has received
evidence satisfactory to it that the holder of such Option may acquire such
shares pursuant to an exemption from registration under such Act. Any
determination in this connection by the Board shall be final, binding, and
conclusive. The Corporation may, but shall in no event be obligated to, register
any securities covered hereby pursuant to the Securities Act of 1933 (as now in
effect or as hereafter amended). The Corporation shall not be obligated to
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take any affirmative action in order to cause the exercise of an Option or the
issuance of shares pursuant thereto to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that an Option shall not be exercisable unless and until the shares
of Stock covered by such Option are registered or are subject to an available
exemption from registration, the exercise of such Option (under circumstances in
which the laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.
9. Rights as Stockholder. Neither the Optionee nor any executor,
administrator, distributee or legatee of the Optionee's estate shall be, or have
any of the rights or privileges of, a stockholder of the Corporation in respect
of any shares of Stock issuable hereunder unless and until such shares have been
fully paid and certificates representing such shares have been endorsed,
transferred and delivered, and the name of the Optionee (or of such personal
representative, administrator, distributee or legatee of the Optionee's estate)
has been entered as the stockholder of record on the books of the Corporation.
10. Withholding of Taxes. The parties hereto recognize that the
Corporation or a Subsidiary may be obligated to withhold federal, state and
local income taxes and Social Security taxes to the extent that the Optionee
realizes ordinary income in connection with the exercise of the Option or in
connection with a disposition of any shares of Stock acquired by exercise of the
Option. The Optionee agrees that the Corporation or a Subsidiary may withhold
amounts needed to cover such taxes from payments otherwise due and owing to the
Optionee, and also agrees that upon demand the Optionee will promptly pay to the
Corporation or a Subsidiary having such obligation any additional amounts as may
be necessary to satisfy such withholding tax obligation. Such payment shall be
made in cash or by certified check payable to the order of the Corporation or a
Subsidiary.
11. Disclaimer of Rights. No provision in this Option Agreement shall be
construed to confer upon the Optionee the right to remain in the employ or
service of or to maintain a relationship with the Corporation or any Subsidiary,
or to interfere in any way with any contractual or other right or authority of
the Corporation or any Subsidiary either to increase or decrease the
compensation of the Optionee at any time, or to terminate any employment or
other relationship between the Optionee and the Corporation or any Subsidiary.
12. Interpretation of this Option Agreement. All decisions and
interpretations made by the Board or the Committee thereof with regard to any
question arising under the Plan or this Option Agreement shall be binding and
conclusive on the Corporation and the Optionee and any other person entitled to
exercise the Option as provided for herein.
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13. Governing Law. This Option Agreement shall be governed by the laws of
the State of Delaware (excluding its choice of law rules).
14. Approval by Stockholders. This Option Agreement and the issuance of
any shares under it are expressly subject to the approval of the Plan by the
stockholders of the Corporation as provided for therein. The Option shall not in
any event be exercisable in whole or in part prior to the date the Plan is
approved by the stockholders of the Corporation as provided for therein.
15. Binding Effect. Subject to all restrictions provided for in this
Option Agreement, the Plan and by applicable law limiting assignment and
transfer of this Option Agreement and the Option provided for herein, this
Option Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, successors, and
assigns.
16. Notice. Any notice hereunder by the Optionee to the Corporation shall
be in writing and shall be deemed duly given if mailed or delivered to the
Corporation at its principal office, addressed to the attention of the
President, or if so mailed or delivered to such other address as the Corporation
may hereafter designate by notice to the Optionee. Any notice hereunder by the
Corporation to the Optionee shall be in writing and shall be deemed duly given
if mailed or delivered to the Optionee at the address specified below by the
Optionee for such purpose, or if so mailed or delivered to such other address as
the Optionee may hereafter designate by written notice given to the Corporation.
17. Entire Agreement. This Option Agreement and the Plan together
constitute the entire agreement and supersede all prior understandings and
agreements, written or oral, of the parties hereto with respect to the subject
matter hereof. Neither this Option Agreement nor any term hereof may be amended,
waived, discharged or terminated except by a written instrument signed by the
Corporation and the Optionee; provided, however, that the Corporation
unilaterally may waive any provision hereof in writing to the extent that such
waiver does not adversely affect the interests of the Optionee hereunder, but no
such waiver shall operate as or be construed to be a subsequent waiver of the
same provision or a waiver of any other provision hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Option
Agreement, or caused this Option Agreement to be duly executed in their name and
on their behalf, as of the day and year first above written.
VITAS HEALTHCARE CORPORATION
By:_________________________________
Title:______________________________
OPTIONEE:
____________________________________
ADDRESS FOR NOTICE TO OPTIONEE:
____________________________________
Number Street
____________________________________
City State Zip Code
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<PAGE>
EXHIBIT 10.35
VITAS HEALTHCARE CORPORATION
1994 MANAGEMENT EQUITY INCENTIVE PLAN
NON-INCENTIVE STOCK OPTION AGREEMENT
[Time Vesting]
<PAGE>
VITAS HEALTHCARE CORPORATION
1994 MANAGEMENT EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
TABLE OF CONTENTS
1. Grant of Option ...................................................... 1
2. Terms of Plan ........................................................ 2
3. Price ................................................................ 2
4. Vesting in Options ................................................... 2
4(a) General ......................................................... 2
4(b) Service Requirement ............................................. 2
4(c) Performance Targets ............................................. 2
5. Exercise of Option ................................................... 3
5(a) Time of Exercise of Option ...................................... 3
5(b) Termination of Option ........................................... 3
5(c) Limitations on Exercise of Option ............................... 4
5(d) Method of Exercise of Option .................................... 4
5(e) Parachute Limitations ........................................... 4
6. Transferability ...................................................... 5
6(a) Transferability of Options ...................................... 5
6(b) Nontransferability of Shares .................................... 5
6(c) Repurchase Rights ............................................... 6
6(d) Purchase of Option .............................................. 6
6(e) Publicly Traded Stock ........................................... 7
6(f) Installment Payments ............................................ 7
6(g) Legend Describing Restrictions and
Obligations ................................................... 7
7. Effect of Changes in Capitalization .................................. 7
7(a) Changes in Stock ................................................ 7
7(b) Reorganization in Which the Corporation
Is the Surviving Corporation .................................. 8
7(c) Dissolution, Liquidation, Sale of Assets,
Reorganization in Which the Corporation
Is Not the Surviving Corporation, Etc. ........................ 8
7(d) Adjustments ..................................................... 9
7(e) No Limitations on Corporation ................................... 9
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7(c) Dissolution, Liquidation, Sale of Assets,
Reorganization in which the Corporation
Is Not the Surviving Corporation, Etc. ........................ 7
7(d) Adjustments ..................................................... 8
7(e) No Limitations on Corporation ................................... 8
8. Requirements of Law .................................................. 8
9. Rights as Stockholder ................................................ 9
10. Withholding of Taxes ................................................. 9
11. Disclaimer of Rights ................................................. 10
12. Interpretation of this Option Agreement .............................. 10
13. Governing Law ........................................................ 10
14. Approval by Stockholders ............................................. 10
15. Binding Effect ....................................................... 10
16. Notice ............................................................... 10
17. Entire Agreement ..................................................... 10
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Time Vesting
VITAS HEALTHCARE CORPORATION
1994 MANAGEMENT EQUITY INCENTIVE PLAN
NON-INCENTIVE STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Option Agreement") is made as of
______________, 199__, by and between Vitas Healthcare Corporation, a Delaware
corporation (the "Corporation"), and _______________, an individual who is
employed by or otherwise has a relationship with the Corporation or its
subsidiaries (the "Optionee").
WHEREAS, the Board of Directors of the Corporation has duly adopted and
approved the Vitas Healthcare Corporation 1994 Management Equity Incentive Plan
(the "Plan"), subject to approval by the stockholders of the Corporation, which
Plan authorizes the Corporation to grant to eligible individuals options for the
purchase of shares of the Corporation's common stock, par value $.001 per share,
(the "Stock"); and
WHEREAS, the Corporation has determined that it is desirable and in its
best interests to grant to the Optionee, pursuant to the Plan (including Section
4(a) of the Plan), an option to purchase a certain number of shares of Stock, in
order to provide the Optionee with an incentive to advance the interests of the
Corporation and any "subsidiary corporation" thereof within the meaning of
Section 424(f) of the Internal Revenue Code of 1986 (a "Subsidiary"), all
according to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto do hereby agree as follows:
1. Grant of Option. Subject to the terms of the Plan (attached hereto as
Exhibit A), and to the requisite approval of the Plan by the stockholders of the
Corporation, the Corporation hereby grants to the Optionee the right and option
(the "Option") to purchase from the Corporation, on the terms and subject to the
conditions set forth in the Plan and in this Option Agreement, ____________
(____) shares of Stock. This Option shall not constitute an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). The date of grant of this Option is _______________
199__, the date on which the grant of the Option was approved by the
Compensation Committee (the "Committee") of the Board of Directors of the
Corporation (the "Board").
<PAGE>
2. Terms of Plan. The Option granted pursuant to this Option Agreement is
granted subject to the terms and conditions set forth in the Plan. All terms and
conditions of the Plan, as it may be amended from time to time, are hereby
incorporated into this Option Agreement by reference and shall be deemed to be
part of this Option Agreement, without regard to whether such terms and
conditions are not otherwise set forth in this Option Agreement. In the event
that there is any inconsistency between the provisions of this Option Agreement
and of the Plan, the provisions of the Plan shall govern.
3. Price. The purchase price (the "Option Price") for the shares of Stock
subject to the Option granted by this Option Agreement is $____ per share.
4. Vesting in Options. The Option becomes vested (i.e., nonforfeitable) as
to 25% of the shares of Stock purchasable pursuant to the Option on or after
___________, 199__ (the "Anniversary Date"), if Optionee has been providing
services to the Corporation or a Subsidiary continuously from the date of grant
to the Anniversary Date. Thereafter, so long as continuous service has not been
interrupted, the Option becomes vested (i.e., nonforfeitable) as to an
additional 25% of the shares of Stock subject to the Option on or after each of
the next three anniversaries of the Anniversary Date. Service for this purpose
includes service as an employee, director or independent contractor providing
services to the Corporation or a Subsidiary. For purposes of the Option
Agreement, termination of service would not be deemed to occur if the Optionee,
after terminating service in one capacity, continues to provide service to the
Corporation or any Subsidiary in another capacity. Termination of service is
sometimes also referred to herein as termination of employment or other
relationship with the Corporation or its Subsidiaries. Termination of service
(regardless of whether with or without cause or by reason of death, disability
or voluntary resignation) results in forfeiture of that portion of the Option
(if any) that has not yet vested (i.e., become nonforfeitable) but does not
affect the exercisability of that portion of the Option (if any) that has vested
and which continues to be subject to the limitations on exercise set forth in
this Option Agreement and the Plan.
5. Exercise of Option. Except as otherwise provided herein, and subject to
the provisions of the Plan, the Option granted pursuant to this Option Agreement
shall be subject to exercise as follows:
(a) Time of Exercise of Option. The Optionee may exercise the Option
(subject to the limitations on exercise set forth in this Option Agreement and
in the Plan), to the extent the Option is vested (i.e., nonforfeitable) and has
not terminated under Section 5(b), on the earliest of the following: (i) nine
years and ten months after the date of grant; (ii) the closing of a bona fide,
firm commitment underwritten public offering of the Common Stock of the
Corporation pursuant to a registration statement declared effective under the
Securities Act of
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<PAGE>
1933, as amended, and (iii) receipt by the Optionee of notice from the
Corporation that the Corporation has entered into a definitive agreement or the
Board has adopted definitive resolutions calling for the Corporation, subject to
certain terms and conditions, to effect a transaction or event described in
Section 7(c). No single exercise of the Option shall be for less than 100 shares
of Stock, unless the number of shares purchased is the total number at the time
available for purchase under this Option.
(b) Termination of Option. The Option shall terminate upon the
earliest of (i) the expiration of a period of ten years from the date of grant
of the Option, as set forth in Section 1 above, (ii) the occurrence of a
transaction or event described in Section 7(c) which causes termination of the
Option, (iii) the Optionee's termination of employment or other relationship
with the Corporation or a Subsidiary to the extent the Option has not become
vested (i.e., nonforfeitable) in accordance with Section 4 or (iv) the purchase
of the Option by the Corporation pursuant to Section 6(d).
(c) Limitations on Exercise of Option. Notwithstanding the foregoing
Subsections, in no event may the Option be exercised, in whole or in part, prior
to the date the Plan is approved by the stockholders of the Corporation and in
the event the stockholders fail to approve the Plan within one year of the date
of its adoption by the Board, the Option shall be null and void and of no
effect.
(d) Method of Exercise of Option. Subject to the terms and
conditions of this Option Agreement, the Option may be exercised by delivering
written notice of exercise to the Corporation, at its principal office,
addressed to the attention of the President, which notice shall specify the
number of shares for which the Option is being exercised, and shall be
accompanied by payment in full of the Option Price of the shares of Stock for
which the Option is being exercised. Payment of the Option Price for the shares
of Stock purchased pursuant to the exercise of the Option shall be made in cash
or by certified check payable to the order of the Corporation. If the person
exercising the Option is not the Optionee, such person shall also deliver with
the notice of exercise appropriate proof of his or her right to exercise the
Option. An attempt to exercise the Option granted hereunder other than as set
forth above shall be invalid and of no force and effect. Promptly after exercise
of the Option as provided for above, the Corporation shall deliver to the person
exercising the Option a certificate or certificates for the shares of Stock
being purchased.
(e) Parachute Limitations. Notwithstanding any other provision of
this Option Agreement or of any other agreement, contract, or understanding
heretofore or hereafter entered into by the Optionee with the Corporation or any
Subsidiary or Affiliate (as defined in Section 6(b)), except an agreement,
contract, or understanding hereafter entered into that expressly
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<PAGE>
modifies or excludes application of this Section (the "Other Agreements"), and
notwithstanding any formal or informal plan or other arrangement heretofore or
hereafter adopted by the Corporation (or any such Subsidiary or Affiliate) for
the direct or indirect compensation of the Optionee (including groups or classes
of participants or beneficiaries of which the Optionee is a member), whether or
not such compensation is deferred, is in cash, or is in the form of a benefit to
or for the Optionee (a "Benefit Arrangement"), if the Optionee is a
"disqualified individual," as defined in Section 280G(c) of the Code, the Option
and any right to receive any payment or other benefit under the Plan shall not
become exercisable or vested (i) to the extent that such right to exercise,
vesting, payment, or benefit, taking into account all other rights, payments, or
benefits to or for Optionee under the Plan, all Other Agreements, and all
Benefit Arrangements, would cause any payment or benefit to the Optionee under
this Option to be considered "a parachute payment" within the meaning of Section
280G(b)(2) of the Code as then in effect (a "Parachute Payment") and (ii) if, as
a result of receiving a Parachute Payment, the aggregate after-tax amounts
received by the Optionee from the Corporation under this Plan, all Other
Agreements, and all Benefit Arrangements would be less than the maximum after-
tax amount that could be received by Optionee without causing any such payment
or benefit to be considered a Parachute Payment. In the event that the receipt
of any such right to exercise, vesting, payment, or benefit under this Option,
in conjunction with all other rights, payments, or benefits to or for the
Optionee under the Plan, any Other Agreement or any Benefit Arrangement would
cause the Optionee to be considered to have received a Parachute Payment under
the Option that would have the effect of decreasing the after-tax amount
received by the Optionee as described in clause (ii) of the preceding sentence,
then the Optionee shall have the right, in the Optionee's sole discretion, to
designate those rights, payments, or benefits under the Option, the Plan, any
Other Agreements, and any Benefit Arrangements that should be reduced or
eliminated so as to avoid having the payment or benefit to the Optionee under
the Option be deemed to be a Parachute Payment.
6. Transferability.
(a) Transferability of Options. During the lifetime of the Optionee,
only such Optionee (or, in the event of legal incapacity or incompetency, the
Optionee's guardian or legal representative) may exercise the Option. No Option
shall be assignable or transferable by the Optionee to whom it is granted, other
than by will or the laws of descent and distribution.
(b) Nontransferability of Shares. The Optionee (or any other person
who is entitled to exercise an Option pursuant to the terms of the Plan and this
Option Agreement) shall not sell, pledge, assign, gift, transfer or otherwise
dispose of any shares of Stock acquired pursuant to the Option to anyone without
first offering such Stock to the Corporation for purchase on the same terms and
conditions as those offered to the proposed transferee. Any individual who
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<PAGE>
proposes such a transfer (the "Transferor") shall notify the Corporation, in
writing, of the identity of the proposed transferee and the terms and conditions
of such proposed transfer. The Corporation may exercise its right of first
refusal under this Subsection within 90 days after receiving such notice of the
proposed transfer. The Corporation may assign its right of first refusal under
this Subsection, in whole or in part, to (1) any stockholder of the Corporation
who owns stock or securities of the Corporation (a "Stockholder"), (2) any
employee benefit plan (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended) maintained by the
Corporation or a Subsidiary for the benefit of employees of the Corporation or a
Subsidiary (a "Benefit Plan"), or (3) any corporation or other trade or business
that is controlled by or under common control with the Corporation (determined
in accordance with the principles of Section 414(b) and Section 414(c) of the
Code and the regulations thereunder) (an "Affiliate"). The Corporation shall
give reasonable written notice to the Transferor of any such assignment of its
rights. If the Corporation (or its permitted assignee) fails to exercise such
right of first refusal during this 90-day period, the Transferor may proceed
with the proposed transfer at any time within the next 45 days, and if he does
not do so, the restrictions of this Subsection shall re-apply. These
restrictions also shall re-apply to any person to whom Stock that was originally
acquired pursuant to an Option is sold, pledged, assigned, bequeathed, gifted,
transferred or otherwise disposed of without regard to the number of such
subsequent transferees or the manner in which they acquire the Stock.
Notwithstanding the foregoing, the restrictions of this Subsection shall not
apply to a transfer of Stock that occurs as a result of the death of the
Transferor or of any subsequent transferee but such restrictions shall apply to
the executor, administrator or personal representative, the estate and the
legatees, beneficiaries and assigns thereof.
(c) Repurchase Rights. Upon the termination of employment or other
relationship of the Optionee with the Corporation or a Subsidiary, the
Corporation shall have the right, for a period of twelve months following such
termination, to repurchase any or all of the shares of Stock acquired pursuant
to such Option, at a price equal to the fair market value of such shares on the
date the Corporation delivers to the Optionee, or other holder of such shares of
Stock, notice that it is exercising its repurchase rights. Upon the exercise of
the Option granted hereunder following the termination of employment or other
relationship of the Optionee with the Corporation or a Subsidiary, the
Corporation shall have the right, for a period of twelve months following such
exercise, to repurchase any or all of the shares of Stock acquired by the
Optionee pursuant to such exercise of such Option, at a price equal to the fair
market value of such shares on the date the Corporation delivers to the
Optionee, or other holder of such shares of Stock, notice that it is exercising
its repurchase rights. In the event that the Corporation determines that it
cannot or will not exercise its rights to purchase Stock pursuant to this
Subsection, in whole or in part, the Corporation may assign its rights
hereunder, in whole or in part, to a Stockholder, a Benefit Plan or an
Affiliate.
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<PAGE>
The Corporation shall give reasonable written notice to the Optionee of any
assignment of its rights. "Fair market value", for purposes of this Subsection,
shall be determined by the Board in the same manner specified in the Plan for
determining the Option Price. A notice of repurchase given pursuant to this
Subsection shall specify the price and date of closing of such repurchase, which
shall be no later than 30 days from the date of such notice. In the event any
such repurchase rights are exercised in accordance with this Subsection, the
holder of the Stock being repurchased shall be obligated to sell such Stock
pursuant to the exercise of such rights.
(d) Purchase of Option. Upon the termination of employment or other
relationship of the Optionee with the Corporation or a Subsidiary, the
Corporation shall have the right, at all times before the Option is exercised,
to purchase the vested (i.e., nonforfeitable) portion of the Option, in whole or
in part, at a price equal to the value of such Option on the date the
Corporation delivers to the Optionee (or transferee of the Option pursuant to
Section 6(a)), notice that it is exercising such purchase rights. For this
purpose, the value of the Option is equal to the excess (if any) of the fair
market value of the shares of Stock that are subject to the Option, determined
by the Board in the same manner specified in the Plan for determining the Option
Price as of the date of notice, over the aggregate Option Price of such shares.
Upon payment (or tender of payment) in the applicable amount to the Optionee (or
transferee of the Option), the vested (i.e. nonforfeitable) portion of the
Option shall be terminated and, if payment has been tendered but not made, shall
only represent the right to receive such payment without interest. A notice of
purchase given pursuant to this Subsection shall specify the price and date of
closing of such purchase which shall be no later than 30 days from the date of
such notice. In the event any such purchase right is exercised in accordance
with this Subsection, the Optionee (or holder of the Option being purchased)
shall be obligated to sell such Option pursuant to the exercise of such rights.
(e) Publicly Traded Stock. If the Stock is listed on an established
national or regional stock exchange or is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System, or is publicly
traded in an established securities market, the foregoing restrictions, purchase
and repurchase rights of Sections 6(b), 6(c) and 6(d) shall terminate as of the
first date that the Stock is so listed, quoted or publicly traded.
(f) Installment Payments. In the case of any purchase of Stock or an
Option under this Section 6, at the option of the Corporation or its permitted
assignee the Corporation or its permitted assignee may pay the Optionee,
transferee of the Option or other registered owner of the Stock the purchase
price in three or fewer annual installments. Interest shall be credited on the
installments at the applicable federal rate (as determined for purposes of
Section 1274 of the Code) in effect on the date on which the purchase is made.
The
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Corporation or its permitted assignee shall pay at least one-third of the total
purchase price each year, plus interest on the unpaid balance, with the first
payment being made on or before the 60th day after the purchase.
(g) Legend Describing Restrictions and Obligations. The Board or
Committee may cause a legend to be placed prominently on certificates
representing Stock issued pursuant to this Plan in order to give notice of the
transferability restrictions, repurchase rights and other obligations imposed by
this Section.
7. Effect of Changes in Capitalization
(a) Changes in Stock. If the number of outstanding shares of Stock
is increased or decreased or the shares of Stock are changed into or exchanged
for a different number or kind of shares or other securities of the Corporation
on account of any recapitalization, reclassification, stock split-up,
combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Corporation, occurring after the date of
grant of the Option, the number and kind of shares of Stock for which the Option
was granted shall be adjusted proportionately and accordingly so that the
proportionate interest of the Optionee immediately following such event shall,
to the extent practicable, be the same as immediately before such event. Any
such adjustment in the Option shall not change the aggregate Option Price
payable with respect to shares that are subject to the unexercised portion of
the Option but shall include a corresponding proportionate adjustment in the
Option Price per share.
(b) Reorganization in which the Corporation Is the Surviving
Corporation. Subject to Subsection 7(c)(iv) hereof, if the Corporation shall be
the surviving corporation in any reorganization, merger, or consolidation of the
Corporation with one or more other corporations, the Option shall pertain to and
apply to the securities to which a holder of the number of shares of Stock
subject to the Option would have been entitled immediately following such
reorganization, merger, or consolidation, with a corresponding proportionate
adjustment of the Option Price per share so that the aggregate Option Price
thereafter shall be the same as the aggregate Option Price of the shares
remaining subject to the Option immediately prior to such reorganization,
merger, or consolidation.
(c) Dissolution, Liquidation, Sale of Assets, Reorganization in
Which the Corporation Is Not the Surviving Corporation, Etc. The Option shall
terminate (i) upon the dissolution or liquidation of the Corporation, or (ii)
upon a merger, consolidation, or reorganization of the Corporation with one or
more other corporations in which the Corporation is not the surviving
corporation,
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or (iii) upon a sale of substantially all of the assets of the Corporation to
another person or entity, or (iv) upon a merger, consolidation or reorganization
(or other transaction if so determined by the Board in its sole discretion) in
which the Corporation is the surviving corporation, that is approved by the
Board and that results in any person or entity (other than persons who are
holders of Stock of the Corporation at the time the Plan is approved by the
stockholders and other than an Affiliate) owning 80 percent or more of the
combined voting power of all classes of stock of the Corporation, except to the
extent provision is made in writing in connection with any such transaction
covered by clauses (i) through (iv) for the assumption of the Option or for the
substitution for the Option of a new option(s) covering the stock of a successor
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and exercise prices, in which event the Option
theretofore granted shall continue in the manner and under the terms so
provided. In the event of any such termination of the Option, the Optionee shall
have the right (subject to the general limitations on exercise set forth in
Section 5), during such period occurring before such termination as the Board in
its sole discretion shall determine and designate, and in any event immediately
before the occurrence of such termination, to exercise such Option in whole or
in part, to the extent that such Option was otherwise exercisable at the time
such termination occurs. The Corporation shall send written notice of a
transaction or event that will result in such a termination to Optionee not
later than the time at which the Corporation gives notice thereof to its
stockholders.
(d) Adjustments. Adjustments under this Section 7 related to stock
or securities of the Corporation shall be made by the Board, whose determination
in that respect shall be final, binding, and conclusive. No fractional shares of
Stock or units of other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share or unit.
(e) No Limitations on Corporation. The grant of the Option shall not
affect or limit in any way the right or power of the Corporation to make
adjustments, reclassifications, reorganizations, or changes of its capital or
business structure or to merge, consolidate, dissolve, or liquidate, or to sell
or transfer all or any part of its business or assets.
8. Requirements of Law. The Corporation shall not be required to sell or
issue any shares of Stock under the Option if the sale or issuance of such
shares would constitute a violation by the Optionee, the individual exercising
the Option, or the Corporation of any provisions of any law or regulation of any
governmental authority, including without limitation any federal or state
securities laws or regulations. If at any time the Corporation shall determine,
in its discretion, that the listing, registration, or qualification of any
shares subject to the Option upon any securities exchange or under any state or
federal law, or the
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consent or approval of any government regulatory or self-regulatory body is
necessary or desirable as a condition of, or in connection with the issuance or
purchase of shares, the Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Corporation,
and any delay caused thereby shall in no way affect the date of termination of
the Option. Specifically in connection with the Securities Act of 1933 (as now
in effect or as hereafter amended), upon the exercise of any Option, unless a
registration statement under such Act is in effect with respect to the shares of
Stock covered thereby, the Corporation shall not be required to sell or issue
such shares unless the Board has received evidence satisfactory to it that the
holder of such Option may acquire such shares pursuant to an exemption from
registration under such Act. Any determination in this connection by the Board
shall be final, binding, and conclusive. The Corporation may, but shall in no
event be obligated to, register any securities covered hereby pursuant to the
Securities Act of 1933 (as now in effect or as hereafter amended). The
Corporation shall not be obligated to take any affirmative action in order to
cause the exercise of an Option or the issuance of shares pursuant thereto to
comply with any law or regulation of any governmental authority. As to any
jurisdiction that expressly imposes the requirement that an Option shall not be
exercisable unless and until the shares of Stock covered by such Option are
registered or are subject to an available exemption from registration, the
exercise of such Option (under circumstances in which the laws of such
jurisdiction apply) shall be deemed conditioned upon the effectiveness of such
registration or the availability of such an exemption.
9. Rights as Stockholder. Neither the Optionee nor any executor,
administrator, distributee or legatee of the Optionee's estate shall be, or have
any of the rights or privileges of, a stockholder of the Corporation in respect
of any shares of Stock issuable hereunder unless and until such shares have been
fully paid and certificates representing such shares have been endorsed,
transferred and delivered, and the name of the Optionee (or of such personal
representative, administrator, distributee or legatee of the Optionee's estate)
has been entered as the stockholder of record on the books of the Corporation.
10. Withholding of Taxes. The parties hereto recognize that the
Corporation or a Subsidiary may be obligated to withhold federal, state and
local income taxes and Social Security taxes to the extent that the Optionee
realizes ordinary income in connection with the exercise of the Option or in
connection with a disposition of any shares of Stock acquired by exercise of the
Option. The Optionee agrees that the Corporation or a Subsidiary may withhold
amounts needed to cover such taxes from payments otherwise due and owing to the
Optionee, and also agrees that upon demand the Optionee will promptly pay to the
Corporation or a Subsidiary having such obligation any additional amounts as may
be necessary to satisfy such withholding tax obligation. Such payment shall
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be made in cash or by certified check payable to the order of the Corporation or
a Subsidiary.
11. Disclaimer of Rights. No provision in this Option Agreement shall be
construed to confer upon the Optionee the right to remain in the employ or
service of or to maintain a relationship with the Corporation or any Subsidiary,
or to interfere in any way with any contractual or other right or authority of
the Corporation or any Subsidiary either to increase or decrease the
compensation of the Optionee at any time, or to terminate any employment or
other relationship between the Optionee and the Corporation or any Subsidiary.
12. Interpretation of this Option Agreement. All decisions and
interpretations made by the Board or the Committee thereof with regard to any
question arising under the Plan or this Option Agreement shall be binding and
conclusive on the Corporation and the Optionee and any other person entitled to
exercise the Option as provided for herein.
13. Governing Law. This Option Agreement shall be governed by the laws of
the State of Delaware (excluding its choice of law rules).
14. Approval by Stockholders. This Option Agreement and the issuance of
any shares under it are expressly subject to the approval of the Plan by the
stockholders of the Corporation as provided for therein. The Option shall not in
any event be exercisable in whole or in part prior to the date the Plan is
approved by the stockholders of the Corporation as provided for therein.
15. Binding Effect. Subject to all restrictions provided for in this
Option Agreement, the Plan and by applicable law limiting assignment and
transfer of this Option Agreement and the Option provided for herein, this
Option Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, successors, and
assigns.
16. Notice. Any notice hereunder by the Optionee to the Corporation shall
be in writing and shall be deemed duly given if mailed or delivered to the
Corporation at its principal office, addressed to the attention of the
President, or if so mailed or delivered to such other address as the Corporation
may hereafter designate by notice to the Optionee. Any notice hereunder by the
Corporation to the Optionee shall be in writing and shall be deemed duly given
if mailed or delivered to the Optionee at the address specified below by the
Optionee for such purpose, or if so mailed or delivered to such other address as
the Optionee may hereafter designate by written notice given to the Corporation.
17. Entire Agreement. This Option Agreement and the Plan together
constitute the entire agreement and supersede all prior understandings and
agreements, written or oral, of the parties hereto with respect to the subject
-10-
<PAGE>
matter hereof. Neither this Option Agreement nor any term hereof may be amended,
waived, discharged or terminated except by a written instrument signed by the
Corporation and the Optionee; provided, however, that the Corporation
unilaterally may waive any provision hereof in writing to the extent that such
waiver does not adversely affect the interests of the Optionee hereunder, but no
such waiver shall operate as or be construed to be a subsequent waiver of the
same provision or a waiver of any other provision hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this Option
Agreement, or caused this Option Agreement to be duly executed in their name and
on their behalf, as of the day and year first above written.
VITAS HEALTHCARE CORPORATION
By:_________________________________
Title:______________________________
OPTIONEE:
____________________________________
ADDRESS FOR NOTICE TO OPTIONEE:
____________________________________
Number Street
____________________________________
City State Zip Code
-11-
<PAGE>
EXHIBIT 10.38
AMENDED AND RESTATED
REVOLVING CREDIT, TERM LOAN
AND
REIMBURSEMENT AGREEMENT
by and among
VITAS HEALTHCARE CORPORATION, as Borrower,
and
NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION,
as Lender
and
NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION, as Agent
February 17, 1995
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I
Definitions and Terms
1.01 Definitions ..................................................... 2
1.02 Accounting Terms ................................................ 27
1.03 UCC Terms ....................................................... 28
ARTICLE II
The Loans
2.01 Revolving Credit Facility ....................................... 29
2.02 Term Loan ....................................................... 31
2.03 Rate Selection and Interest Periods ............................. 31
2.04 Payment of Interest ............................................. 31
2.05 Payment of Principal ............................................ 32
2.06 Notes ........................................................... 35
2.07 Pro Rata Payments ............................................... 35
2.08 Reductions ...................................................... 35
2.09 Increase and Decrease in Amounts ................................ 36
2.10 Conversions and Elections of Subsequent
Interest Periods ................................................ 36
2.11 Unused Fee ...................................................... 37
2.12 Deficiency Advances ............................................. 37
2.13 Use of Proceeds ................................................. 38
2.14 Extension of Revolving Credit Termination
Date and Term Loan Maturity Date ................................ 38
ARTICLE III
Letters of Credit
3.01 Letters of Credit ............................................... 39
3.02 Reimbursement ................................................... 39
3.03 Letter of Credit Fee ............................................ 43
3.04 Administrative Fees and Reserves ................................ 43
ARTICLE IV
Yield Protection and Illegality
4.01 Additional Costs ................................................ 44
4.02 Suspension of Loans ............................................. 46
4.03 Illegality ...................................................... 46
4.04 Compensation .................................................... 47
4.05 Alternate Loans ................................................. 47
4.06 Taxes ........................................................... 47
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Page
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ARTICLE V
Conditions to Making Loans and Issuing
Letters of Credit
5.01 Conditions of Closing ........................................... 50
5.02 Conditions of Loans and Issuance of Letters
of Credit ....................................................... 53
5.03 Supplements to Schedules ........................................ 53
ARTICLE VI
Security
6.01 Security ........................................................ 55
6.02 Further Assurances .............................................. 55
6.03 Property Location ............................................... 55
6.04 Chief Executive Offices ......................................... 55
ARTICLE VII
Representations and Warranties
7.01 Representations and Warranties .................................. 57
ARTICLE VIII
Affirmative Covenants
8.01 Financial Reports, Etc .......................................... 66
8.02 Maintain Properties ............................................. 67
8.03 Existence, Qualification, Etc ................................... 68
8.04 Regulations and Taxes ........................................... 68
8.05 Insurance ....................................................... 68
8.06 True Books ...................................................... 68
8.07 Pay Indebtedness to Lenders and Perform
Other Covenants ................................................. 69
8.08 Right of Inspection ............................................. 69
8.09 Observe all Laws ................................................ 69
8.10 Governmental Licenses ........................................... 69
8.11 Covenants Extending to Subsidiaries ............................. 69
8.12 Officer's Knowledge of Default .................................. 69
8.13 Suits or Other Proceedings ...................................... 70
8.14 Notice of Discharge of Hazardous Material
or Environmental Complaint ...................................... 70
8.15 Environmental Compliance ........................................ 70
8.16 Indemnification ................................................. 70
8.17 Further Assurances .............................................. 71
8.18 ERISA Requirement ............................................... 71
8.19 Continued Operations ............................................ 71
8.20 Use of Proceeds ................................................. 71
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Page
----
8.21 Trade Names ..................................................... 71
8.22 New Guarantors .................................................. 72
ARTICLE IX
Negative Covenants
9.01 Consolidated Shareholders' Equity ............................... 74
9.02 Current Ratio ................................................... 74
9.03 Consolidated Interest Coverage Ratio ............................ 74
9.04 Consolidated Leverage Ratio ..................................... 74
9.05 Consolidated Fixed Charge Ratio ................................. 75
9.06 Indebtedness .................................................... 75
9.07 Liens ........................................................... 76
9.08 Transfer of Assets .............................................. 77
9.09 Investments; Acquisitions ....................................... 77
9.10 Dividends or Distributions ...................................... 78
9.11 Merger or Consolidation ......................................... 79
9.12 Change in Control ............................................... 79
9.13 Transactions with Affiliates .................................... 79
9.14 ERISA ........................................................... 80
9.15 Fiscal Year ..................................................... 80
9.16 Dissolution, etc ................................................ 81
9.17 Rate Hedging Obligations ........................................ 81
9.18 Subordinated Obligations ........................................ 81
ARTICLE X
Events of Default and Acceleration
10.01 Events of Default ............................................... 82
10.02 Agent to Act .................................................... 86
10.03 Cumulative Rights ............................................... 86
10.04 No Waiver ....................................................... 86
10.05 Allocation of Proceeds .......................................... 87
ARTICLE XI
The Agent
11.01 Appointment ..................................................... 88
11.02 Attorneys-in-fact ............................................... 88
11.03 Limitation on Liability ......................................... 88
11.04 Reliance ........................................................ 89
11.05 Notice of Default ............................................... 89
11.06 No Representations .............................................. 89
11.07 Indemnification ................................................. 90
11.08 Lender .......................................................... 90
11.09 Resignation ..................................................... 90
11.10 Sharing of Payments, etc ........................................ 91
11.11 Fees ............................................................ 92
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Page
----
11.12 One Lender ...................................................... 92
ARTICLE XII
Miscellaneous
12.01 Assignments and Participations ................................. 93
12.02 Notices ........................................................ 95
12.03 Setoff ......................................................... 97
12.04 Survival ....................................................... 97
12.05 Expenses ....................................................... 98
12.06 Amendments ..................................................... 99
12.07 Counterparts ................................................... 100
12.08 Waivers by Borrower ............................................ 100
12.09 Termination .................................................... 100
12.10 Governing Law .................................................. 101
12.11 Indemnification ................................................ 101
12.12 Headings and References ........................................ 103
12.13 Severability ................................................... 103
12.14 Entire Agreement ............................................... 103
12.15 Agreement Controls ............................................. 103
12.16 Usury Savings Clause ........................................... 103
12.17 Confidentiality ................................................ 104
12.18 Savings Clause ................................................. 104
12.19 Consents ....................................................... 105
EXHIBIT A Applicable Commitment Percentages ........................... 108
EXHIBIT B Form of Assignment and Acceptance ........................... 109
EXHIBIT C Notice of Appointment (or Revocation)
of Authorized Representative ................................ 112
EXHIBIT D Form of Borrowing Base Certificate .......................... 113
EXHIBIT E Form of Borrowing Notice--Loans ............................. 114
EXHIBIT F Form of Interest Rate Selection Notice ...................... 116
EXHIBIT G Form of Amended and Restated Revolving
Credit Notes ................................................ 118
EXHIBIT H Form of Term Notes .......................................... 121
EXHIBIT I Compliance Certificate ...................................... 124
EXHIBIT J Form of Subsidiary Guaranty ................................. 131
EXHIBIT K Form of Subsidiary Security Agreement ....................... 132
SCHEDULE 1.01 Existing Letters of Credit
SCHEDULE 6.03 Locations of Inventory and Equipment
SCHEDULE 6.04 Chief Executive Offices
SCHEDULE 7.01(d) Subsidiaries adn Investments
SCHEDULE 7.01(f) Contingent and Other Obligations
SCHEDULE 7.01(g) Existing Liens on the Collateral
SCHEDULE 7.01(h) Taxes
SCHEDULE 7.01(j) Litigation
SCHEDULE 7.01(m) Exceptions Regarding Patents
iv
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Page
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SCHEDULE 7.01(o) Consents and Notices
SCHEDULE 7.01(r) Hazardous Materials
SCHEDULE 7.01(t) Pending Administrative Matters
SCHEDULE 8.05 Existing Insurance
SCHEDULE 9.06 Indebtedness
VITAS AGREES TO PROVIDE A COPY OF THE EXHIBITS AND SCHEDULES LISTED ABOVE TO THE
COMMISSION UPON REQUEST.
v
<PAGE>
AMENDED AND RESTATED
REVOLVING CREDIT, TERM LOAN AND REIMBURSEMENT AGREEMENT
THIS AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN AND REIMBURSEMENT
AGREEMENT, dated as of February 17, 1995 (the "Agreement"), is made by and
among:
VITAS HEALTHCARE CORPORATION, a Delaware corporation having its principal
place of business in Miami, Florida (the "Borrower"); and
NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States of
America and having its principal place of business in Tampa, Florida
("NationsBank"), and each other lender which may hereafter execute and deliver
an instrument of assignment with respect to this Agreement pursuant to Section
12.01 (hereinafter NationsBank and such other lenders may be referred to
individually as a "Lender" or collectively as the "Lenders"); and
NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION, in its capacity as agent for
the Lenders (in such capacity, the "Agent");
W I T N E S S E T H:
WHEREAS, pursuant to a Revolving Credit and Reimbursement Agreement dated
as of August 11, 1994 among the Borrower, NationsBank and NationsBank as agent
(the "Prior Agreement"), NationsBank as lender made available to the Borrower a
revolving credit facility of up to $15,000,000 which included thereunder a
revolving letter of credit facility of up to $2,500,000, for working capital
needs and general corporate purposes; and
WHEREAS, the Borrower and Vitas Healthcare Corporation of California, a
Subsidiary of the Borrower ("Vitas California"), have entered into an Asset
Purchase Agreement with the Sellers (as hereinafter defined) dated as of
December 27, 1994 (the "Asset Purchase Agreement") pursuant to which Vitas
California has agreed to purchase substantially all of the operating assets of
the CHC Entities (as hereinafter defined) pursuant to the terms and subject to
the conditions set forth therein and, in connection therewith, the Borrower has
requested that the Prior Agreement be amended and restated to increase the
revolving credit facility from $15,000,000 to $20,000,000, to provide for a
$25,000,000 term loan facility, and to make certain other modifications set
forth herein; and
WHEREAS, the Lenders are willing to amend and increase such revolving
credit facility and make such term loan available to the Borrower upon the terms
and conditions set forth herein;
NOW, THEREFORE, the Borrower, the Lenders and the Agent hereby agree as
follows:
<PAGE>
ARTICLE I
Definitions and Terms
1.01 Definitions. For the purposes of this Agreement, in addition to the
definitions set forth above, the following terms shall have the respective
meanings set forth below:
"Accounts" of any Person means all accounts, accounts receivable,
contract rights, general intangibles, notes, bills, acceptances, choses in
action, chattel paper, instruments, documents, and other forms of
obligations at any time owing to such Person, the proceeds thereof and all
of such Person's rights with respect to any goods represented thereby,
whether or not delivered, goods returned by customers and all rights as an
unpaid vendor or lienor, including rights of stoppage in transit and of
recovering possession by proceedings including replevin and reclamation,
together with all customer lists, books and records, ledger and account
cards, computer tapes, software, disks, printouts and records, whether now
in existence or hereafter created, relating to Accounts;
"Advance" means a borrowing under the Revolving Credit Facility
consisting of the aggregate principal amount of a Floating Rate Loan or a
LIBOR Loan, as the case may be;
"Affiliate" means a Person, other than a Subsidiary, (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with the Borrower; (ii) which
is the beneficial owner (as defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) of 10% or more of any class of the
outstanding voting stock of the Borrower; (iii) 10% or more of any class
of the outstanding voting stock (or in the case of a Person which is not a
corporation, 10% or more of the equity interest) of which is beneficially
owned or held by the Borrower. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership of
voting stock, by contract or otherwise; provided, however, that when the
Borrower registers any security issued by it pursuant to the Securities
Act of 1933, as amended, the figure 10% used throughout this definition
shall automatically be changed to 5%;
"Applicable Commitment Percentage" means, for each Lender, with
respect to the Obligations hereunder (each a type of "credit exposure"),
including its Participations and its obligations hereunder to NationsBank
to acquire Participations, a fraction (expressed as a percentage) of each
of the Total Revolving Loan Commitment and the Total Term Loan Commitment,
the numerator of which shall be the then amount of
2
<PAGE>
such Lender's Revolving Loan Commitment or Term Loan Commitment, as the
case may be, and the denominator of which shall be the Total Revolving
Loan Commitment or Total Term Loan Commitment, as the case may be, which
Revolving Loan Commitment, Term Loan Commitment and respective Applicable
Commitment Percentages for each Lender as of the Closing Date are as set
forth in Exhibit A attached hereto and incorporated herein by this
reference; provided that the Applicable Commitment Percentages of each
Lender shall be increased or decreased to reflect any assignments to or by
such Lender effected in accordance with Section 12.01 hereof;
"Applicable Interest Addition" means, for each type of Loan
outstanding during any portion of any of the periods set forth below, the
amount set forth for such type of Loan opposite such period:
Term Loan Revolving Credit Loan
--------- ---------------------
Floating Floating
LIBOR Rate LIBOR Rate
----- ---- ----- ----
Closing Date to 2.50% 1.00% 2.50% 1.00%
and including
January 31, 1996
February 1, 1996 2.75% 1.25% 2.50% 1.00%
to and including
April 30, 1996
May 1, 1996
and thereafter 3.00% 1.50% 2.50% 1.00%;
provided, however, if on or before January 31, 1996 the Borrower shall
make a prepayment of not less than $6,000,000 principal amount of the Term
Loan from the proceeds of an offering of Qualified Equity Securities, then
(i) the Applicable Interest Addition for all LIBOR Loans shall be 2.50%
and (ii) the Applicable Interest Addition for all Floating Rate Loans
shall be 1.00%;
"Applications and Agreements for Letters of Credit" means,
collectively, the Applications and Agreements for Letters of Credit
executed by the Borrower from time to time and delivered to NationsBank to
support the issuance of Letters of Credit;
"Assignment and Acceptance" shall mean an Assignment and Acceptance
in the form of Exhibit B (with blanks appropriately filled in) delivered
to the Agent in connection with an assignment of a Lender's interest under
this Agreement pursuant to Section 12.01;
3
<PAGE>
"Authorized Representative" means any of the President, chief
executive officer or chief financial officer of the Borrower or, with
respect to financial matters, the Treasurer, any Assistant Treasurer or
chief financial officer of the Borrower or any other person expressly
designated by the Board of Directors of the Borrower (or the appropriate
committee thereof) as an Authorized Representative of the Borrower, as set
forth from time to time in a certificate in the form attached hereto as
Exhibit C;
"Base Rate" means for any LIBOR Loan, in respect of the Interest
Period specified by the Authorized Representative in the Borrowing Notice
for such LIBOR Loan, the rate (expressed as a percentage and rounded
upward if necessary to the nearest 1/100 of 1%) (which shall be the same
for each day of such Interest Period) determined by the Agent in good
faith in accordance with its usual procedures for its customers generally
to be the average of the rates per annum for deposits in Dollars offered
to major banks in the London interbank market at approximately 11:00 A.M.
Charlotte time two (2) LIBOR Business Days prior to the commencement of
the applicable Interest Period in an amount approximately equal to the
principal amount of, and for a period comparable to the Interest Period
for, such LIBOR Loan;
"Board" means the Board of Governors of the Federal Reserve System
(or any successor body);
"Borrowing Base" means, as of any date of determination thereof, (i)
from the Closing Date through April 30, 1995, 90%, (ii) from May 1, 1995
through July 31, 1995, 80%, and (iii) thereafter, 70%, of the gross amount
of Eligible Accounts;
"Borrowing Base Certificate" means a certificate of an Authorized
Representative in the form attached hereto as Exhibit D;
"Borrowing Notice" means the notice delivered by an Authorized
Representative in connection with an Advance, in the form attached hereto
as Exhibit E;
"Business Day" means any day which is not a Saturday, Sunday or a
day on which banks in the States of North Carolina or Florida are
authorized or obligated by law, executive order or governmental decree to
be closed;
"Capital Expenditures" means, for any period, the sum of (without
duplication) (i) all expenditures (whether paid in cash or accrued as
liabilities) by the Borrower or any Subsidiary during that period that are
for items that would be classified as "property, plant or equipment" or
comparable items on the consolidated balance sheet of the Borrower, plus
4
<PAGE>
(ii) with respect to any Capital Lease entered into by the Borrower or its
Subsidiaries during such period, the present value of the lease payments
due under such Capital Lease over the term of such Capital Lease, applying
a discount rate equal to the interest rate provided in such lease (or in
the absence of a stated interest rate that rate used in the preparation of
the financial statements described in Section 8.01(a) hereof), excluding,
however, the amount of any Capital Expenditures paid for with proceeds of
casualty insurance;
"Capital Leases" means all leases which have been or should be
capitalized in accordance with Generally Accepted Accounting Principles as
in effect from time to time including Statement No. 13 of the Financial
Accounting Standards Board and any successor thereof;
"CHC Entities" means, collectively, Community and the following
limited partnerships, of each of which Community is the sole general
partner as of the Closing Date: Community Hospice Care of Orange County,
Ltd. L.P., Community Hospice Care of San Diego Limited Partnership,
Community Hospice Care - Coastal Cities Limited Partnership, Community
Hospice Care - Inland Cities Limited Partnership, Community Hospice Care
- San Gabriel Valley Limited Partnership, Community Hospice Care - Valley
Cities, L. P., and Community Hospice Care - Los Angeles Cities, L.P;
"CHC Transaction" means the acquisition by Vitas California of
substantially all of the operating assets of the CHC Entities in
accordance with the terms of the Asset Purchase Agreement;
"CHC Transaction Documents" means, collectively, the Asset Purchase
Agreement, the Seller Notes, the Subordination Agreements, and the Bill of
Sale, Assumption Agreement, Guaranty, Will Agreement, Joint Account
Agreement, Non-Competition Agreement and Will Non-Competition Agreement
referred to in the Asset Purchase Agreement (including in each case all
exhibits and schedules thereto);
"Closing Date" means the date as of which this Agreement is executed
and delivered by the Borrower, the Lenders and the Agent and on which the
conditions set forth in Section 5.01 hereof have been satisfied;
"Code" means the Internal Revenue Code of 1986, as amended, any
successor provision or provisions and any regulations promulgated
thereunder;
"Collateral" means, collectively, all collateral or security granted
to the Agent for the ratable benefit of the Lenders by the Borrower, the
Subsidiaries or any other Person pursuant to the Security Documents;
5
<PAGE>
"Community" means Community Hospice Care, Inc., a California
corporation;
"Consistent Basis" in reference to the application of Generally
Accepted Accounting Principles means the accounting principles observed in
the period referred to are comparable in all material respects to those
applied in the preparation of the audited financial statements of the
Borrower referred to in Section 7.O1(f)(i) hereof, subject to Section 1.02
hereof;
"Consolidated Current Assets" means cash and all other assets of the
Borrower and its Subsidiaries which are expected to be realized in cash,
sold in the ordinary course of business, or consumed within one year or
which would be classified as a current asset, all determined in accordance
with Generally Accepted Accounting Principles applied on a Consistent
Basis;
"Consolidated Current Liabilities" means all liabilities of the
Borrower and its Subsidiaries which by their terms are payable within one
year (including all Indebtedness payable on demand or maturing not more
than one year from the date of computation and the current portion of
Indebtedness having a maturity date in excess of one year, but excluding
in all cases the Revolving Credit Debit Balance, the Term Loan and Seller
Notes), all determined in accordance with Generally Accepted Accounting
Principles applied on a Consistent Basis;
"Consolidated EBITDAR" means, with respect to the Borrower and its
Subsidiaries for any period of computation thereof, the sum of, without
duplication, (i) Consolidated Net Income, plus (ii) Consolidated Interest
Expense accrued during such period, plus (iii) taxes on income accrued
during such period, plus (iv) amortization accrued during such period,
plus (v) any depreciation during such period, plus (vi) all contributions
to the ESOP made or accrued by the Borrower during such period, plus (vii)
Consolidated Rentals, all determined on a consolidated basis in accordance
with Generally Accepted Accounting Principles applied on a Consistent
Basis;
"Consolidated Fixed Charge Ratio" means, with respect to the
Borrower and its Subsidiaries for the Four-Quarter Period ending on the
date of computation thereof, the ratio of (a) Consolidated EBITDAR minus
Capital Expenditures (other than (i) Capital Expenditures of up to
$2,300,000 in the aggregate incurred in connection with the operation of
the business acquired in the CHC Transaction and (ii) Capital Expenditures
incurred under Capital Leases) to (b) Consolidated Fixed Charges;
6
<PAGE>
"Consolidated Fixed Charges" means, with respect to Borrower and its
Subsidiaries, for any period of computation thereof, the sum of, without
duplication, (i) Consolidated Interest Expense accrued during such period,
(ii) dividends and distributions (other than dividends payable solely in
capital stock of the Borrower) paid during such period, including
Preferred Stock Redemptions, but excluding redemptions of Preferred Stock
effected in connection with, and funded with proceeds of the Borrower's
offering of Qualified Equity Securities, (iii) principal payments of
Consolidated Funded Indebtedness required to be paid during such period
(but excluding any principal payments that might be required under this
Agreement), and (iv) Consolidated Rentals;
"Consolidated Funded Indebtedness" means Indebtedness for Money
Borrowed of the Borrower and its Subsidiaries and the ESOP Debt;
"Consolidated Indebtedness" means all Indebtedness of the Borrower
and its Subsidiaries, all determined on a consolidated basis and including
the ESOP Debt;
"Consolidated Interest Coverage Ratio" means, with respect to the
Borrower and its Subsidiaries for the Four-Quarter Period ending on the
date of computation thereof, the ratio of (a) Consolidated Net Income plus
to the extent deducted in determining Consolidated Net Income (i) taxes
based on income accrued during such period, (ii) Consolidated Interest
Expense, plus (iii) all contributions to the ESOP made or accrued by the
Borrower during such period related to (b) Consolidated Interest Expense;
"Consolidated Interest Expense" means, with respect to any period of
computation thereof, the gross interest expense of the Borrower and its
Subsidiaries accrued during such period and including interest expense
payable in respect of the ESOP Debt, including without limitation (i) the
amortization of debt discounts, (ii) the amortization of all fees
(including, without limitation, fees payable in respect of a Swap
Agreement) payable in connection with the incurrence of Indebtedness to
the extent included in interest expense and (iii) the portion of any
liabilities incurred in connection with Capital Leases allocable to
interest expense, all determined on a consolidated basis in accordance
with Generally Accepted Accounting Principles applied on a Consistent
Basis;
"Consolidated Leverage Ratio" means the ratio of Consolidated Funded
Indebtedness to Consolidated Total Capital;
7
<PAGE>
"Consolidated Net Income" means, for any period of computation
thereof, the gross revenues from operations of the Borrower and its
Subsidiaries (including payments received by the Borrower and its
Subsidiaries of (i) interest income, and (ii) dividends and distributions
made in the ordinary course of their businesses by Persons in which
investment is permitted pursuant to Section 9.09 and not related to an
extraordinary event) less all operating and non-operating expenses of the
Borrower and its Subsidiaries including taxes on income (excluding,
however, up to $800,000 of expenses incurred in connection with
preparation of a proposed public offering of the Borrower's capital stock
that was not pursued due to market conditions) all determined on a
consolidated basis in accordance with Generally Accepted Accounting
Principles applied on a Consistent Basis; but excluding as income: (i) net
gains on the sale, conversion or other disposition of capital assets, (ii)
net gains on the acquisition, retirement, sale or other disposition of
capital stock and other securities of the Borrower or its Subsidiaries,
(iii) net gains on the collection of proceeds of life insurance policies,
(iv) any write-up of any asset, and (v) any other net gain or credit of an
extraordinary nature as determined in accordance with Generally Accepted
Accounting Principles applied on a Consistent Basis;
"Consolidated Rentals" means and includes with respect to any period
of determination thereof, the aggregate amount of all fixed payments
(including as such all payments which the lessee is obligated to make to
the lessor on termination of the lease or surrender of the leased
property) payable by the Borrower or any of its Subsidiaries, as lessee or
sublessee under any lease of real property, or with respect to inpatient
facilities, any lease of real or personal property, and shall include any
amounts required to be paid by the Borrower or any of its Subsidiaries
(whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar charges;
"Consolidated Shareholders' Equity" means, at any time as of which
the amount thereof is to be determined, the sum of the following in
respect of the Borrower and its Subsidiaries (determined on a consolidated
basis and excluding intercompany items among the Borrower and its
Subsidiaries and any upward adjustment after the Closing Date due to
revaluation of assets): (i) the amount of issued and outstanding capital
stock, plus (ii) the amount of additional paid-in capital and retained
income (or, in the case of a deficit, minus the amount of such deficit),
minus, without duplication, (iii) the amount of any deferred compensation
or other contra-equity account in respect of the ESOP Debt), in each case
as determined in accordance with Generally Accepted Accounting Principles
applied on a Consistent Basis, except that regardless of the treatment
thereof under Generally Accepted
8
<PAGE>
Accounting Principles, the Preferred Stock and Qualified Equity Securities
shall be considered part of Consolidated Shareholders' Equity for purposes
of this Agreement;
"Consolidated Total Capital" means the sum of Consolidated Funded
Indebtedness and Consolidated Shareholders' Equity;
"Contingent Obligation" of any Person means all contingent
liabilities required (or which, upon the creation or incurring thereof,
would be required) to be included in the consolidated financial statements
(including footnotes) of such Person in accordance with Generally Accepted
Accounting Principles applied on a Consistent Basis, including Statement
No. 5 of the Financial Accounting Standards Board, and any obligation of
such Person guaranteeing or in effect guaranteeing any Indebtedness,
dividend or other obligation of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, including obligations of
such Person however incurred:
(1) to purchase such Indebtedness or other obligation or any
property or assets constituting security therefor;
(2) to advance or supply funds in any manner (i) for the
purchase or payment of such Indebtedness or other obligation, or
(ii) to maintain a minimum working capital, net worth or other
balance sheet condition or any income statement condition of the
primary obligor;
(3) to grant or convey any lien, security interest, pledge,
charge or other encumbrance on any property or assets of such Person
to secure payment of such Indebtedness or other obligation;
(4) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the owner
or holder of such Indebtedness or obligation of the ability of the
primary obligor to make payment of such Indebtedness or other
obligation; or
(5) otherwise to assure the owner of the Indebtedness or such
obligation of the primary obligor against loss in respect thereof;
with respect to Contingent Obligations, such liabilities shall be computed
at the amount which, in light of all the facts and circumstances existing
at the time, represent the present value of the amount which can
reasonably be expected to become an actual or matured liability;
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"Cost of Acquisition" means the sum of the purchase price, as
reflected in any definitive agreement to acquire all or any portion of the
stock or all or any portion of the assets of any Person plus, without
duplication, any Indebtedness assumed by the Borrower or its Subsidiaries
in connection with such acquisition;
"Default" means any event or condition which, with the giving or
receipt of notice or lapse of time or both, would constitute an Event of
Default hereunder;
"Dollars" and the symbol "$" means dollars constituting legal tender
for the payment of public and private debts in the United States of
America;
"Eligible Accounts" means those Accounts, of the Borrower or any
Guarantor (other than inter-company accounts among the Borrower and any
Guarantor ) arising from the delivery by Borrower or any Guarantor of
healthcare or other services in the ordinary course of business, in which
the Agent has a perfected first priority security interest pursuant to the
other Loan Documents (or, in the case of Government Receivables, in which
the Agent has a first priority security interest to the extent that such
may be granted under applicable law), which (i) in the case of Accounts
due from third party payors are reduced by discounts, disallowances,
claims, bad debts, and credits in accordance with those adjustments
applied by Borrower and Guarantors on a Consistent Basis, and (ii) in the
case of Accounts which are directly payable by the recipient of services
(typically known as self-pay) are not more than 180 days old;
"Eligible Securities" means the following obligations and any other
obligations previously approved in writing by the Agent:
(a) Government Securities;
(b) the following debt securities of the following agencies or
instrumentalities of the United States of America if at all times
the full faith and credit of the United States of America is pledged
to the full and timely payment of all interest and principal
thereof:
(i) all direct or fully guaranteed obligations of the
United States Treasury; and
(ii) mortgage-backed securities and participation
certificates guaranteed by the Government National Mortgage
Association or any successor thereto;
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(c) the following obligations of the following agencies or
instrumentalities of the United States of America:
(i) participation certificates and debt obligations of
the Federal Home Loan Mortgage Corporation or any successor
thereto;
(ii) consolidated debt obligations, and obligations
secured by a letter of credit, of any of the Federal Home Loan
Banks; and
(iii) debt obligations and mortgage-backed securities of
the Federal National Mortgage Association or any successor
thereto which have not had the interest portion thereof
severed therefrom;
(d) obligations of any corporation organized under the laws of
any state of the United States of America or under the laws of any
other nation, payable in the United States of America, expressed to
mature not later than one year following the date of purchase
thereof and rated in an investment grade rating category by S&P and
Moody's;
(e) interest bearing demand or time deposits issued by
NationsBank or certificates of deposit maturing within one year from
the date of acquisition issued by a bank or trust company organized
under the laws of the United States or of any state thereof having
capital surplus and undivided profits aggregating at least
$400,000,000 and being rated A-3 or better by S&P or A or better by
Moody's;
(f) Repurchase Agreements;
(g) Pre-Refunded Municipal Obligations;
(h) shares of mutual funds which invest in obligations
described in paragraphs (a) through (g) above, the shares of which
mutual funds are at all times rated "AAA" by S&P;
(i) asset-backed remarketed certificates of participation
representing a fractional undivided interest in the assets of a
trust, which certificates are rated at least "A-l" by S&P and "P-l"
by Moody's; and
(j) any other obligation or security, the investment in which
is consistent with the Borrower's written investment policies, a
copy of which has been delivered by the Borrower to the Agent on or
prior to the Closing Date.
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Obligations which are in book-entry form must be held in a
book-entry custody account with any Federal Reserve Bank or with a
clearing corporation or chain of clearing corporations which has an
account with any Federal Reserve Bank;
"Environmental Laws" means, collectively, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, the Superfund Amendments and Reauthorization Act of 1986, the
Resource Conservation and Recovery Act, the Toxic Substances Control Act,
as amended, the Clean Air Act, as amended, the Clean Water Act, as
amended, any other "Superfund" or "Superlien" law or any other federal, or
applicable state or local statute, law, ordinance, code, rule, regulation,
order or decree regulating, relating to, or imposing liability or
standards of conduct concerning, any hazardous, toxic or dangerous waste,
substance or material;
"ERISA" means, at any date, the Employee Retirement Income Security
Act of 1974, as amended, and the regulations thereunder, all as the same
shall be in effect at such date;
"ESOP" means The Vitas Healthcare Corporation Employee Stock
Ownership Plan and the trust related thereto, as in effect as of the
Closing Date and as thereafter modified, supplemented or amended;
"ESOP Debt" means, as of any date of computation thereof, the
aggregate principal amount of the indebtedness outstanding under the ESOP
Loan Documents;
"ESOP Guaranty" means the Amended and Restated Guaranty and
Contingent Purchase Agreement of the Borrower dated as of the date hereof
pursuant to which the Borrower guarantees the obligations and liabilities
of the ESOP under the ESOP Loan Documents, as the same may be amended,
modified or supplemented as therein permitted;
"ESOP Guaranty Obligations" means the obligations and liabilities of
the Borrower under the ESOP Guaranty;
"ESOP Loan Documents" means the Loan Agreement dated as of August
11, 1994, between the ESOP and NationsBank providing for a term loan to
the ESOP in the original principal amount of $2,386,670, the ESOP
Guaranty, and all promissory notes, pledge agreements and other documents,
instruments and agreements now or hereafter delivered to NationsBank
evidencing or relating to such indebtedness, as any of such documents may
hereafter be amended, modified or supplemented as therein permitted;
"Event of Default" means any of the occurrences set forth as such in
Section 10.01 hereof;
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"Excess Cash Flow" means with respect to any period of computation
thereof, the positive difference, if any, resulting from subtracting from
Consolidated EBITDAR the sum of the following: (i) Capital Expenditures,
(ii) Consolidated Interest Expense, (iii) required principal payments on
Consolidated Funded Indebtedness (including without limitation deferred
compensation contributions utilized to fund payments of principal of the
ESOP Debt), (iv) the aggregate amount of all dividends, distributions,
redemptions or other purchases paid or declared during such period in
respect of the Preferred Stock, (v) taxes on income accrued during such
period, and (vi) Consolidated Rentals;
"Existing L/Cs" means, collectively, the letters of credit issued
under the Prior Agreement and remaining outstanding as of the Closing
Date, as more particularly described on Schedule 1.01 attached hereto and
all renewals or replacements thereof, which Existing L/Cs shall not exceed
$1,500,000 in aggregate stated amount outstanding;
"Federal Funds Effective Rate" for any day, as used herein, means
the rate per annum (rounded upward to the nearest 1/100 of 1%) announced
by the Federal Reserve Bank of New York (or any successor) on such day as
being the weighted average of the rates on overnight Federal funds
transactions arranged by Federal funds brokers on the previous trading
day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal
Funds Effective Rate" as of the date of this Agreement; provided, if such
Federal Reserve Bank (or its successor) does not announce such rate on any
day, the "Federal Funds Effective Rate" for such day shall be the Federal
Funds Effective Rate for the last day on which such rate was announced;
"Fiscal Year" means the 12 month period of the Borrower ending on
September 30 of each calendar year and commencing on October 1 of each
calendar year, subject to change pursuant to Section 9.15 hereof;
"Floating Rate" means the sum of (A) the greater of (i) the Prime
Rate or (ii) the Federal Funds Effective Rate plus one-half of one percent
(1/2%), plus (B) the Applicable Interest Addition, each change in the
Floating Rate to be effective as of the effective date of any change in
the Prime Rate or the Federal Funds Effective Rate giving rise thereto;
"Floating Rate Loan" means a Loan for which the rate of interest is
determined by reference to the Floating Rate;
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"Four-Quarter Period" means a period of four full consecutive
quarterly periods, taken together as one accounting period;
"Generally Accepted Accounting Principles" means generally accepted
accounting principles in effect in the United States of America as applied
by nationally recognized accounting firms;
"Government Receivables" means Accounts of the Borrower or any
Subsidiary as to which the United States of America or any State or agency
or instrumentality thereof (including, without limitation, any agent,
fiscal intermediary or carrier acting on behalf or under the direction of
the United States of America or any State or agency or instrumentality
thereof) is the account obligor;
"Government Securities" means direct obligations of, or obligations
the timely payment of principal and interest on which are fully and
unconditionally guaranteed by, the United States of America;
"Governmental Authority" shall mean any Federal, state, municipal,
national or other governmental department, commission, board, bureau,
agency or instrumentality or political subdivision thereof or any entity
or officer exercising executive, legislative or judicial, regulatory or
administrative functions of or pertaining to any government or any court,
in each case whether of a state, territory or possession of the United
States, the United States, a foreign governmental entity or the District
of Columbia;
"Guarantors" means, collectively, (i) Vitas California, Vitas
Healthcare Corporation of Florida, a Florida corporation, Vitas Healthcare
Corporation of Ohio, a Delaware corporation, Vitas Healthcare Corporation
of Pennsylvania, a Delaware corporation, (ii) every other Subsidiary of
the Borrower, existing as of the Closing Date, and every Strategic
Investment Subsidiary, which (x) in any calendar month shall have
operating revenues of $50,000 or more and (y) shall have executed and
delivered a Guaranty pursuant to Section 8.22 hereof, and (iii) every
other Subsidiary (excluding Strategic Investment Subsidiaries) of the
Borrower hereafter organized or acquired which shall have executed and
delivered a Guaranty pursuant to Section 8.22 hereof;
"Guaranty" means (i) as to all Persons who executed and delivered a
"Guaranty" under and as defined in the Prior Agreement, each Amended and
Restated Guaranty and Suretyship Agreement of a Guarantor of even date
herewith, (ii) as to Vitas California, the Guaranty and Suretyship
Agreement of Vitas California of even date herewith, and (iii) as to
Persons delivering a Guaranty pursuant to Section 8.22 hereof,
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<PAGE>
each Guaranty and Suretyship Agreement dated as of the date of delivery
thereof, in favor of the Agent, as the same may be amended, modified or
supplemented;
"Hazardous Material" means and includes any hazardous, toxic or
dangerous waste, substance or material, the generation, handling, storage,
disposal, treatment or emission of which is subject to any Environmental
Law;
"Indebtedness" means with respect to any Person, without
duplication, all Indebtedness for Money Borrowed, all indebtedness of such
Person for the acquisition of property, all indebtedness secured by any
Lien on the property of such Person whether or not such indebtedness is
assumed (but if not assumed, then the amount of such indebtedness shall be
the lower of the amount thereof or the book value of such property), all
liability of such Person by way of endorsements (other than for collection
or deposit in the ordinary course of business), all Contingent
Obligations; but excluding all accounts payable in the ordinary course of
business so long as payment therefor is due within one year; provided that
in no event shall the term Indebtedness include shareholders' capital,
surplus and retained earnings, minority interest in Subsidiaries, lease
obligations (other than pursuant to Capital Leases), the Preferred Stock,
obligations to pay dividends on or to redeem the Preferred Stock,
Qualified Equity Securities, reserves for deferred income taxes and
investment credits, other deferred credits and reserves, including,
without limitation, unearned Medicare prospective payments, and deferred
compensation obligations (except that deferred compensation obligations
relating to the ESOP Debt shall constitute Indebtedness);
"Indebtedness for Money Borrowed" means all indebtedness in respect
of money borrowed, including without limitation all Capital Leases and the
deferred purchase price of any property or asset, evidenced by a
promissory note, bond or similar written obligation for the payment of
money (including, but not limited to, conditional sales or similar title
retention agreements) and shall include the ESOP Debt;
"Individual Sellers" means, collectively, Connie A. Black, a
resident of the State of California, and Dennis Rezendes, a resident of
the State of Colorado, each a signatory to the Asset Purchase Agreement;
"Interest Period" for each LIBOR Loan means a period commencing on
the date such LIBOR Loan is made or converted and each subsequent period
commencing on the last day of the immediately preceding Interest Period
for such LIBOR Loan, and ending, at the Borrower's option, on the date
one, two, three or six months thereafter as notified to the Agent by the
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<PAGE>
Authorized Representative three (3) LIBOR Business Days prior to the
beginning of such Interest Period; provided, that,
(i) if the Authorized Representative fails to notify the Agent
of the length of an Interest Period three (3) LIBOR Business Days
prior to the first day of such Interest Period, the Loan for which
such Interest Period was to be determined shall be deemed to be a
Floating Rate Loan as of the first day thereof;
(ii) if an Interest Period for a LIBOR Loan would end on a day
which is not a LIBOR Business Day such Interest Period shall be
extended to the next LIBOR Business Day (unless such extension would
cause the applicable Interest Period to end in the succeeding
calendar month, in which case such Interest Period shall end on the
next preceding LIBOR Business Day);
(iii) there shall not be more than 5 (five) Interest Periods
in effect on any day; and
(iv) during the first three (3) months and three (3) Business
Days following the Closing Date (the "Initial Period"), the Borrower
shall not be entitled to elect or maintain any Interest Period
ending after the Initial Period, and for the next four (4) months
following the Initial Period, the Borrower shall only be entitled to
have Interest Periods of one month duration in effect;
"Interest Rate Selection Notice" means the telephonic request of an
Authorized Representative to elect a subsequent Interest Period for, or to
convert, a Loan or Loans of any type hereunder, as such election or
conversion shall be otherwise permitted herein. Any Interest Rate
Selection Notice shall be binding on and irrevocable by the Borrower and
shall be confirmed by facsimile transmission delivered to the Agent,
effective upon receipt, on the same Business Day upon which the telephonic
request is made, by the Authorized Representative in the form attached
hereto as Exhibit F;
"LC Account Agreement" means the Amended and Restated LC Account
Agreement dated as of the date hereof between the Borrower and the Agent,
as amended or modified from time to time;
"Lending Office" means, as to each Lender, the Lending Office of
such Lender designated on the signature pages hereof or in an Assignment
and Acceptance or such other office of such Lender (or of an affiliate of
such Lender) as such Lender may from time to time specify to the
Authorized Representative and the Agent as the office by which its Loans
are to be made and maintained;
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<PAGE>
"Letter of Credit" means a standby letter of credit issued by
NationsBank for the account of the Borrower in favor of a Person advancing
credit or securing an obligation on behalf of the Borrower, and shall
include the Existing L/Cs;
"Letter of Credit Commitment" means with respect to each Lender, the
obligation of such Lender to acquire Letter of Credit Participations up to
an aggregate stated amount at any one time outstanding equal to such
Lender's Applicable Commitment Percentage of the Total Letter of Credit
Commitment as the same may be increased or decreased from time to time
pursuant to this Agreement;
"Letter of Credit Facility" means the facility described in Article
III hereof providing for the issuance by NationsBank for the account of
the Borrower of Letters of Credit in an aggregate stated amount at any
time outstanding not exceeding the Total Letter of Credit Commitment;
"LIBOR Business Day" means a Business Day on which the relevant
international financial markets are open for the transaction of the
business contemplated by this Agreement in London, England and New York,
New York;
"LIBOR Loan" means a Loan for which the rate of interest is
determined by reference to the LIBOR Rate;
"LIBOR Rate" means, for the Interest Period for any LIBOR Loan, the
rate of interest per annum determined pursuant to the following formula:
Base Rate
---------------------
LIBOR Rate = 1-Reserve Requirement + Applicable
Interest
Addition
"Lien" means any interest in property securing any obligation owed
to, or a claim by, a Person other than the owner of the property, whether
such interest is based on the common law, statute or contract, and
including but not limited to the lien or security interest arising from a
mortgage, encumbrance, pledge, security agreement, conditional sale or
trust receipt or a lease, consignment or bailment for security purposes.
For the purposes of this Agreement, the Borrower and its Subsidiaries
shall be deemed to be the owners of any property which any of them have
acquired or hold subject to a conditional sale agreement, financing
lease, or other arrangement pursuant to which title to the property has
been retained by or vested in some other Person for security purposes;
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"Loan" or "Loans" means any of the LIBOR Loans or Floating Rate
Loans constituting all or part of the Revolving Credit Loan or the Term
Loan, as the context may require;
"Loan Documents" means this Agreement, the Notes, the Guaranties,
the Subordination Agreements, Applications and Agreements for Letters of
Credit, the LC Account Agreement, the Security Documents and all other
instruments and documents heretofore or hereafter executed or delivered to
and in favor of any Lender or the Agent in connection with the Loans or
the Letters of Credit made, issued or created under this Agreement as the
same may be amended, modified or supplemented from time to time;
"Maturity Extension Conditions" means all of the following:
(i) No Default or Event of Default shall exist or have occurred and
not have been waived;
(ii) In the good faith judgment of the Lenders, no material adverse
change shall have occurred in the business, financial condition or
operations of the Borrower and its Subsidiaries, taken as a whole,
since the Closing Date;
(iii) The Borrower shall have redeemed all of the 9% Preferred Stock
through consummation of an offering of Qualified Equity Securities,
shall have applied net proceeds therefrom to the prepayment of not
less than $6,000,000 principal amount of the Term Loan and,
immediately after giving effect to such redemption, offering and
prepayment, shall have effected a net increase in its equity of not
less than $11,000,000; and
(iv) Each of the Lenders shall have received payment from the
Borrower of an extension fee equal to .25% (twenty-five basis
points) of the sum of its Revolving Credit Commitment and Term Loan
Commitment as in effect on the effective date of any extension of
the Revolving Credit Termination Date or Term Loan Maturity Date as
provided in Section 2.14 hereof;
"Moody's" means Moody's Investors Service, Inc., a Delaware
corporation, or any successor thereto;
"Multi-employer Plan" means an employee pension benefit plan covered
by Title IV of ERISA and in respect of which the Borrower or any
Subsidiary is an "employer" as described in Section 4001(b) of ERISA,
which is also a multi-employer plan as defined in Section 4001(a)(3) of
ERISA;
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"NCMI" means NationsBanc Capital Markets, Inc., and its successors;
"9% Preferred Stock" means the 9.0% Cumulative Nonconvertible
Preferred Stock, par value $1.00 per share, issued by the Borrower, of
which 270,000 shares are issued and outstanding as of the Closing Date;
"New Guaranty Event" shall have the meaning provided in Section
8.22;
"Notes" means, collectively, the Revolving Credit Notes and the Term
Notes;
"Obligations" means the obligations, liabilities and Indebtedness of
the Borrower with respect to (i) the principal and interest on the Loans
as evidenced by the Notes, (ii) the Reimbursement Obligations, (iii) all
liabilities of Borrower to any Lender which arise under a Swap Agreement,
and (iv) the payment and performance of all other obligations, liabilities
and Indebtedness of the Borrower to the Lenders or the Agent hereunder,
under any one or more of the other Loan Documents or with respect to the
Loans;
"Outstanding Letters of Credit" means all undrawn amounts of Letters
of Credit plus Reimbursement Obligations;
"Participation" means, with respect to any Lender (other than
NationsBank), the extension of credit represented by the participation of
such Lender hereunder in the liability of NationsBank in respect of a
Letter of Credit issued by NationsBank in accordance with the terms
hereof;
"Permitted Acquisition" means the acquisition by the Borrower or a
Guarantor of any Person or the assets of any Person, which satisfies the
following: (i) such Person is or the assets of such Person are used in the
same or similar line of business as that engaged in by the Borrower, (ii)
the Person acquired does not oppose such acquisition, (iii) such Person
(to the extent a separate entity is acquired or results) becomes a
Guarantor and is consolidated with the Borrower for financial reporting
purposes or the assets acquired from such Person are owned by the Borrower
or a Guarantor, (iv) if the Cost of Acquisition exceeds $2,500,000, the
Required Lenders shall have consented thereto, and (v) no Default or Event
of Default exists immediately after giving effect to such acquisition;
"Permitted Liens" means those Liens described in subsections (i)
through (vii) of Section 9.07 hereof;
19
<PAGE>
"Person" means an individual, partnership, corporation, trust,
unincorporated organization, association, joint venture or a government or
agency or political subdivision thereof;
"Preferred Stock" means, collectively, the 9% Preferred Stock and
the Series B Preferred Stock;
"Preferred Stock Redemption" means (i) with respect to the 9%
Preferred Stock, redemptions made by the Borrower pursuant to Section 3(b)
of the Certificate of Designation, Preferences and Other Rights of 9.0%
Cumulative Nonconvertible Preferred Stock of the Borrower, and (ii) with
respect to the Series B Preferred Stock, redemptions made by the Borrower
pursuant to Sections 3(a) and 3(b) of the Certificate of Designation,
Preferences and Other Rights of the Series B Convertible Preferred Stock
of the Borrower;
"Pre-Refunded Municipal Obligations" means obligations of any state
of the United States of America or of any municipal corporation or other
public body Organized under the laws of any such state which are rated,
based on the escrow, in the highest investment rating category by both S&P
and Moody's and which have been irrevocably called for redemption and
advance refunded through the deposit in escrow of Government Securities or
other debt securities which are (i) not callable at the option of the
issuer thereof prior to maturity, (ii) irrevocably pledged solely to the
payment of all principal and interest and other charges on such
obligations as the same becomes due and (iii) in a principal amount and
bear such rate or rates of interest as shall be sufficient to pay in full
all principal of, interest, and premium, if any, on such obligations as
the same becomes due as verified by a nationally recognized firm of
certified public accountants;
"Prime Rate" means the rate of interest per annum announced publicly
by the Agent as its prime rate from time to time. The Prime Rate is not
necessarily the best or the lowest rate of interest offered by the Agent;
"Principal Office" means the office of the Agent at One Independence
Center, 101 North Tryon Street, NC1-O01-15-04, Charlotte, North Carolina
28255, Attention: Corporate Banking, Agency Services, or such other office
and address as the Agent may from time to time designate;
"Prior Notes" means, collectively, the promissory notes issued under
the Prior Agreement evidencing the Borrower's obligations in respect of
the Revolving Credit Facility prior to the date hereof;
"Projection of Combined Entities" means the Vitas Healthcare
Corporation Analysis of Community Hospice Care, Inc. dated as of January
24, 1995;
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<PAGE>
"Qualified Equity Securities" means either of the following types of
equity securities of the Borrower sold in a public or private offering
(other than securities issued as a result of the exercise of stock
options):
(i) common stock; or
(ii) preferred stock having no right to the payment of cash
dividends or other similar cash distributions and as to which the
Borrower has no obligation to redeem, repurchase or otherwise retire
any of such securities during the period from the date of issuance
thereof until not earlier than 91 days following the full payment
and satisfaction of the Obligations and termination of this
Agreement, the net proceeds of which preferred stock are used to the
extent necessary to redeem in whole the 9% Preferred Stock;
provided that in either case such securities are issued substantially
simultaneously with or following either (x) the redemption in full of the
Series B Preferred Stock or (y) amendment of the Series B Preferred Stock
(and related Certificate of Designation, Preferences and Other Rights) in
form and substance reasonably acceptable to the Agent in order to
eliminate any obligation of the Borrower to redeem, repurchase or
otherwise retire any of such securities until not earlier than 91 days
following the full payment and satisfaction of the Obligations and
termination of this Agreement;
"Ratable Benefit" means, as to each Lender, such Lender's share of
the Collateral, determined by dividing (a) the outstanding principal
amount of the Obligations owing to such Lender by (b) the sum of the
outstanding principal amount of the Obligations owing to all the Lenders;
"Rate Hedging Obligations" means any and all obligations of the
Borrower, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor), under
(a) any and all agreements, devices or arrangements designed to protect at
least one of the parties thereto from the fluctuations of interest rates,
exchange rates or forward rates applicable to such party's assets,
liabilities or exchange transactions, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements,
forward currency exchange agreements, interest rate cap or collar
protection agreements, forward rate currency or interest rate options,
puts, warrants and those commonly known as interest rate "swap"
agreements; and (b) any and all cancellations, buybacks, reversals,
terminations or assignments of any of the foregoing;
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<PAGE>
"Regulation D" means Regulation D of the Board as the same may be
amended or supplemented from time to time;
"Regulatory Change" means any change effective after the Closing
Date in United States federal or state laws or regulations (including
Regulation D and capital adequacy regulations) or foreign laws or
regulations or the adoption or making after such date of any
interpretations, directives or requests applying to a class of banks,
which includes any of the Lenders, under any United States federal or
state or 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 or compliance by any Lender with
any request or directive regarding capital adequacy, including with
respect to "highly leveraged transactions" having the force of law,
whether or not published or proposed prior to the date hereof;
"Reimbursement Obligation" shall mean at any time, the obligation of
the Borrower with respect to any Letter of Credit to reimburse NationsBank
and the Lenders to the extent of their respective Participations
(including by the receipt by NationsBank of proceeds of Loans pursuant to
Section 3.02) for amounts theretofore paid by NationsBank pursuant to a
drawing under such Letter of Credit;
"Repurchase Agreement" means a repurchase agreement entered into
with any financial institution whose debt obligations or commercial paper
are rated "A" by either of S&P or Moody's or "A-l" by S&P or "P-l" by
Moody's;
"Required Lenders" means, as of any date, Lenders on such date
having Credit Exposures (as defined below) aggregating at least (i) so
long as there shall be fewer than three (3) Lenders, 100%, and (ii)
thereafter 66-2/3% of the aggregate Credit Exposures of all the Lenders on
such date. For purposes of the preceding sentence, the amount of the
"Credit Exposure" of each Lender shall be equal to the aggregate principal
amount of the Loans owing to such Lender plus the aggregate unutilized
amounts of such Lender's Revolving Credit Commitment plus the amount of
such Lender's Applicable Commitment Percentage of Outstanding Letters of
Credit; provided that, if any Lender shall have failed to pay to
NationsBank its Applicable Commitment Percentage of any drawing under any
Letter of Credit resulting in an outstanding Reimbursement Obligation,
such Lender's Credit Exposure attributable to Letters of Credit,
Reimbursement Obligations and the Letter of Credit Commitment shall be
deemed to be held by NationsBank for purposes of this definition;
"Required New Guarantor" shall have the meaning therefor provided in
Section 8.22;
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"Reserve Requirement" means, for any LIBOR Loan with respect
thereto, the maximum aggregate rate at which reserves (including, without
limitation, any marginal, supplemental or emergency reserves) are required
to be maintained with respect thereto under Regulation D by the Lenders
with respect to Dollar funding in the London interbank market. Without
limiting the effect of the foregoing, the Reserve Requirement shall
reflect any other reserves required to be maintained by the Lenders by
reason of any Regulatory Change against (i) any category of liabilities
which includes deposits by reference to which the Base Rate is to be
determined or (ii) any category of extensions of credit or other assets
which include LIBOR Loans;
"Revolving Credit Advance Account" means an account on the books of
the Agent in which
(i) each Advance by the Agent pursuant to Section 2.01 shall
be debited thereto by recording therein on the date of such Advance
a debit entry in the amount of such Advance; and
(ii) each payment made to the Agent for credit to the
Revolving Credit Advance Account shall be credited thereto by
recording therein on the date paid to the Agent a credit entry in
the amount of such payment;
"Revolving Credit Commitment" means with respect to each Lender, the
obligation of such Lender to make Loans to the Borrower up to an aggregate
principal amount at any one time outstanding equal to such Lender's
percentage as set forth on Exhibit A hereto of the Total Revolving Credit
Commitment as the same may be increased or decreased from time to time
pursuant to this Agreement;
"Revolving Credit Debit Balance" means an amount equal to the
excess, if any, of all debit entries over all credit entries required to
be recorded pursuant to Section 2.01 hereof in a Revolving Credit Advance
Account of the Agent up to and including the date of computation;
"Revolving Credit Facility" means the facility described in Section
2.01 hereof providing for Loans to the Borrower by the Lenders in the
aggregate principal amount of Total Revolving Credit Commitment less the
aggregate amount of Outstanding Letters of Credit;
"Revolving Credit Loan" means a Loan or Loans made available to the
Borrower pursuant to the Revolving Credit Facility;
"Revolving Credit Notes" means, collectively, the promissory notes
of the Borrower evidencing the Revolving
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Credit Loans executed and delivered to the Lenders as provided in Section
2.06 hereof substantially in the form attached hereto as Exhibit G, with
appropriate insertions as to amounts, dates and names of Lenders;
"Revolving Credit Termination Date" means (i) September 30, 1996 or,
upon satisfaction of the conditions for extension provided in Section 2.14
hereof, September 30, 1998, (ii) such earlier date of termination of
Lenders' obligations pursuant to Section 10.01 upon the occurrence of an
Event of Default, or (iii) such date as the Borrower may voluntarily
permanently terminate the Revolving Credit Facility by payment in full of
all Obligations (including the discharge of all Obligations of NationsBank
and the Lenders with respect to Letters of Credit and Participations);
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, or any successor thereto;
"Secured Interest Rate Management Facility" means any Rate Hedging
Obligation arising under a Swap Agreement between the Borrower and one or
more of the Lenders which is secured by the Collateral;
"Security Agreement" means the Amended and Restated Pledge and
Security Agreement dated as of the date hereof by the Borrower to the
Agent pursuant to which the Borrower, inter alia, grants a security
interest in the Collateral (i) to the Agent for the ratable benefit of the
Lenders as security for the Obligations and (ii) to NationsBank as
security for the ESOP Guaranty Obligations, as the same may be modified,
amended or supplemented from time to time as herein and therein permitted;
"Security Agreements" means, collectively, the Security Agreement
and the Subsidiary Security Agreements;
"Security Documents" means the Security Agreement, the Subsidiary
Security Agreements, the financing statements required to perfect a
security interest in the Collateral, the stock certificates evidencing the
Borrower's equity interests in all Subsidiaries with duly executed stock
powers in blank affixed thereto ("Subsidiary Stock"), and such other
documents and instruments as the Agent may require to create or perfect a
security interest in the Collateral;
"Seller Notes" means the promissory notes of even date herewith made
by Vitas California to the order of one or more of the CHC Entities in the
initial aggregate principal amount of $11,400,000, which are subordinated
in right of payment to the Obligations pursuant to the Subordination
Agreements;
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"Sellers" means, collectively, the CHC Entities and the Individual
Sellers;
"Series B Preferred Stock" means the Series B Convertible Preferred
Stock, par value $1.00 per share, issued by the Borrower, of which 262,500
shares are issued and outstanding as of the Closing Date;
"Single Employer Plan" means any employee pension benefit plan
covered by Title IV of ERISA and in respect of which the Borrower or any
Subsidiary is an "employer" as described in Section 4001(b) of ERISA,
which is not a Multi-employer Plan;
"Solvent" means, when used with respect to any Person, that at the
time of determination:
(i) the fair value of its assets (both at fair valuation and
at present fair saleable value on an orderly basis) is in excess of
the total amount of its liabilities, including, without limitation,
Contingent Obligations; and
(ii) it is then able and expects to be able to pay its debts
as they mature; and
(iii) it has capital sufficient to carry on its business as
presently conducted;
"Strategic Investment" means an equity investment not constituting a
Permitted Acquisition by the Borrower or any Subsidiary in, or any loan or
advance by the Borrower or any Subsidiary to, a Person (i) not
constituting a Subsidiary at the time of such investment and (ii) who is
engaged in the same or similar line of business as the Borrower, which
investment (a) is not opposed by the Person in whom such investment is
made, (b) is made pursuant to an interest or plan reflected in the minutes
of the board of directors (or appropriate committee thereof) of the
Borrower or Subsidiary making such investment, either to acquire all or
substantially all of the stock or assets of such Person or to enter into a
joint venture, co-ownership or similar arrangement through such
investment, and (c) does not, and so far as can reasonably be foreseen
will not, give rise to or result in any Indebtedness (including any
Contingent Obligation) or other liability of or claim against the assets
of Borrower or any Subsidiary (other than claims against the related
Strategic Investment itself), whether as a result of being a general
partner or joint venturer, an owner or operator of any facility or
property, or otherwise by operation of any contract, commitment, statute
or principle of law;
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"Strategic Investment Subsidiary" means any Subsidiary used for the
primary purpose of making one or more Strategic Investments;
"Subordination Agreements" means, collectively, the Subordination
Agreement-A and the Subordination Agreement-B, each of even date herewith
from the CHC Entities for the benefit of the Agent and Lenders
subordinating the Seller Notes and certain other rights to payment under
the Asset Purchase Agreement to the payment and satisfaction of the
Obligations, as the same may be amended, modified or supplemented from
time to time as therein permitted;
"Subordinated Obligations" has the meaning provided in the
Subordination Agreements;
"Subsidiary" means any corporation or other entity in which more
than 50% of its outstanding voting stock or more than 50% of all equity
interests is owned directly or indirectly by the Borrower and/or by one or
more of the Borrower's Subsidiaries;
"Subsidiary Security Agreement" means (i) as to all Persons who
executed and delivered a "Subsidiary Security Agreement" under and as
defined in the Prior Agreement, the Amended and Restated Pledge and
Security Agreement of each Guarantor dated as of the date hereof, (ii) as
to Vitas California, the Pledge and Security Agreement of Vitas California
of even date herewith, and (iii) as to Persons delivering a Pledge and
Security Agreement pursuant to Section 8.22 hereof, each Pledge and
Security Agreement dated the date of such delivery, by a Subsidiary of the
Borrower to the Agent pursuant to which such Subsidiary, inter alia,
grants a security interest in the Collateral (i) to the Agent for the
ratable benefit of the Lenders and (ii) to NationsBank as security for the
obligations of such Subsidiary under its Guaranty, as the same may be
modified, amended or supplemented from time to time as herein and therein
permitted;
"Successor Preferred Stock" means preferred stock of the Borrower
(a) described in clause (ii) of the definition of "Qualified Equity
Securities" in this Section 1.01 issued in connection with (and the net
proceeds of which issue are utilized to fund) the redemption in full or in
part of the 9% Preferred Stock, or (b) having terms which are approved by
the Agent and the Required Lenders.
"Swap Agreement" means one or more agreements with respect to
Indebtedness evidenced by the Notes between the Borrower and another
Person, on terms mutually acceptable to such Borrower and such Person,
which agreements create Rate Hedging Obligations;
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"Term Loan" means the Loan or Loans made available to the Borrower
pursuant to Section 2.02 hereof;
"Term Loan Commitment" means with respect to each Lender, the
obligation of such Lender to make on the Closing Date a Term Loan to the
Borrower in an initial principal amount equal to such Lender's percentage
as set forth on Exhibit A hereto of the Total Term Loan Commitment;
"Term Loan Maturity Date" means (i) September 30, 1996 or, upon
satisfaction of the conditions for extension provided in Section 2.14
hereof, September 30, 1998, or (ii) such earlier date as the Term Loan
shall become due and payable pursuant to Section 10.01 upon the occurrence
of an Event of Default;
"Term Notes" means, collectively, the promissory notes of the
Borrower evidencing the Term Loan executed and delivered to the Lenders as
provided in Section 2.06 hereof substantially in the form attached hereto
as Exhibit H, with appropriate insertions as to amounts, dates and names
of Lenders;
"Total Letter of Credit Commitment" means a principal amount not to
exceed $2,500,000;
"Total Revolving Credit Commitment" means a principal amount equal
to $20,000,000, as reduced from time to time in accordance with Section
2.08;
"Total Term Loan Commitment" means the several obligations of the
Lenders to make a Term Loan on the Closing Date in the aggregate initial
principal amount of $25,000,000;
"Will Agreement" has the meaning therefor provided in the Asset
Purchase Agreement;
"Will Entities" means, collectively, Vernon R. Will and Wilcare
Corporation, a California corporation, signatories to the Will Agreement.
1.02 Accounting Terms. All accounting terms not specifically defined
herein shall have the meanings assigned to such terms and shall be interpreted
in accordance with Generally Accepted Accounting Principles applied on a
Consistent Basis; provided, however, if any change in Generally Accepted
Accounting Principles or, if applicable, Regulation S-X promulgated pursuant to
the Securities Act of 1933, as amended, in effect on the Closing Date shall
result in a change in any calculation (or the meaning or effect of any
calculation) required to determine compliance with any provision contained in
this Agreement, the Borrower and the Required Lenders will amend such provision
in a manner to reflect
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such change such that the determination of compliance with such provision shall
yield the same result as would have been obtained prior to such change in
Generally Accepted Accounting Principles or Regulation S-X. Until an amendment
is entered into covenants shall be calculated in accordance with Generally
Accepted Accounting Principles as in effect immediately preceding such change.
1.03 UCC Terms. Each term defined in Article 1 or 9 of the Florida Uniform
Commercial Code shall have the meaning herein given therein unless otherwise
defined herein, except to the extent that the Uniform Commercial Code of another
jurisdiction is controlling, in which case such terms shall have the meaning
given in the Uniform Commercial Code of the applicable jurisdiction.
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ARTICLE II
The Loans
2.01 Revolving Credit Facility
(a) Commitment. Subject to the terms and conditions of this Agreement,
each Lender severally agrees to make Advances to the Borrower, from time to time
from the Closing Date until the Revolving Credit Termination Date on a pro rata
basis as to the total borrowing requested by the Borrower on any day determined
by its Applicable Commitment Percentage up to but not exceeding the Revolving
Credit Commitment of such Lender, provided, however, that the Lenders will not
be required and shall have no obligation to make any Advance (i) so long as a
Default or an Event of Default has occurred and is continuing or (ii) if the
Agent has accelerated the maturity of the Notes as a result of an Event of
Default; provided further, however, that immediately after giving effect to each
Advance, the principal amount of outstanding Revolving Credit Loans plus the
amount of all Outstanding Letters of Credit shall not exceed the lesser of the
Total Revolving Credit Commitment or the Borrowing Base. Within such limits, the
Borrower may borrow, repay and reborrow hereunder, on a Business Day in the case
of a Floating Rate Loan and on a LIBOR Business Day in the case of a LIBOR Loan,
from the Closing Date until, but (as to borrowings and reborrowings) not
including, the Revolving Credit Termination Date; provided, however, that (x) no
LIBOR Loan shall be made which has an Interest Period that extends beyond the
Revolving Credit Termination Date and (y) each LIBOR Loan may, subject to the
provisions of Section 2.10, be repaid only on the last day of the Interest
Period with respect thereto.
(b) Amounts. Except as otherwise permitted by the Lenders from time to
time, the aggregate unpaid principal amount of the Revolving Credit Loans and
Outstanding Letters of Credit shall not exceed at any time, an amount equal to
the lesser of the Total Revolving Credit Commitment or the Borrowing Base. Each
Revolving Credit Loan hereunder and each conversion under Section 2.10 shall be
in an amount of at least $500,000, and, if greater than $500,000, an integral
multiple of $100,000.
(c) Advances. (i) An Authorized Representative shall give the Agent (1) at
least three (3) LIBOR Business Days' irrevocable telefacsimile or other written
notice of each Revolving Credit Loan that is to be a LIBOR Loan (whether
representing an additional borrowing hereunder or the conversion of borrowing
hereunder from Floating Rate Loans to LIBOR Loans) prior to 10:30 A.M.,
Charlotte, North Carolina time; and (2) irrevocable telefacsimile or other
written notice of each Revolving Credit Loan that is to be a Floating Rate Loan
representing an additional borrowing hereunder prior to 10:30 A.M. Charlotte,
North Carolina time on the day of such proposed Floating Rate Loan. Each
Borrowing Notice, which shall be effective upon receipt by the Agent, shall
specify the
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amount of the borrowing, the type (Floating or LIBOR) of Revolving Credit Loan,
the date of borrowing and, if a LIBOR Loan, the Interest Period to be used in
the computation of interest. Each Borrowing Notice shall be in the form attached
hereto as Exhibit E or F, as applicable, with appropriate insertions. Notice of
receipt of such Borrowing Notice or Interest Rate Selection Notice shall be
provided by the Agent to each Lender by telefacsimile with reasonable
promptness, but not later than 1:00 P.M., Charlotte, North Carolina time on the
same day as Agent's receipt of such notice.
(ii) Not later than 3:00 P.M., Charlotte, North Carolina time on the date
specified for each borrowing under this Section 2.01, each Lender shall,
pursuant to the terms and subject to the conditions of this Agreement, make the
amount of the Revolving Credit Loan or Revolving Credit Loans to be made by it
on such day available to the Agent, by depositing or transferring the proceeds
thereof in immediately available funds at the Principal Office. The amount so
received by the Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Borrower by delivery of the proceeds thereof
as shall be directed in the applicable Borrowing Notice by the Authorized
Representative.
(iii) Notwithstanding the foregoing, if a drawing is made under any Letter
of Credit prior to the Revolving Credit Termination Date, the drawing shall be
paid by the Agent without the requirement of notice from the Borrower from
immediately available funds which shall be advanced by the Lenders under the
Revolving Credit Facility. If a drawing is presented under any Letter of Credit
in accordance with the terms thereof and if Borrower shall not immediately
reimburse NationsBank for the amount of such draw or payment then notice of such
drawing or payment shall be provided promptly by NationsBank to the Agent and
the Agent shall provide notice to each Lender by telephone. If notice to the
Lenders of a drawing under any Letter of Credit is given by the Agent at or
before 12:00 noon Charlotte, North Carolina time on any Business Day, each
Lender shall, pursuant to the conditions of this Agreement, make a Floating Rate
Loan under the Revolving Credit Facility in the amount of such Lender's
Applicable Commitment Percentage of such drawing or payment and shall pay such
amount to the Agent for the account of NationsBank at the Principal Office in
Dollars and in immediately available funds before 2:30 P.M. Charlotte, North
Carolina time on the same Business Day. If notice to the Lenders of a drawing
under a Letter of Credit is given by the Agent after 12:00 noon Charlotte, North
Carolina time on any Business Day, each Lender shall, pursuant to the terms and
subject to the conditions of this Agreement, make a Floating Rate Loan under the
Revolving Credit Facility in the amount of such Lender's Applicable Commitment
Percentage of such drawing or payment and shall pay such amount to the Agent for
the account of NationsBank at the Principal Office in Dollars and in immediately
available funds before 12:00 noon Charlotte, North Carolina time on the next
following Business Day. Such Floating Rate Loan shall
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continue unless and until the Borrower converts such Floating Rate Loan in
accordance with the terms of Section 2.10 hereof.
2.02 Term Loan.
(a) Commitment. Subject to the terms and conditions of this
Agreement, each Lender severally agrees to make a Term Loan to the Borrower on
the Closing Date in an amount equal to the product of such Lender's Applicable
Commitment Percentage (expressed as a decimal) multiplied by $25,000,000.
(b) Interest Selection. An Authorized Representative shall give the
Agent (i) at least three (3) LIBOR Business Days' irrevocable telephonic notice
of selection of a LIBOR Loan for all or part of the Term Loan (representing the
conversion of a Floating Rate Loan to a LIBOR Loan or of one LIBOR Loan to
another LIBOR Loan) prior to 10:30 A.M., Charlotte, North Carolina time; and
(iii) irrevocable telephonic notice of each Floating Rate Loan for all or part
of the Term Loan (representing a conversion from a LIBOR Loan) prior to 10:30
A.M. Charlotte, North Carolina time on the day of the proposed change in
interest rate. An Authorized Representative shall give the Agent written
confirmation of each such telephone notice by telefacsimile transmission in the
form of the Interest Rate Selection Notice, but failure to provide such
confirmation shall not affect the validity of such telephonic notice.
Notwithstanding the foregoing, no part of the Term Loan shall be a LIBOR Loan
unless such LIBOR Loan shall be made in an amount at least equal to the lesser
of $5,000,000 and 20% of the then outstanding principal balance of the Term Loan
or, if greater, an integral multiple of $1,000,000.
2.03 Rate Selection and Interest Periods. Each Loan shall be, at the
option of the Borrower as specified in the applicable Borrowing Notice or
Interest Selection Notice, as appropriate, furnished to the Agent pursuant to
Sections 2.01 or 2.02 hereof, either a Floating Rate Loan or a LIBOR Loan, which
shall in each case be made or maintained by each Lender at its applicable
Lending Office. Floating Rate Loans and LIBOR Loans may be outstanding at the
same time, provided, however, (x) there shall not be outstanding at any one time
LIBOR Loans having more than five (5) different Interest Periods and (y) LIBOR
Loans constituting part of the Term Loan shall at no time have Interest Periods
in effect such that giving effect to any required payment or prepayment of
principal of the Term Loan hereunder would require the prepayment of any of such
LIBOR Loans.
2.04 Payment of Interest. (a) The Borrower shall pay interest to the Agent
for the account of each Lender on the outstanding and unpaid principal amount of
each Loan made by such Lender for the period commencing on the date of such Loan
until such Loan shall be due at the then applicable Floating Rate for Floating
Rate Loans or applicable LIBOR Rate for LIBOR Loans, as designated by the
Authorized Representative pursuant to Sections
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2.01 and 2.02 hereof or as otherwise provided herein; provided, however, that if
any amount shall not be paid when due (at maturity, by acceleration or
otherwise), all amounts outstanding hereunder shall bear interest thereafter (i)
in the case of a LIBOR Loan, until the end of the Interest Period with respect
to such LIBOR Loan, at a rate of two percent (2%) above such LIBOR Rate and (ii)
thereafter, and with respect to Floating Rate Loans, at a rate of interest per
annum which shall be two percent (2%) above the Floating Rate or the maximum
rate permitted by applicable law, whichever is lower, from the date such amount
was due and payable until the date such amount is paid in full.
(b) Interest on each Loan shall be computed on the basis of a year of 360
days and calculated for the actual number of days elapsed. Interest on each Loan
shall be paid (i) quarterly in arrears on the last Business Day of each March,
June, September and December, commencing March 31, 1995, on each Floating Rate
Loan, (ii) on the last day of the applicable Interest Period for each LIBOR Loan
and, if any Interest Period extends for more than three months, at intervals of
three months after the first day of the Interest Period in respect of the
related LIBOR Loan, and (iii) upon the principal amount of such Loan being paid
or otherwise becoming due and payable in full. The duration of the initial
Interest Period for each Loan that is a LIBOR Loan shall be as specified in the
initial Borrowing Notice. The Borrower shall have the option to elect the
duration of subsequent Interest Periods and to convert the Loans in accordance
with Section 2.10 hereof. If the Agent does not receive a notice of election of
duration of an Interest Period or to convert by the time prescribed by Section
2.10 hereof, the Borrower shall be deemed to have elected to convert such Loan
to (or continue such Loan as) a Floating Rate Loan until the Borrower notifies
the Agent in accordance with Section 2.10.
2.05 Payment of Principal. (a) The principal amount of each Revolving
Credit Loan shall be due and payable to the Agent for the benefit of each Lender
in full on the Revolving Credit Termination Date.
(b) The entire outstanding principal amount of the Term Loan shall be due
and payable to the Agent for the benefit of each Lender in full on the Term Loan
Maturity Date. In addition, in the event that the Term Loan Maturity Date shall
be extended to September 30, 1998 pursuant to the provisions of Section 2.14
hereof, a principal payment in the amount of forty percent (40%) of the then
outstanding principal balance of the Term Loan shall be due and payable to the
Agent for the benefit of the Lenders on September 30, 1997.
(c) In addition to the required payments of principal of the Term Loan set
forth in Section 2.05(b) above, the Borrower shall make the following required
prepayments of the Term Loan, each such
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payment to be made to the Agent for the benefit of the Lenders within the time
period specified below:
(i) the Borrower shall make a prepayment from the proceeds of each
offering of Qualified Equity Securities in an amount equal to (1)
$6,000,000 plus (2) after giving effect to the Preferred Stock
Redemption of the 9% Preferred Stock and crediting proceeds received
by the Borrower from the exercise of the Borrower's Warrant A dated
December 17, 1991 or Warrant B dated December 17, 1991, as
applicable, fifty percent (50%) of any additional proceeds reduced
by the amount, not to exceed $10,000,000 in the aggregate, applied
to (w) underwriting discounts (if applicable), commissions (if
applicable) and issuance expenses, (x) working capital, (y) in the
case of a public offering, the amount necessary to prepay the Seller
Notes to the extent required pursuant to Section 10.2(b) of the
Asset Purchase Agreement, and (z) such other purposes as shall be
reasonably acceptable to the Agent, each such prepayment to be made
within ten (10) Business Days of receipt of such proceeds and upon
not less than five (5) Business Days' written notice to the Agent,
which notice shall include a certificate of an Authorized
Representative setting forth in reasonable detail the calculations
utilized in computing the amount of such prepayment;
(ii) without limiting the prohibition on dispositions of assets set
forth in Section 9.08 hereof, the Borrower shall make a prepayment
in an amount equal to 100% of the net cash proceeds received by
Borrower or any Subsidiaries from each sale, lease or other
disposition of assets (whether disposed of singly or in a series of
related transactions) having a market value greater than $50,000,
such prepayment to be made within ten (10) Business Days of receipt
of such proceeds and upon not less than five (5) Business Days
written notice to the Agent, which notice shall include a
certificate of an Authorized Representative setting forth in
reasonable detail the calculations utilized in computing the amount
of such prepayment;
(iii) the Borrower shall make a prepayment in an amount equal to
100% of the net cash proceeds received by Borrower or any
Subsidiaries from each liquidation of any overfunded pension plan,
such prepayment to be made within ten (10) Business Days of receipt
of such proceeds and upon not less than five (5) Business Days
written notice to the Agent, which notice shall include a
certificate of an Authorized Representative setting forth in
reasonable detail the calculations utilized in computing the amount
of such prepayment; and
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(iv) the Borrower shall make a prepayment in an amount equal to the
Applicable Percentage of Excess Cash Flow (as defined below) as at
the end of each Fiscal Year of Borrower, such prepayment to be made
on the date financial statements of the Borrower and its
Subsidiaries for such fiscal period are required to be delivered
(or if earlier, the date such financial statements are delivered)
pursuant to Section 8.01 hereof, which payment shall be accompanied
by a certificate of an Authorized Representative (which may be
incorporated within the certificate regarding compliance with
certain covenants otherwise required to be delivered under Section
8.01) setting forth in reasonable detail the calculations utilized
in computing Excess Cash Flow and the amount of such prepayment
(for purposes of this clause (iv), the "Applicable Percentage of
Excess Cash Flow" with respect to each Fiscal Year means 75% or,
for any Fiscal Year in which both the Consolidated Leverage Ratio
and the Consolidated Fixed Charge Ratio shall be as set forth
below, the percentage set forth opposite such ratios:
Consolidated Leverage Consolidated Fixed Applicable Percentage
Ratio Charge Ratio of Excess Cash Flow
- --------------------- ------------------ ----------------------
Less than .55 to 1.00 Greater than 1.25 50%
but greater than or to 1.00 but less
equal to .50 to 1.00 than or equal to
1.50 to 1.00.
Less than .50 to 1.00 Greater than 1.50
to 1.00 0%)
The Agent shall give each Lender, within one (1) Business Day, telefacsimile
notice of each notice of prepayment described in clauses (i), (ii) and (iii) of
this Section 2.05(c).
(d) Each payment of principal (including any prepayment) and payment of
interest shall be made to the Agent at the Principal Office, for the account of
each Lender's applicable Lending Office, in Dollars and in immediately available
funds before 12:30 P.M. Charlotte, North Carolina time on the date such payment
is due. The Agent may, but shall not be obligated to, debit the amount of any
such payment which is not made by such time to any ordinary deposit account, if
any, of the Borrower with the Agent. The Borrower shall give the Agent prior
telefacsimile notice of any payment of principal on Revolving Credit Loans, such
notice to be given by not later than 11:00 a.m. Charlotte, North Carolina time,
on the date of such payment.
(e) The Agent shall deem any payment by or on behalf of the Borrower
hereunder that is not made both (i) in Dollars and in immediately available
funds and (ii) prior to 12:30 P.M. Charlotte, North Carolina time to be a
non-conforming payment. Any such payment shall not be deemed to be received by
the Agent until the
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time such funds become available funds. Any non-conforming payment may
constitute or become a Default or Event of Default. The Agent shall give prompt
telefacsimile notice to the Authorized Representative and each of the Lenders if
any payment is non-conforming. Interest shall continue to accrue on any
principal as to which a non-conforming payment is made until such funds become
available funds (but in no event less than the period from the date of such
payment to the next succeeding Business Day) at a rate of interest per annum
which shall be two percent (2%) above the Floating Rate or the maximum rate
permitted by applicable law, whichever is lower, from the date such amount was
due and payable until the date such amount is paid in full.
(f) In the event that any payment hereunder or under the Notes becomes due
and payable on a day other than a Business Day, then such due date shall be
extended to the next succeeding Business Day; provided that interest shall
continue to accrue during the period of any such extension at the applicable
rate hereunder.
2.06 Notes. Loans made by each Lender shall be evidenced by, and be
repayable with interest in accordance with the terms of, the promissory notes
payable to the order of such Lender in the respective amounts of its Applicable
Commitment Percentage of (i) in the case of a Term Note, the Total Term Loan
Commitment, and (ii) in the case of a Revolving Credit Note, the Total Revolving
Credit Commitment, which Notes shall be dated the Closing Date or such later
date pursuant to an Assignment and Acceptance and shall be duly completed,
executed and delivered by the Borrower.
2.07 Pro Rata Payments. Except as otherwise provided herein, (a) each
payment on account of the principal of and interest on the Loans and the fees
described in Section 2.11 hereof shall be made to the Agent for the account of
the Lenders pro rata based on their Applicable Commitment Percentages, (b) all
payments to be made by the Borrower for the account of each of the Lenders on
account of principal, interest and fees, shall be made without set-off or
counterclaim, and (c) the Agent will promptly distribute payments received to
the Lenders.
2.08 Reductions. (a) The Borrower shall, by notice from an Authorized
Representative, have the right from time to time (but not more frequently than
once during each fiscal quarter), upon not less than five (5) Business Days'
written notice to the Agent, to reduce the Total Revolving Credit Commitment.
The Agent shall give each Lender, within one (1) Business Day, telefacsimile
notice of such reduction. Each such reduction shall be in the aggregate amount
of $2,500,000 or such greater amount which is in an integral multiple of
$500,000, and shall permanently reduce the Total Revolving Credit Commitment of
the Lenders pro rata. No such reduction shall result in the payment of any LIBOR
Loan other than on the last day of the Interest Period of such Loan unless such
prepayment is accompanied by amounts due, if any, under Section
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4.04. Each reduction of the Total Revolving Credit Commitment shall be
accompanied by payment of the Revolving Credit Notes to the extent that the sum
of the Revolving Credit Debit Balance and the Outstanding Letters of Credit
exceeds the lesser of the Total Revolving Credit Commitment or the Borrowing
Base, after giving effect to such reduction, together with accrued and unpaid
interest on the amounts prepaid.
(b) The Term Loan may be prepaid at the option of the Borrower in whole or
in part (but if in part only in a minimum amount of $1,000,000 or such greater
amount which is an integral multiple of $100,000) without penalty or premium
(but subject to the provisions of Section 4.04 hereof), together with unpaid and
accrued interest on the amount so prepaid, upon not less than five (5) Business
Days written notice to the Agent (which shall be irrevocable) specifying the
amount and date of such prepayment; provided, however, no such optional
prepayment may be made which shall cause a LIBOR Loan to be repaid in whole or
in part prior to the end of the Interest Period of such Loan unless such
prepayment is accompanied by amounts due, if any, under Section 4.04. The Agent
shall give each Lender, within one (1) Business Day, telephonic notice
(confirmed in writing) of such notice of prepayment. Each optional or mandatory
payment or prepayment of principal of the Term Loan shall permanently reduce the
Total Term Loan Commitment of the Lenders pro rata.
2.09 Increase and Decrease in Amounts. The amount of the Total Revolving
Credit Commitment which shall be available to the Borrower shall be reduced by
the aggregate amount of all Outstanding Letters of Credit. The amount of the
Total Revolving Credit Commitment available to the Borrower shall be
automatically increased by the stated amount remaining available to be drawn
thereunder of each Letter of Credit upon the expiration or cancellation thereof
and, without duplication, by the amount by which any Letter of Credit is reduced
to the extent no Reimbursement Obligation arising from such reduction shall be
outstanding.
2.10 Conversions and Elections of Subsequent Interest Periods. Provided
that no Default or Event of Default shall have occurred and be continuing and
subject to the limitations set forth below and in Sections 4.01(b), 4.02 and
4.03 hereof, the Borrower may:
(a) upon notice to the Agent on or before 10:30 A.M. Charlotte, North
Carolina time on any Business Day, convert all or a part of LIBOR Loans to
Floating Rate Loans on the last day of the Interest Period for such LIBOR Loans;
(b) on three (3) LIBOR Business Days' notice to the Agent on or
before 10:30 A.M. Charlotte, North Carolina time:
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(i) elect a subsequent Interest Period for all or a portion of LIBOR
Loans to begin on the last day of the current Interest Period for such
LIBOR Loans;
(ii) convert Floating Rate Loans to LIBOR Loans on any date.
Notice of any such elections or conversions shall be in the form of
Exhibit F attached hereto and shall specify the effective date of such election
or conversion and the Interest Period to be applicable to the Loan as continued
or converted. Each election and conversion pursuant to this Section 2.10 shall
be subject to the limitations on LIBOR Loans set forth in the definition of
"Interest Period" herein and in Sections 2.01, 2.02 and 2.03 and Article IV
hereof. All such continuations or conversions of Loans shall be effected pro
rata based on the Applicable Commitment Percentages of the Lenders.
2.11 Unused Fee. For the period beginning on the Closing Date and ending
on the Revolving Credit Termination Date (or such earlier date on which the
Revolving Credit Facility has terminated), the Borrower agrees to pay to the
Agent, for the pro rata benefit of the Lenders based on their Applicable
Commitment Percentages, an unused fee equal to one half percent (1/2%) per annum
on the sum of the daily amount by which the Total Revolving Credit Commitment
exceeds the average daily Revolving Credit Debit Balance. Such payments of fees
provided for in this Section 2.11 shall be due in arrears on the last Business
Day of each March, June, September and December beginning March 31, 1995 to and
on the Revolving Credit Termination Date (or such earlier date on which the
Revolving Credit Facility has terminated). Notwithstanding the foregoing, so
long as any Lender fails to make available any portion of its Revolving Credit
Commitment when requested, such Lender shall not be entitled to receive, and the
Borrower shall not be required to make, payment of its pro rata share of such
fee until such Lender shall make available such portion. Such fee shall be
calculated on the basis of a year of 360 days for the actual number of days
elapsed.
2.12 Deficiency Advances. No Lender shall be responsible for any default
of any other Lender in respect of such other Lender's obligation to make any
Loan hereunder nor shall the Revolving Credit Commitment or Term Loan Commitment
of any Lender hereunder be increased as a result of such default of any other
Lender. Without limiting the generality of the foregoing, in the event any
Lender shall fail to make an Advance to the Borrower as herein provided, the
Agent may in its discretion, but shall not be obligated to, advance under the
Revolving Credit Note in its favor as a Lender all or any portion of such amount
or amounts (each, a "deficiency advance") and shall thereafter be entitled to
payments of principal of and interest on such deficiency advance in the same
manner and at the same interest rate or rates to which such other Lender would
have been entitled had it made such advance under its
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Revolving Credit Note; provided that, upon payment to the Agent from such other
Lender of the entire outstanding amount of each such deficiency advance,
together with accrued and unpaid interest thereon, from the most recent date or
dates interest was paid to the Agent by the Borrower on each Loan comprising the
deficiency advance at the interest rate per annum for overnight borrowing by the
Agent from the Federal Reserve Bank, then such payment shall be credited against
the applicable Revolving Credit Note of the Agent in full payment of such
deficiency advance and the Borrower shall be deemed to have borrowed the amount
of such deficiency advance from such other Lender as of the most recent date or
dates, as the case may be, upon which any payments of interest were made by the
Borrower thereon.
2.13 Use of Proceeds. The proceeds of the Loans made pursuant to the
Revolving Credit Facility and the Term Loan shall be used by the Borrower solely
(i) to pay the cash portion of the purchase price to be paid by Vitas California
or the Borrower pursuant to the Asset Purchase Agreement, (ii) to pay the fees
and expenses incurred by Vitas California or the Borrower in connection with the
negotiation and consummation of the CHC Transaction, and (iii) for Borrower's
and/or any Guarantor's working capital and/or general corporate purposes.
2.14 Extension of Revolving Credit Termination Date and Term Loan Maturity
Date. In the event that (i) all Maturity Extension Conditions shall have been
satisfied on or before August 30, 1996, and (ii) the Borrower shall have given
not less than thirty (30) days' written notice to the Agent of its election to
extend the Revolving Credit Termination Date and the Term Loan Maturity Date
under the provisions of this Section 2.14, then, provided that all Maturity
Extension Conditions continue to be satisfied on September 30, 1996, clause (i)
of the definitions of "Revolving Credit Termination Date" and "Term Loan
Maturity Date" in Article I hereof shall on such date be deemed deleted and the
date "September 30, 1998" substituted in lieu thereof without further action.
The Agent shall give each Lender notice of the Borrower's notice of election to
extend described above within one (1) Business Day of its receipt thereof.
Following the consummation by the Borrower of a public or private offering of
Qualified Equity Securities constituting one of the Maturity Extension
Conditions, the Borrower and the Lenders shall negotiate in good faith to amend
this Agreement to reflect the Borrower's financial condition after giving effect
to such offering.
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ARTICLE III
Letters of Credit
3.01 Letters of Credit. NationsBank agrees, subject to the terms and
conditions of this Agreement, upon request of Borrower to issue from time to
time for the account of Borrower Letters of Credit upon delivery to NationsBank
of its Application and Agreement for Letter of Credit in NationsBank's then
current form; provided, that the Outstanding Letters of Credit shall not exceed
the Total Letter of Credit Commitment. No Letter of Credit shall be issued by
NationsBank with an expiry date or payment date occurring subsequent to the
earlier to occur of one year from the date of its issuance or the fifth Business
Day preceding the Revolving Credit Termination Date unless the Borrower shall
have furnished cash collateral therefor under the LC Account Agreement.
NationsBank shall not be required to issue any Letter of Credit if the
Outstanding Letters of Credit when added to the face amount of any requested
Letter of Credit and the Revolving Credit Debit Balance exceeds the lesser of
the Total Revolving Credit Commitment or the Borrowing Base.
3.02 Reimbursement.
(a) The Borrower hereby unconditionally agrees immediately to pay to
NationsBank on demand at the Principal Office all amounts required to pay all
drafts drawn or purporting to be drawn under the Letters of Credit and all
reasonable expenses incurred by NationsBank in connection with the Letters of
Credit and in any event and without demand to place in possession of NationsBank
(which shall include Advances under the Revolving Credit Facility if permitted
by Section 2.01(c) hereof) subject to and after presentation of a draft
sufficient funds to pay all debts and liabilities arising under any Letter of
Credit. The Borrower's obligations to pay NationsBank under this Section 3.02,
and NationsBank's right to receive the same, shall be absolute and unconditional
and shall not be affected by any circumstance whatsoever; provided, however,
that nothing contained herein shall be deemed to release NationsBank or any
other Lender of any liability for actual loss arising as a result of its gross
negligence, bad faith or willful misconduct or out of the wrongful dishonor by
NationsBank of a proper demand for payment made under and in strict compliance
with the terms of any Letter of Credit. NationsBank agrees to give the Borrower
prompt notice of any request for a draw under a Letter of Credit. NationsBank
may charge any account the Borrower may have with it for any and all amounts
NationsBank pays under a Letter of Credit, plus reasonable charges and expenses
as from time to time agreed to by NationsBank and the Borrower in writing;
provided that to the extent permitted by Section 2.01(c) (iii), amounts shall be
paid pursuant to Advances under the Revolving Credit Facility. The Borrower
agrees that NationsBank may, in its sole discretion, accept or pay, as complying
with the terms of any Letter of Credit, any drafts or
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other documents otherwise in order which may be signed or issued by an
administrator, executor, trustee in bankruptcy, debtor in possession, assignee
for the benefit of creditors, liquidator, receiver, attorney in fact or other
legal representative of a party who is authorized under such Letter of Credit to
draw or issue any drafts or other documents. The Borrower agrees to pay
NationsBank interest on any amounts not paid when due hereunder at the Floating
Rate plus two percent (2%), or the maximum rate permitted by applicable law, if
lower.
(b) In accordance with the provisions of Section 2.01(c) hereof,
NationsBank shall notify the Agent (and shall also notify the Borrower) of any
drawing under any Letter of Credit as promptly as practicable following the
receipt by NationsBank of such drawing.
(c) Each Lender (other than NationsBank) shall automatically acquire
on the date of issuance thereof, a Participation in the liability of NationsBank
in respect of each Letter of Credit in an amount equal to such Lender's
Applicable Commitment Percentage of such liability, and to the extent that the
Borrower is obligated to pay NationsBank under Section 3.02(a), each Lender
(other than NationsBank) thereby shall absolutely, unconditionally and
irrevocably assume, and shall be unconditionally obligated to pay to NationsBank
as hereinafter described, its Applicable Commitment Percentage of the liability
of NationsBank under such Letter of Credit. Prior to the Revolving Credit
Termination Date, each Lender (including NationsBank in its capacity as a
Lender) shall, subject to the terms and conditions of Article II, make a
Floating Rate Loan to the Borrower by paying to the Agent for the account of
NationsBank at the Principal Office in Dollars and in immediately available
funds, an amount equal to its Applicable Commitment Percentage of any drawing
under a Letter of Credit, all as described and pursuant to Section 2.01(c). With
respect to drawings under any of the Letters of Credit, each Lender, upon
receipt from the Agent of notice of a drawing in the manner described in Section
2.01(c), shall promptly pay to the Agent for the account of NationsBank, prior
to the applicable time set forth in Section 2.0l(c), its Applicable Commitment
Percentage of such drawing. Simultaneously with the making of each such payment
by a Lender to NationsBank, such Lender shall, automatically and without any
further action on the part of NationsBank or such Lender, acquire a
Participation in an amount equal to such payment (excluding the portion thereof
constituting interest) in the related Reimbursement Obligation of the Borrower.
The Reimbursement Obligations of the Borrower shall be immediately due and
payable whether by Advances made in accordance with Section 2.01(c) or
otherwise. Each Lender's obligation to make payment to the Agent for the account
of NationsBank pursuant to this Section 3.02(c), and the right of NationsBank to
receive the same, shall be absolute and unconditional, shall not be affected by
any circumstance whatsoever and shall be made without any offset, abatement,
withholding or reduction whatsoever. If any Lender is
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obligated to pay but does not pay amounts to the Agent for the account of
NationsBank in full upon such request as required by this Section 3.02(c), such
Lender shall, on demand, pay to the Agent for the account of NationsBank
interest on the unpaid amount for each day during the period commencing on the
date of notice given to such Lender pursuant to Section 2.01(c) until such
Lender pays such amount to the Agent for the account of NationsBank in full at
the interest rate per annum for overnight borrowing by NationsBank from the
Federal Reserve Bank.
(d) Promptly following the end of each calendar quarter, NationsBank
shall deliver to the Agent and the Borrower, and the Agent shall deliver to each
Lender, a notice describing the aggregate undrawn amount of all Letters of
Credit at the end of such quarter. Upon the request of any Lender from time to
time, NationsBank shall deliver to the Agent, and the Agent shall deliver to
such Lender, any other information reasonably requested by such Lender with
respect to each Outstanding Letter of Credit.
(e) The issuance by NationsBank of each Letter of Credit shall, in
addition to the conditions precedent set forth in Section 5.01 hereof, be
subject to the conditions that such Letter of Credit be in such form and contain
such terms as shall be reasonably satisfactory to NationsBank consistent with
the then current practices and procedures of NationsBank with respect to similar
letters of credit, and the Borrower shall have executed and delivered such other
instruments and agreements relating to such Letters of Credit as NationsBank
shall have reasonably requested consistent with such practices and procedures.
All Letters of Credit shall be issued pursuant to and subject to the Uniform
Customs and Practice for Documentary Credits, 1993 revision, International
Chamber of Commerce Publication No. 500 and all subsequent amendments and
revisions thereto.
(f) Without duplication of Section 11.07 hereof, the Borrower hereby
agrees to indemnify and hold harmless NationsBank, each other Lender and the
Agent from and against any and all claims and damages, losses, liabilities,
reasonable costs and expenses which NationsBank, such other Lender or the Agent
may incur (or which may be claimed against NationsBank, such other Lender or the
Agent by any Person) by reason of or in connection with the issuance or transfer
of or payment or failure to pay under any Letter of Credit; provided that the
Borrower shall not be required to indemnify NationsBank, any other Lender or the
Agent for any claims, damages, losses, liabilities, costs or expenses to the
extent, but only to the extent, (i) caused by the bad faith, willful misconduct
or gross negligence of the party to be indemnified or (ii) caused by the failure
of NationsBank to pay under any Letter of Credit after the presentation to it of
a proper demand strictly complying with the terms and conditions of such Letter
of Credit, unless such payment is prohibited by any law, regulation, court order
or decree. The indemnification and hold harmless provisions of this Section
3.02(f) shall survive repayment
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of the Obligations, occurrence of the Revolving Credit Termination Date and
expiration or termination of this Agreement.
(g) Without limiting Borrower's rights as set forth in Section
3.02(f) above, the obligation of the Borrower to immediately reimburse Agent for
drawings made under Letters of Credit shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit and the related applications for any
Letter of Credit, under all circumstances whatsoever, including, without
limitation, the following circumstances:
(i) any lack of validity or enforceability of the Letter of
Credit, the obligation supported by the Letter of Credit or any other agreement
or instrument relating thereto (collectively, the "Related Documents");
(ii) any amendment or waiver of or any consent to or departure
from all or any of the Related Documents;
(iii) the existence of any claim, setoff, defense (other than
the defense of payment in accordance with the terms of this Agreement) or other
rights which the Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any persons or entities for whom any such
beneficiary or any such transferee may be acting), Agent, Lenders or any other
person or entity, whether in connection with the Loan Documents, the Related
Documents or any unrelated transaction;
(iv) any breach of contract or other dispute between the
Borrower and any beneficiary or any transferee of a Letter of Credit (or any
persons or entities for whom such beneficiary or any such transferee may be
acting), Agent, Lenders or any other Person;
(v) any draft, statement or any other document appearing genuine
on its face presented under the 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;
(vi) any delay, extension of time, renewal, compromise or other
indulgence or modification granted or agreed to by Agent, with or without notice
to or approval by the Borrower in respect of any of Borrower's Obligations under
this Agreement; or
(vii) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing;
provided, however, that nothing contained herein shall be deemed to release
NationsBank or any other Lender of any liability for actual loss arising as a
result of its gross negligence, bad faith or willful misconduct or out of the
wrongful dishonor by NationsBank
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of a proper demand for payment made under and strictly complying with the terms
of any Letter of Credit.
3.03 Letter of Credit Fee. The Borrower agrees to pay to the Agent, for
the pro rata benefit of the Lenders based on their Applicable Commitment
Percentages, a fee on the aggregate amount available to be drawn on each
Outstanding Letter of Credit at a rate equal to (i) with respect to the Existing
L/C issued for the benefit of Reliance National Indemnity Company (NationsBank
Letter of Credit No. 40940), 2.00% per annum, and (ii) with respect to all other
Letters of Credit, the Applicable Interest Addition applicable to LIBOR Loans
under the Revolving Credit Facility. Such payment of fees provided for in this
Section 3.03 shall be due with respect to each Letter of Credit quarterly in
arrears on the last day of each March, June, September and December, the first
such payment to be made on March 31, 1995. Such fee shall be calculated on the
basis of a year of 360 days for the actual number of days elapsed. In addition,
the Borrower shall pay to the Agent for the benefit of NationsBank as issuer of
the Letters of Credit a Letter of Credit fronting fee of one-eighth of one
percent (1/8%) per annum, such fee to be paid quarterly in arrears on the dates
set forth above in this Section 3.03.
3.04 Administrative Fees and Reserves. The Borrower shall pay to
NationsBank such administrative fee and other fees, if any, in connection with
the Letters of Credit in such amounts and at such times as NationsBank and the
Borrower shall agree in writing from time to time.
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ARTICLE IV
Yield Protection and Illegality
4.01 Additional Costs. (a) The Borrower shall promptly pay to the Agent
for the account of a Lender from time to time, without duplication, such amounts
as such Lender may determine to be necessary to compensate it for any increased
costs incurred by such Lender which it reasonably determines are attributable to
its making or maintaining any Loan or its obligation to make any Loans, or the
issuance or maintenance by NationsBank of or any other Lender's Participation in
any Letter of Credit issued hereunder, or any reduction in any amount receivable
by such Lender under this Agreement, the Notes or the Letters of Credit in
respect of any of such Loans or such obligation or the Letters of Credit,
including reductions in the rate of return on a Lender's capital (such increases
in costs and reductions in amounts receivable and returns being herein called
"Additional Costs"), resulting from any Regulatory Change which: (i) changes the
basis of taxation of any amounts payable to such Lender under this Agreement or
the Notes in respect of any of such Loans or Letters of Credit (other than taxes
imposed on or measured by income, revenues or assets); or (ii) imposes or
modifies any reserve, special deposit, or similar requirements relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender (other than any such reserve, deposit or requirement
reflected in the Prime Rate, the Federal Funds Effective Rate or the LIBOR Rate,
in each case computed in accordance with the respective definitions of such
terms set forth in Section 1.01 hereof); or (iii) imposes any other condition
adversely affecting the Agent or the Lenders under this Agreement, the Notes or
the issuance or maintenance of, or any Lender's Participation in, the Letters of
Credit (or any of such extensions of credit or liabilities), in each case, the
effect of which is to reduce the rate of return on capital of any such Lender to
a level below that which the Lender could have achieved but for such Regulatory
Change (taking into consideration such Lender's policies with respect to capital
adequacy). Each Lender will notify the Authorized Representative and the Agent
of any event occurring after the Closing Date which would entitle it to
compensation pursuant to this Section 4.01(a) as promptly as practicable after
it obtains knowledge thereof and determines to request such compensation.
Notwithstanding anything contained in this Agreement to the contrary, the
Borrower shall have no obligations under this Section 4.01 unless any Lender
seeking payment of Additional Costs shall have required similar payments from
its other similarly situated customers.
(b) Without limiting the effect of the foregoing provisions of this
Section 4.01, in the event that, by reason of any Regulatory Change, any Lender
either (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
the Lender which includes deposits by reference to which the interest rate on
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LIBOR Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of any Lender which includes LIBOR Loans or
(ii) becomes subject to restrictions on the amount of such a category of
liabilities or assets which it may hold, then, if the Lender so elects by notice
to the Borrower and the other Lenders, the obligation hereunder of such Lender
to make, and to convert Floating Rate Loans into, LIBOR Loans that are the
subject of such restrictions shall be suspended until the date such Regulatory
Change ceases to be in effect and the Borrower shall, on the last day(s) of the
then current Interest Period(s) for outstanding LIBOR Loans convert such LIBOR
Loans into Floating Rate Loans; Provided, however, that the suspension of such
obligation and the conversion of any LIBOR Loans into Floating Rate Loans shall
apply only to any Lender who is affected by such restrictions and who has
provided such notice to the Borrower and the other Lenders, and the obligation
of the other Lenders to make, and to convert Floating Rate Loans into, LIBOR
Loans shall not be affected by such restrictions. In the event that the
obligation of some, but not all of the Lenders to make, or to convert Floating
Rate Loans into, LIBOR Loans is suspended, then any request by the Borrower
during the pendency of such suspension for a LIBOR Loan shall be deemed a
request for such LIBOR Loan from the Lender(s) not subject to such suspension
and for a Floating Rate Loan from the Lender(s) who are subject to such
suspension, in each case in the respective amounts based on the Lenders'
respective Revolving Credit Commitments.
(c) Determinations by any Lender for purposes of this Section 4.01 of the
effect of any Regulatory Change on its costs of making or maintaining, or being
committed to make, Loans or by NationsBank as issuer of any Letter of Credit of
the effect of any Regulatory Change on its costs in connection with the issuance
or maintenance of, or any other Lender's Participation in, any Letter of Credit
issued hereunder, or on amounts receivable by any Lender in respect of Loans or
Letters of Credit, and of the additional amounts required to compensate the
Lender in respect of any Additional Costs, shall be conclusive absent manifest
error, provided that such determinations are made on a reasonable basis taking
into account such Lender's reasonable policies as to the allocation of capital,
costs and other items. The Lender requesting such compensation shall furnish to
the Authorized Representative and the Agent within one hundred and eighty (180)
days of the incurrence of any Additional Costs for which compensation is sought
an explanation of the Regulatory Change and calculations, in reasonable detail,
setting forth such Lender's determination of any such Additional Costs. Each
Lender will use its best efforts, consistent with its bank policies and
procedures, to minimize or eliminate the obligation of the Borrower to pay any
Additional Costs by booking Loans in a different Lending Office or taking other
reasonable and appropriate actions; provided, however, that no Lender will be
obligated to suffer or incur any economic, financial or regulatory costs,
expenses or other disadvantages by reason of its obligation contained in this
Section 4.01(c), except
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in the case of costs and expenses which are reimbursed by the Borrower.
4.02 Suspension of Loans. Anything herein to the contrary notwithstanding,
if, on or prior to the determination of any interest rate for any LIBOR Loan for
any Interest Period, the Agent determines (which determination made on a
reasonable basis shall be conclusive absent manifest error) that:
(a) quotations of interest rates for the relevant deposits referred
to in the definition of "LIBOR Rate" in Section 1.01 hereof are not being
provided in the relevant amounts or for the relevant maturities for
purposes of determining the rate of interest for such LIBOR Loan as
provided in this Agreement; or
(b) the relevant rates of interest referred to in the definition
of "Base Rate" in Section 1.01 hereof upon the basis of which the LIBOR
Rate for such Interest Period is to be determined do not adequately
reflect the cost to the Lenders of making or maintaining such LIBOR Loan
for such Interest Period (which determination shall be made on a
reasonable basis and in good faith by the Agent, and the Person making
such determination shall furnish the Authorized Representative evidence of
the facts leading to such determination);
then the Agent shall give the Authorized Representative prompt notice thereof,
and so long as such condition remains in effect, the Lenders shall be under no
obligation to make LIBOR Loans that are subject to such condition, or to convert
Loans into LIBOR Loans, and the Borrower shall on the last day(s) of the then
current Interest Period(s) for outstanding LIBOR Loans, as applicable, convert
such LIBOR Loans into a LIBOR Loan if such LIBOR Loan is not subject to the same
or similar condition and is available hereunder, or to Floating Rate Loans. The
Agent shall give the Authorized Representative not less than fifteen (15) days
prior notice describing in reasonable detail any event or condition described in
this Section 4.02 promptly following the determination by the Agent that the
availability of LIBOR Loans is, or is to be, suspended as a result thereof.
4.03 Illegality. Notwithstanding any other provision of this Agreement, in
the event that it becomes unlawful for any Lender to honor its obligation to
make or maintain LIBOR Loans hereunder, then such Lender shall promptly notify
the Borrower thereof (with a copy to the Agent) and such Lender's obligation to
make or continue LIBOR Loans, or convert Floating Rate Loans into LIBOR Loans,
shall be suspended, effective upon the respective maturities of the Interest
Periods currently in effect unless sooner required by law, until such time as
such Lender may again make and maintain LIBOR Loans, and such Lender's
outstanding LIBOR Loans shall be
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converted into Floating Rate Loans in accordance with Section 2.10 hereof.
4.04 Compensation. The Borrower shall promptly pay to each Lender, upon
the request of such Lender, such amount or amounts as shall be sufficient (in
the reasonable determination of Lender) to compensate it for any loss, cost or
expense incurred by it as a result of:
(a) any payment, prepayment or conversion of a LIBOR Loan on a date
other than the last day of the Interest Period for such LIBOR Loan,
including without limitation any conversion required pursuant to Section
4.03; or
(b) any failure by the Borrower to borrow a LIBOR Loan on the date
for such borrowing specified in the relevant Borrowing Notice under
Article II hereof;
such compensation to include, without limitation, an amount equal to the excess,
if any, of (i) the amount of interest which would have accrued on the principal
amount so paid, prepaid or converted or not borrowed for the period from the
date of such payment, prepayment or conversion or failure to borrow or convert
to the last day of the then current Interest Period for such Loan (or, in the
case of a failure to borrow or convert, the Interest Period for such Loan which
would have commenced on the date scheduled for such borrowing or conversion) at
the applicable rate of interest for such LIBOR Loan provided for herein over
(ii) the Base Rate (as reasonably determined by the Agent) for Dollar deposits
of amounts comparable to such principal amount and maturities comparable to such
period. A determination of a Lender as to the amounts payable pursuant to this
Section 4.04 shall be conclusive, absent manifest error, provided that such
determinations are made on a reasonable basis. The Lender requesting
compensation under this Section 4.04 shall furnish to the Authorized
Representative and the Agent calculations in reasonable detail setting forth
such Lender's determination of the amount of such compensation.
4.05 Alternate Loans. In the event any Lender suspends the making of any
LIBOR Loan pursuant to this Article IV (herein a "Restricted Lender"), the
Restricted Lender's Commitment Percentage of any LIBOR Loan shall bear interest
at either the Floating Rate or the LIBOR Rate for which the suspension does not
apply, as selected by Borrower, until the Restricted Lender once again makes
available the applicable LIBOR Loan. Notwithstanding the provisions of Section
2.04(b), interest shall be payable to the Restricted Lender at the time and
manner as paid to those Lenders making available LIBOR Loans.
4.06 Taxes. All payments by the Borrower of principal of, and interest on,
the Loans and all other amounts payable hereunder shall be made free and clear
of and without deduction for any present or future excise, stamp or other taxes,
fees, duties,
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levies, imposts, charges, deductions, withholdings or other charges of any
nature whatsoever imposed by any taxing authority, but excluding (i) franchise
taxes, (ii) any taxes (other than withholding taxes) that would not be imposed
but for a connection or former connection between a Lender or the Agent and the
jurisdiction imposing such taxes (other than a connection arising solely by
virtue of the activities of such Lender or the Agent pursuant to or in respect
of this Agreement or any other Loan Document), (iii) any withholding taxes
payable with respect to payments hereunder or under any other Loan Document
under laws (including, without limitation, any statute, treaty, ruling,
determination or regulation), (iv) any taxes imposed on or measured by any
Lender's assets, net income, receipts or branch profits and (v) any taxes
arising after the Closing Date solely as a result of or attributable to Lender
changing its designated Lending Office after the date such Lender becomes a
party hereto (such non-excluded items being collectively called "Taxes"). In the
event that any withholding or deduction from any payment to be made by the
Borrower hereunder is required in respect of any Taxes pursuant to any
applicable law, rule or regulation, then the Borrower will
(a) pay directly to the relevant authority the full amount required
to be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
(c) pay to the Agent for the account of the Lender such additional
amount or amounts as is necessary to ensure that the net amount actually
received by each Lender will equal the full amount such Lender would have
received had no such withholding or deduction been required, unless such
Lender fails to deliver to the Borrower any certificate, document or
evidence referred to in the next following sentence, in which case such
obligation to pay shall be suspended until such item is delivered by such
Lender.
Prior to the date that any Lender organized under the laws of a
jurisdiction outside the United States becomes a party hereto, such Person shall
deliver to the Borrower and the Agent such certificates, documents or other
evidence, as required by the Code or Treasury Regulations issued pursuant
thereto or as otherwise reasonably requested by the Borrower, properly
completed, currently effective and duly executed by such Lender establishing
that such payment is (i) not subject to United States Federal backup withholding
tax and (ii) not subject to United States Federal withholding tax under the Code
because such payment is either effectively connected with the conduct by such
Lender of a trade or business in the United States or totally exempt from United
States Federal withholding tax by reason of the application of the provisions of
a treaty to which the United States is a party or such Lender is otherwise
exempt.
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If the Borrower shall be required to make any payment to the Agent for the
account of any Lender under this Section 4.06, and if such Lender is able, in
its reasonable opinion, to claim any deduction, credit, offset, allowance,
reduction in net tax payable or similar tax benefit by reason of such payment,
such Lender will promptly reimburse the Borrower for the amount of such benefit
upon its realization of the economic benefit thereof. As and to the extent that
the Borrower may be able to mitigate or deduct the amount of any such payments
under the provisions of any treaty, law or other governmental regulation, such
Lender will render whatever reasonable assistance at the request and expense of
the Borrower, may be required to effect such mitigation or reduced payment.
If the Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Agent, for the account of the respective
Lender, the required receipts or other required documentary evidence, the
Borrower shall indemnify the Lenders for any incremental Taxes, interest or
penalties that may become payable by any Lender as a result of any such failure.
For purposes of this Section 4.06, a distribution hereunder by the Agent or any
Lender to or for the account of any Lender shall be deemed a payment by the
Borrower.
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ARTICLE V
Conditions to Making Loans and Issuing
Letters of Credit
5.01 Conditions of Closing. The obligations of the Lenders hereunder are
subject to the conditions precedent that:
(a) the Agent shall have received on the Closing Date, in form and
substance satisfactory to the Agent and Lenders, the following:
(i) executed originals of each of this Agreement, the Notes, the
Security Documents, the Subordination Agreements and the other Loan
Documents, together with all schedules and exhibits thereto;
(ii) executed originals, or copies of executed originals certified
by the secretary or assistant secretary of the Borrower, of the CHC
Transaction Documents, which shall evidence (i) the consummation of the
CHC Transaction as of the Closing Date on the terms provided in the Asset
Purchase Agreement (without further amendment) and (ii) the placement on
the Subordinated Transaction Documents (as defined in the Subordination
Agreements) of the restrictive legend required by the Subordination
Agreements;
(iii) the written opinion with respect to the Loan Documents, the
CHC Transaction Documents and the respective transactions contemplated
thereby of special counsel to the Borrower and the Guarantors dated the
Closing Date, addressed to the Agent and the Lenders and satisfactory to
Smith Helms Mulliss & Moore, special counsel to the Agent;
(iv) the written opinion or opinions with respect to the
Subordination Agreements and the other CHC Transaction Documents and the
transactions contemplated thereby of counsel for the Sellers (which
opinion or opinions may be in the form of a letter or letters stating that
the Agent and the Lenders may rely upon the opinion or opinions of such
counsel delivered to the Borrower or any of its Subsidiaries as if the
same were addressed to them), dated the Closing Date, addressed to the
Agent and the Lenders and satisfactory to Smith Helms Mulliss & Moore,
special counsel to the Agent;
(v) copies of resolutions of the boards of directors or other
appropriate governing body (or of the appropriate committee thereof) of
the Borrower and each of the Guarantors certified by its secretary or
assistant secretary as of the Closing Date, appointing (in the case of the
Borrower) the Authorized Representative and approving and adopting the
Loan Documents and CHC Transaction Documents to be executed by such
Person, and authorizing the execution and delivery thereof;
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(vi) specimen signatures of officers of the Borrower and each
Guarantor executing the Loan Documents on behalf of such Person, certified
by the secretary or assistant secretary of the Borrower or Guarantor, as
applicable;
(vii) the charter documents of the Borrower and each Guarantor
certified as of a recent date by the Secretary of State of its state of
incorporation;
(viii) the by-laws of the Borrower and each Guarantor certified as
of the Closing Date as true and correct by the secretary or assistant
secretary of the Person to whom such by-laws relate;
(ix) certificates issued as of a recent date by the Secretaries of
State of the jurisdiction of incorporation of the Borrower and each
Guarantor, as the case may be, as to the due existence and good standing
of the Borrower and each Guarantor therein;
(x) appropriate certificates of qualification to do business, good
standing and, where appropriate, authority to conduct business under
assumed name, issued in respect of the Borrower and each Guarantor as of a
recent date by the Secretary of State or comparable official of each
jurisdiction in which the failure to be qualified to do business or
authorized so to conduct business could materially adversely affect the
business, operations or conditions, financial or otherwise, of the
Borrower or any Guarantor;
(xi) notice of appointment of the Authorized Representative;
(xii) a certificate of an Authorized Representative dated the
Closing Date demonstrating compliance with the financial covenants
contained in Sections 9.01 through 9.05 and 9.09(v) as of the Closing
Date, substantially in the form of Exhibit I attached hereto;
(xiii) a certificate of Borrower's President, chief executive
officer or chief financial officer dated the Closing Date certifying that
as of the Closing Date and immediately after giving effect to the CHC
Transaction, the Term Loan and Advances made as of the Closing Date (A)
there does not exist any Default or Event of Default and (B) the Borrower
and the Guarantors are Solvent;
(xiv) a Borrowing Base Certificate dated as of the Closing Date;
(xv) evidence of insurance required by the Loan Documents;
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(xvi) if the Borrower shall request an Advance on the Closing Date,
a Borrowing Notice with respect to such Advance;
(xvii) all fees payable by the Borrower on the Closing Date to the
Agent, NationsBank, the Lenders and NCMI; and
(xviii) such other documents, instruments and certificates as the
Agent or any Lender may reasonably request on or prior to the Closing Date
in connection with the consummation of the CHC Transaction and the
transactions contemplated hereby; and
(b) In the good faith judgment of the Agent and the Lenders:
(i) there shall not have occurred or become known to the Agent or
the Lenders any material adverse change in the business, financial
condition, operations, properties or prospects of the Borrower or its
Subsidiaries or Affiliates since September 30, 1994;
(ii) no litigation shall be pending or threatened which would be
likely to materially and adversely affect the business, financial
condition, operations, properties or prospects of the Borrower or its
Subsidiaries or Affiliates, or which could reasonably be expected to
restrain or enjoin, impose burdensome conditions on, or otherwise
materially and adversely (A) affect the ability of the Borrower and its
Subsidiaries to fulfill their respective obligations under the Loan
Documents or the CHC Transaction Documents, or (B) impair any interests or
rights of the Agent or any Lender under the Loan Documents; and
(iii) the Borrower, its Subsidiaries and the Sellers shall have
received all approvals, consents and waivers, and shall have made or given
all necessary filings and notices as shall be required to consummate the
transactions contemplated hereby and by the CHC Transaction Documents
without the occurrence of any default under, conflict with or violation of
(A) any applicable law, rule, regulation, order or decree of any
Governmental Authority or arbitral authority or (B) any agreement,
document or instrument to which any of the Borrower, any Subsidiary or any
of the Sellers is a party or by which any of them or their properties is
bound, except for such approvals, consents, waivers, filings and notices
the receipt, making or giving of which is not material to the financial
condition, business or operations of the Borrower and its Subsidiaries
taken as a whole after giving effect to the CHC Transaction.
Upon satisfaction of the conditions described in Section 5.01, the Prior
Agreement shall be superseded by this Agreement, and with reasonable promptness
thereafter the Agent will surrender the Prior Notes to the Borrower.
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5.02 Conditions of Loans and Issuance of Letters of Credit. The obligation
of the Lenders to make any Revolving Credit Loans, and NationsBank to issue
Letters of Credit hereunder on or subsequent to the Closing Date are subject to
the satisfaction of the following conditions:
(a) the Agent shall have received a notice of such borrowing or
request if required by Article II hereof;
(b) the representations and warranties of the Borrower and each
Guarantor set forth in Article VII hereof and in each of the other Loan
Documents shall be true and correct in all material respects on and as of
the date of such Advance or issuance of such Letters of Credit, as the
case may be, with the same effect as though such representations and
warranties had been made on and as of such date, except (i) to the extent
that such representations and warranties expressly relate to an earlier
date and (ii) the financial statements referred to in Section 7.0l(f)(i)
shall be deemed to be those financial statements most recently delivered
to the Agent and the Lenders pursuant to Section 8.01 hereof;
(c) in the case of the issuance of a Letter of Credit, Borrower
shall have executed and delivered to NationsBank NationsBank's then
current form of Application and Agreement for Letter of Credit together
with such other instruments and documents as it shall reasonably request;
(d) at the time of each such Advance or issuance of each Letter of
Credit, as the case may be, no Default or Event of Default specified in
Article X hereof, shall have occurred and be continuing;
(e) immediately after giving effect to a Revolving Credit Loan or
Letter of Credit the aggregate principal balance of all outstanding
Revolving Credit Loans and Participations for each Lender and in the
aggregate shall not exceed, respectively, (i) such Lender's Revolving
Credit Commitment or Letter of Credit Commitment or (ii) the Total
Revolving Credit Commitment or the Total Letter of Credit Commitment; and
(f) immediately after giving effect to a Revolving Credit Loan or
Letter of Credit, the aggregate principal amount of Revolving Credit Loans
and Outstanding Letters of Credit shall not exceed the lesser of the Total
Revolving Credit Commitment or the Borrowing Base.
5.03 Supplements to Schedules. The Borrower may, from time to time, amend
or supplement the Schedules to this Agreement by delivering (effective upon
receipt) to the Agent and each Lender a copy of such revised Schedule or
Schedules which shall (i) be dated the date of delivery, (ii) be certified by an
Authorized
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Representative as true, complete and correct as of such date and as delivered in
replacement for the corresponding Schedule or Schedules previously in effect,
and (iii) show in reasonable detail (by blacklining or other appropriate graphic
means) the changes from each such corresponding predecessor Schedule.
Notwithstanding anything to the contrary contained herein or in any of the other
Loan Documents, in the event that the Required Lenders determine based upon such
revised Schedule (whether individually or in the aggregate or cumulatively) that
there has been a material adverse change since the Closing Date in the financial
condition, business or operations of the Borrower and its Subsidiaries, taken as
a whole, the Lenders shall have no further obligation to fund additional
Advances hereunder.
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ARTICLE VI
Security
6.01 Security. As security for the full and timely payment and performance
of the Obligations, the Borrower and each Guarantor shall execute and deliver to
the Agent on the Closing Date the Security Documents. The Borrower shall (i) do
all things necessary in the opinion of the Agent and its counsel to create in
the Agent for the benefit of the Lenders a perfected first priority security
interest in all Collateral subject to no prior liens or encumbrances other than
Permitted Liens and (ii) cause each Guarantor to do all things necessary in the
opinion of the Agent and its counsel to grant to the Agent for the benefit of
the Lenders a perfected first priority security interest in all Collateral, as
security for the obligations of such Guarantor under its Guaranty, in each case
subject to no prior liens or encumbrances other than Permitted Liens and subject
to limitations under applicable law which may limit the creation, perfection or
priority of Liens on Government Receivables.
6.02 Further Assurances. At the request of the Agent, the Borrower will
execute, or cause the Guarantors to execute, by their respective duly authorized
officers, alone or with the Agent, any certificate, instrument, statement or
document and will procure any such certificate, instrument, statement or
document or (subject to the limitations stated in the last sentence of Section
6.01) take such other action (and pay all connected reasonable costs) which the
Agent reasonably deems necessary to create, continue or preserve the liens and
security interests (and the perfection and priority thereof) of the Agent
contemplated hereby and by the other Loan Documents.
6.03 Property Location. Schedule 6.03 delivered to the Agent
simultaneously with the execution of this Agreement sets forth the true and
complete address of each location where Collateral constituting equipment or
inventory is located and where books and records relating to Accounts are
maintained. The Borrower shall advise the Agent at the time of delivery of each
certificate described in Section 8.0l(a)(ii) and Section 8.0l(b)(ii) of any
change in or addition to the location or locations of such property. The
information provided to the Agent shall include the address of each such
location, the identity (including legal name and any trade name, if different)
of the Person in whose facilities or custody such property is located, and such
additional information as the Agent shall reasonably deem necessary or advisable
in connection with perfecting or maintaining the perfection of a Lien on such
property pursuant to the Loan Documents.
6.04 Chief Executive Offices. The Borrower represents, warrants and
covenants that (i) the chief executive office of the
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Borrower is at the Closing Date located at 100 South Biscayne Boulevard, Miami,
Florida 33131 and the address of the chief executive office of each Guarantor is
as set forth on Schedule 6.04 delivered to the Agent simultaneously with the
execution of this Agreement, and (ii) Schedule 6.04 contains a true and complete
list of (a) the name and address of Borrower and each Guarantor and of each
other Person which has effected any merger or consolidation with Borrower or any
Guarantor or contributed or transferred to Borrower or any Guarantor (other than
by sales of inventory in the ordinary course of business of the seller or) any
property constituting Collateral at any time since January 1, 1989, (b) each
location of the chief executive office of Borrower or any Guarantor at any time
since January 1, 1989, and (c) each trade name currently used by Borrower or any
Guarantor in connection with the creation or billing of Accounts. Borrower shall
not change, or permit any Guarantor to change, the location of its chief
executive office except upon giving not less than thirty (30) days prior written
notice to the Agent and taking or causing to be taken all such action at
Borrower's expense as may be reasonably requested by the Agent to perfect or
maintain the perfection of the security interest of the Agent in Accounts (to
the extent contemplated hereunder), general intangibles and related Collateral.
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ARTICLE VII
Representations and Warranties
7.01 Representations and Warranties. The Borrower represents and warrants
with respect to itself and to its Subsidiaries (which representations and
warranties shall survive the delivery of the documents mentioned herein and the
making of Loans), after giving effect to the CHC Transaction, that:
(a) Organization and Authority.
(i) the Borrower and each Subsidiary is a corporation duly
organized and validly existing under the laws of the jurisdiction of
its incorporation;
(ii) the Borrower and each Subsidiary (x) has the requisite
power and authority to own its properties and assets and to carry on
its business as now being conducted and as contemplated in the Loan
Documents and the CHC Transaction Documents, and (y) is qualified to
do business in every jurisdiction in which failure so to qualify
would have a material adverse effect on the business or operations
of the Borrower or any Subsidiary;
(iii) the Borrower has the power and authority to execute,
deliver and perform this Agreement, the Notes, and the Security
Agreement, and to borrow hereunder, and to execute, deliver and
perform each of the other Loan Documents and CHC Transaction
Documents to which it is a party;
(iv) each Guarantor has the power and authority to execute,
deliver and perform the Guaranty Agreement, the Subsidiary Security
Agreement and the other Loan Documents and CHC Transaction Documents
to which it is a party; and
(v) when executed and delivered, each of the Loan Documents
and CHC Transaction Documents to which Borrower or any Guarantor is
a party will be the legal, valid and binding obligation or
agreement, as the case may be, of the Borrower or such Guarantor,
enforceable against the Borrower or such Guarantor in accordance
with its terms, subject to the effect of any applicable bankruptcy,
moratorium, insolvency, reorganization or other similar law
affecting the enforceability of creditors' rights generally and to
the effect of general principles of equity which may limit the
availability of equitable remedies (whether in a proceeding at law
or in equity);
(b) Loan Documents and CHC Transaction Documents. The execution,
delivery and performance by the Borrower and each
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Guarantor of each of the Loan Documents and each of the CHC Transaction
Documents to which the Borrower or a Guarantor is a party:
(i) have been duly authorized by all requisite corporate
action (including any required shareholder approval) of the Borrower
or Guarantor signatory thereto required for the lawful execution,
delivery and performance thereof;
(ii) do not violate any provisions of (1) applicable law, rule
or regulation, (2) any order of any court or other agency of
government binding on the Borrower, any Guarantor or any other
Subsidiary of Borrower, or their respective properties, or (3) the
charter documents or by-laws of Borrower or any Guarantor;
(iii) will not be in conflict with, result in a breach of or
constitute an event of default, or an event which, with notice or
lapse of time, or both, would constitute an event of default, under
any indenture, agreement or other instrument to which Borrower, any
Guarantor or any other Subsidiary is a party, or by which the
properties or assets of Borrower, any Guarantor or any other
Subsidiary are bound, the effect of which would have any material
adverse effect on the ability of the Borrower or any Guarantor to
observe the covenants and agreements contained herein or in any
other Loan Document or any of the CHC Transaction Documents or to
pay the Obligations;
(iv) will not result in the creation or imposition of any
Lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of Borrower, any Guarantor or any other
Subsidiary of Borrower except any liens in favor of the Agent and
the Lenders created by the Loan Documents;
(c) Solvency. Borrower and each Guarantor are Solvent after giving
effect to the transactions contemplated by this Agreement and the other
Loan Documents, assuming, with respect to each Guarantor, that the
Borrower's past practice of making capital contributions to such Guarantor
as necessary will continue; provided that with respect to any date after
the date hereof on which this representation and warranty is deemed to be
made or reaffirmed hereunder, the Borrower represents and warrants that as
of such later date the Borrower and the Guarantors, taken as a whole, are
Solvent;
(d) Subsidiaries and Stockholders. Borrower has no Subsidiaries
other than those Persons listed as Subsidiaries in Schedule 7.01(d)
delivered to the Agent simultaneously with the execution of this
Agreement; such Schedule 7.01(d) states
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as of the date hereof the authorized and issued capitalization of each
Subsidiary listed thereon, the number of shares or other equity interests
of each class of capital stock or interest issued and outstanding of each
such Subsidiary and the number and/or percentage of outstanding shares or
other equity interest (including options, warrants and other rights to
acquire any interest) of each such class of capital stock or equity
interest owned by Borrower or by any such Subsidiary; the outstanding
shares or other equity interests of each such Subsidiary have been duly
authorized and validly issued and are fully paid and nonassessable; and
Borrower and each such Subsidiary own beneficially and of record all the
shares and other interests it is listed as owning in Schedule 7.01(d),
free and clear of any Lien other than the Lien arising under the Loan
Documents and applicable restrictions on transfer of such securities in
effect on the Closing Date or otherwise imposed by applicable law;
(e) Ownership Interests. Borrower owns no interest in any Person
other than the Persons listed in Schedule 7.0l(d);
(f) Financial Condition. (i) The Borrower has heretofore furnished
to the Agent an audited consolidated balance sheet of the Borrower and its
Subsidiaries as at September 30, 1994 and the notes thereto and the
related consolidated statements of income, stockholders' equity and cash
flows for the Fiscal Year then ended as audited by Ernst & Young. Except
as set forth therein, such financial statements (including the notes
thereto) present fairly the financial condition of the Borrower and its
Subsidiaries as of the end of such Fiscal Year and results of their
operations and the changes in their stockholders' equity for the Fiscal
Year then ended, all in conformity with Generally Accepted Accounting
Principles applied on a Consistent Basis;
(ii) since September 30, 1994, there has been no material adverse
change in the financial condition of the Borrower and its Subsidiaries or
in the businesses, properties and operations of the Borrower or any of its
Subsidiaries (for purposes of this clause (ii), a change in the business,
properties and operations of the Borrower or any Subsidiary shall not be
deemed to be a material adverse change unless such change reduces net
income of the affected entity in an amount not less than an amount equal
to two and one-half percent (2 1/2%) of Consolidated Net Income of the
Borrower and its Subsidiaries for the Four-Quarter Period immediately
preceding the date on which this representation and warranty is made or
deemed made or reaffirmed), nor have such businesses or properties, taken
as a whole, been materially adversely affected as a result of any fire,
explosion, earthquake, accident, strike, lockout, combination of workers,
flood, embargo or act of God; nor has any event occurred, the effect of
which would have any material adverse effect on the
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ability of the Borrower or any Guarantor to observe the covenants and
agreements contained herein or in any other Loan Document or the CHC
Transaction Documents or to pay the Obligations;
(iii) except as set forth in the financial statements referred to in
Section 7.0l(f)(i) or in Schedule 7-01(f) or Schedule 7.01(j) delivered to
the Agent simultaneously with the execution of this Agreement, neither
Borrower nor any Subsidiary has incurred, other than in the ordinary
course of business, any material indebtedness, obligations, commitments or
other liability, contingent or otherwise, which remains outstanding or
unsatisfied;
(iv) the Projection of Combined Entities provided to the Agent and
the Lenders was prepared by the Borrower in good faith and is based upon
assumptions which the Borrower believes to have been reasonable as of the
time of preparation thereof and as of the Closing Date;
(g) Title to Properties. The Borrower and its Subsidiaries have
title to all their respective real and personal properties, subject to no
transfer restrictions or Liens of any kind, except for (x) the transfer
restrictions and Liens described in Schedule 7.0l(g)-Liens delivered to
the Agent simultaneously with the execution of this Agreement, and (y)
Permitted Liens;
(h) Taxes. Except as set forth in Schedule 7.01(h) delivered to the
Agent simultaneously with the execution of this Agreement, the Borrower
and its Subsidiaries have filed or caused to be filed all federal, state
and local tax returns which are required to be filed by them and except
for taxes and assessments being contested in good faith and against which
reserves satisfactory to the Borrower's independent certified public
accountants have been established, have paid or caused to be paid all
taxes as shown on said returns or on any assessment received by them, to
the extent that such taxes have become due;
(i) Other Agreements. Neither the Borrower nor any Subsidiary is
(i) a party to any judgment, order, decree or any agreement or
instrument or subject to restrictions materially adversely affecting
the ability of the Borrower or any Guarantor to observe the
covenants and agreements contained herein or any other Loan Document
or the CHC Transaction Documents or to pay the Obligations; or
(ii) in default in the performance, observance or fulfillment
of any of the obligations, covenants or
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conditions contained in any agreement or instrument to which the
Borrower or any Subsidiary is a party, which default has, or if not
remedied within any applicable grace period would reasonably be
likely to have a material adverse effect on the ability of the
Borrower or any Guarantor to observe the covenants and agreements
contained herein or any other Loan Document or the CHC Transaction
Documents or to pay the Obligations;
(j) Litigation. Except as set forth in Schedule 7.O1(j) or Schedule
7.01(t) delivered to the Agent simultaneously with the execution of this
Agreement, other than proposed legislation or regulation or other
governmental proceedings affecting the healthcare or hospice industries
generally, there is no action, suit or proceeding at law or in equity or
by or before any governmental instrumentality or agency or arbitral body
pending against the Borrower or any Subsidiary or affecting any properties
or rights of the Borrower or any Subsidiary, or to the knowledge of the
Borrower, pending against any of the Sellers or affecting any properties
or rights of any of the Sellers, which would reasonably be expected to (i)
materially adversely affect the financial condition, business or
operations of the Borrower or any of its Subsidiaries, or (ii) restrain,
enjoin, impose burdensome conditions upon or otherwise materially and
adversely affect the consummation of the CHC Transaction in accordance
with the CHC Transaction Documents or the exercise of rights and powers by
the Agent and the Lenders under the Loan Documents or, to the knowledge of
the Borrower, threatened in writing against the Borrower or any Subsidiary
affecting the Borrower or any Subsidiary or any properties or rights of
the Borrower or any Subsidiary, or, to the knowledge of the Borrower,
threatened in writing against any Seller affecting any Seller or any
properties or rights of any Seller, which reasonably is expected to (i)
materially adversely affect the financial condition, business or
operations of the Borrower or any of its Subsidiaries, or (ii) restrain,
enjoin, impose burdensome conditions upon or otherwise materially and
adversely affect the consummation of the CHC Transaction in accordance
with the CHC Transaction Documents or the exercise of rights and powers by
the Agent and the Lenders under the Loan Documents;
(k) Margin Stock. Neither the Borrower nor any Subsidiary owns any
"margin stock" as such term is defined in Regulation U, as amended (12
C.F.R. Part 221), of the Board. The proceeds of the borrowings made
pursuant to Article II hereof will be used by the Borrower only for the
purposes set forth in Section 2.13 hereof. None of such proceeds will be
used, directly or indirectly, for the purpose of purchasing or carrying
any margin stock or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry margin
stock or for any other purpose which might constitute any of the Loans
under this Agreement a
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"purpose credit" within the meaning of said Regulation U or Regulation X
(12 C.F.R. Part 224) of the Board. Neither the Borrower nor any agent
acting in its behalf has taken or will take any action which might cause
this Agreement or any of the documents or instruments delivered pursuant
hereto to violate any regulation of the Board or to violate the Securities
Exchange Act of 1934, as amended, or the Securities Act of 1933, as
amended, or any state securities laws, in each case as in effect on the
date hereof;
(l) Investment Company. Neither the Borrower nor any Subsidiary is
an "investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended (15 U.S.C. (S)
80a-l, et seq.). The application of the proceeds of the Loans and
repayment thereof by the Borrower and the performance by the Borrower of
the transactions contemplated by this Agreement will not violate any
provision of said Act, or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder, in each case as in effect
on the date hereof;
(m) Patents, Etc. Except as set forth in Schedule 7.01(m) delivered
to the Agent simultaneously with the execution of this Agreement, the
Borrower and its Subsidiaries own or have the right to use, under valid
license agreements or otherwise, all material patents, licenses,
franchises, trademarks, trademark rights, trade names, trade name rights,
trade secrets and copyrights necessary to the conduct of their businesses
as now conducted, without known conflict with any patent, license,
franchise, trademark, trade secrets and confidential commercial or
proprietary information, trade name, copyright, rights to trade secrets or
other proprietary rights of any other Person;
(n) No Untrue Statement. Neither this Agreement nor any other Loan
Document or certificate or document executed and delivered by or on behalf
of the Borrower or any Guarantor in accordance with or pursuant to any
Loan Document contains any misrepresentation or untrue statement of
material fact or omits to state a material fact necessary, in light of the
circumstance under which it was made, in order to make any such
representation or statement contained therein not misleading in any
material respect;
(o) No Consents, Etc. Except as set forth in Schedule 7.01(o) or
Schedule 7.0l(g) delivered to the Agent simultaneously with the execution
of this Agreement, neither the respective businesses or properties of the
Borrower or any Subsidiary, nor any relationship between the Borrower or
any Subsidiary and any other Person, nor any circumstance in connection
with the execution, delivery and performance of the
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Loan Documents or the CHC Transaction Documents and the transactions
contemplated hereby and thereby is such as to require a consent, approval
or authorization of, or filing, registration or qualification with, any
governmental or other authority or any other Person on the part of the
Borrower or any Subsidiary as a condition to the execution, delivery and
performance of, or consummation of the transactions contemplated by, this
Agreement or the other Loan Documents or the CHC Transaction Documents by
the Borrower or the Guarantors or if so, such consent, approval,
authorization, filing, registration or qualification has been obtained or
effected, as the case may be;
(p) ERISA.
(i) None of the employee benefit plans maintained at any time by the
Borrower or any Subsidiary or the trusts created thereunder has engaged in
a prohibited transaction which could subject any such employee benefit
plan or trust to a material tax or penalty on prohibited transactions
imposed under Internal Revenue Code Section 4975 or ERISA;
(ii) None of the employee benefit plans maintained at any time by
the Borrower or any Subsidiary which are employee pension benefit plans
and which are subject to Title IV of ERISA or the trusts created
thereunder has been terminated so as to result in a material liability of
the Borrower under ERISA nor has any such employee benefit plan of the
Borrower or any Subsidiary incurred any material liability to the Pension
Benefit Guaranty Corporation established pursuant to ERISA, other than for
required insurance premiums which have been paid or are not yet due and
payable; neither the Borrower nor any Subsidiary has withdrawn from or
caused a partial withdrawal to occur with respect to any Multi-employer
Plan resulting in any assessed and unpaid withdrawal liability; the
Borrower and the Subsidiaries have made or provided for all contributions
to all such employee pension benefit plans which they maintain and which
are required as of the end of the most recent fiscal year under each such
plan; neither the Borrower nor any Subsidiary has incurred any accumulated
funding deficiency with respect to any such plan, whether or not waived;
nor has there been any reportable event, or other event or condition,
which presents a material risk of termination of any such employee benefit
plan by such Pension Benefit Guaranty Corporation;
(iii) The present value of all vested accrued benefits under the
employee pension benefit plans which are subject to Title IV of ERISA,
maintained by the Borrower or any Subsidiary, did not, as of the most
recent valuation date for each such plan, exceed the then current value of
the assets of such employee benefit plans allocable to such benefits;
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(iv) The consummation of the Loans and the issuance of the Letters
of Credit provided for in Article II and Article III will not involve any
prohibited transaction under ERISA which is not subject to a statutory or
administrative exemption;
(v) To the best of the Borrower's knowledge, each employee pension
benefit plan subject to Title IV of ERISA, maintained by the Borrower or
any Subsidiary, has been administered in accordance with its terms in all
material respects and is in compliance in all material respects with all
applicable requirements of ERISA and other applicable laws, regulations
and rules;
(vi) There has been no withdrawal liability incurred and unpaid with
respect to any Multi-employer Plan to which the Borrower or any Subsidiary
is or was a contributor;
(vii) As used in this Agreement, the terms "employee benefit plan,"
"employee pension benefit plan," "accumulated funding deficiency,"
"reportable event," and "accrued benefits" shall have the respective
meanings assigned to them in ERISA, and the term "prohibited transaction"
shall have the meaning assigned to it in Code Section 4975 and ERISA;
(viii) Neither the Borrower nor any Subsidiary has any liability not
disclosed on any of the financial statements furnished to the Lenders
pursuant to Section 7.01(f) hereof, contingent or otherwise, under any
plan or program or the equivalent for unfunded post-retirement benefits,
including pension, medical and death benefits, which liability would have
a material adverse effect on the financial condition of the Borrower or
any Subsidiary.
(q) No Default. As of the date hereof, and after giving effect to
the CHC Transaction, there does not exist any Default or Event of Default
hereunder;
(r) Hazardous Materials. Except as set forth on Schedule 7.01(r),
the Borrower and each Subsidiary is in compliance with all applicable
Environmental Laws in all material respects and neither the Borrower nor
any Subsidiary has been notified of any action, suit, proceeding or
investigation which calls into question compliance by the Borrower or any
Subsidiary with any Environmental Laws or which seeks to suspend, revoke
or terminate any license, permit or approval necessary for the generation,
handling, storage, treatment or disposal of any Hazardous Material;
(s) RICO. Neither the Borrower nor any Subsidiary is engaged in or
has engaged in any course of conduct that could subject any of their
respective properties to any Lien, seizure or other forfeiture under any
criminal law, racketeer
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influenced and corrupt organizations law, civil or criminal, or other
similar laws;
(t) Employment Matters. Except as disclosed on Schedule 7.01(t)
delivered to the Agent simultaneously with the execution of this
Agreement, the Borrower and all Subsidiaries are in compliance in all
material respects with all applicable laws, rules and regulations
pertaining to labor or employment matters, including without limitation
those pertaining to wages, hours, occupational safety and taxation and
there is neither pending or to the Borrower's knowledge threatened any
material litigation, administrative proceeding nor, to the knowledge of
the Borrower, any investigation, in respect of such matters.
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ARTICLE VIII
Affirmative Covenants
Until the Obligations have been paid and satisfied in full and this
Agreement has been terminated in accordance with the terms hereof, unless the
Required Lenders shall otherwise consent in writing, the Borrower will and will,
where applicable, cause each Subsidiary to:
8.01 Financial Reports, Etc. (a) as soon as practicable and in any event
within one hundred and five (105) days (or, at all times after the Borrower
shall become subject to the financial reporting requirements of the Securities
Exchange Act of 1934, as amended, ninety (90) days) after the end of each Fiscal
Year of the Borrower, deliver or cause to be delivered to the Agent (together
with sufficient copies for the Lenders) (i) a consolidated balance sheet of the
Borrower and its Subsidiaries, and the notes thereto, and the related
consolidated statements of income, stockholders' equity and cash flows and the
respective notes thereto, for such Fiscal Year, setting forth comparative
financial statements for the preceding Fiscal Year, all prepared in accordance
with Generally Accepted Accounting Principles applied on a Consistent Basis and
containing, with respect to the consolidated financial reports, opinions of
Ernst & Young, or other such independent certified public accountants of
nationally recognized standing selected by the Borrower, which are unqualified
as to the scope of the audit performed and as to the "going concern" status of
the Borrower; and (ii) a certificate of an Authorized Representative
demonstrating compliance with Sections 9.01, 9.02, 9.03, 9.04, 9.05, and 9.09(v)
of this Agreement, which certificate shall be in the form attached hereto as
Exhibit I;
(b) as soon as practicable and in any event within thirty (30) days after
the end of each calendar month, other than the last month of each Fiscal Year
(except the last month of each fiscal quarter, as to which forty-five (45) days
shall apply), deliver to the Agent (together with sufficient copies for the
Lenders) (i) a consolidated balance sheet of the Borrower and its Subsidiaries
as of the end of such reporting period, the related consolidated statement of
income and in the case of quarterly statements a statement of cash flows for
such reporting period and for the period from the beginning of the Fiscal Year
through the end of such reporting period, accompanied by a certificate of an
Authorized Representative to the effect that such financial statements present
fairly the financial position of the Borrower and its Subsidiaries as of the end
of such reporting period and the results of their operations and the changes in
their financial position for such reporting period, in conformity with the
standards set forth in Section 7.01(f) (i) with respect to interim financials,
(ii) a Borrowing Base Certificate as of the end of such calendar month, and
(iii) a certificate of an Authorized Representative (which shall be required to
be delivered only in
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connection with the interim financial statements delivered as at the end of each
three, six and nine month period in each Fiscal Year) containing computations
for such quarter comparable to that required pursuant to Section 8.01(a) (ii);
(c) together with each delivery of the financial statements required by
Section 8.01(a)(i) hereof, deliver to the Agent (with sufficient copies for each
Lender) a letter from the Borrower's accountants specified in Section 8.01(a)
(i) hereof stating that in performing the audit necessary to render an opinion
on the financial statements delivered under Section 8.0l(a)(i), nothing has come
to their attention that has caused them to believe that there exists any Default
or Event of Default by the Borrower in the fulfillment of the terms and
provisions of this Agreement insofar as they relate to financial matters (which
at the date of such statement remains uncured); and if the accountants have
obtained knowledge of such Default or Event of Default, a statement specifying
the nature and period of existence thereof;
(d) promptly upon their becoming available to the Borrower, the Borrower
shall deliver to the Agent and each Lender a copy of (i) all regular or special
reports or effective registration statements which Borrower or any Subsidiary
shall file with the Securities and Exchange Commission (or any successor
thereto) (including without limitation filings on Forms 10-K, l0-Q and 8-K) or
any securities exchange, (ii) at any time after becoming subject to the
Securities Exchange Act of 1934, as amended, any proxy statement distributed by
the Borrower to its shareholders, bondholders or the financial community in
general, and (iii) any management letter or other similar report submitted to
the Borrower or any of its Subsidiaries by independent accountants presenting in
final form any results of, deficiencies discovered during or recommendations
arising from any annual, interim or special audit of the Borrower or any of its
Subsidiaries; and
(e) promptly, from time to time, deliver or cause to be delivered to the
Agent (with sufficient copies for each Lender) such other information regarding
Borrower's and each Subsidiary's operations, business affairs and financial
condition as the Agent or any Lender may reasonably request. The Agent and the
Lenders are hereby authorized to deliver a copy of any financial information
delivered hereunder to the Lenders (or any affiliate of any Lender) or to the
Agent, to any regulatory authority having jurisdiction over any of the Lenders
pursuant to any written request therefor, or, subject to Section 12.01(a) or
12.01(e) hereof, to any other Person who shall acquire or consider the
acquisition of a participation interest in or assignment of any Loan or Letter
of Credit permitted by this Agreement and provided, that such Person shall agree
to be bound by the confidentiality provisions set forth in Section 12.17.
8.02 Maintain Properties. Maintain all properties necessary to its
operations in good working order and condition (ordinary
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wear and tear excepted) and make all needed repairs, replacements and renewals
as are necessary to conduct its business in accordance with customary business
practices.
8.03 Existence, Qualification, Etc. Do or cause to be done all things
necessary to preserve and keep in full force and effect its existence and all
material rights and material franchises, trade names, trademarks and
permits, and, except as otherwise expressly permitted by this Agreement,
maintain its license or qualification to do business as a foreign corporation
and good standing in each jurisdiction in which its ownership or lease of
property or the nature of its business makes such license or qualification
necessary and failure to maintain qualification or good standing would
reasonably be likely to have a material adverse effect on the Borrower or any
of its Subsidiaries; except that the Borrower may effect the dissolution of
Vitas Healthcare Corporation of Texas so long as it remains an inactive
Subsidiary of the Borrower prior to such dissolution.
8.04 Regulations and Taxes. Comply with, in all material respects, or
contest in good faith, all statutes and governmental regulations applicable to
the Borrower or its Subsidiaries and pay all taxes, assessments, governmental
charges, claims for labor, supplies, rent and any other obligation which, if
unpaid, might become a Lien against any of its properties, except liabilities
being contested in good faith and against which adequate reserves have been
established.
8.05 Insurance. (i) Keep all of its insurable properties adequately
insured in all material respects at all times with responsible insurance
carriers against loss or damage by fire and other hazards to the extent and in
the manner required by the Security Agreement and otherwise as are customarily
insured against by similar businesses owning such properties similarly situated,
(ii) maintain general public liability insurance and medical malpractice
insurance at all times with responsible insurance carriers against liability on
account of damage to persons and property having such limits, deductibles,
exclusions and coinsurance and other provisions providing no less coverage than
that specified in Schedule 8.05 delivered to the Agent simultaneously with the
execution of this Agreement, such insurance policies to be in form reasonably
satisfactory to the Agent, and (iii) maintain insurance under all applicable
workers' compensation laws (or in the alternative, maintain required reserves if
self-insured for workers' compensation purposes). Without limiting any
additional requirement contained in the Security Agreement, each of the policies
of insurance described in this Section 8.05 shall provide that the insurer shall
give the Agent not less than thirty (30) days' prior written notice before any
such policy shall be terminated, lapse or be altered in any manner.
8.06 True Books. Keep true books of record and account in accordance with
commercially reasonable business practices in which
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full, true and correct entries will be made of all of its dealings and
transactions in all material respects, and set up on its books such reserves as
may be required by Generally Accepted Accounting Principles with respect to
doubtful accounts and all taxes, assessments, charges, levies and claims and
with respect to its business in general, and include such reserves in quarterly
as well as year-end financial statements.
8.07 Pay Indebtedness to Lenders and Perform Other Covenants. (a) Make
full and timely payment of the principal of and interest on the Notes and all
other Obligations whether now existing or hereafter arising; and (b) duly comply
with all the terms and covenants contained in all Loan Documents and other
instruments and documents given to the Agent or the Lenders pursuant hereto or
thereto.
8.08 Right of Inspection. Permit any Person designated by any Lender or
the Agent at the Lender's or Agent's expense, as the case may be, to visit and
inspect any of the properties, corporate books and financial reports of the
Borrower and its Subsidiaries, and to discuss their respective affairs, finances
and accounts with their principal officers and independent auditors, all at
reasonable times, at reasonable intervals and with reasonable prior notice, and
all subject to the limitations set forth in Section 12.17 hereof (but such
limitations shall not continue to apply to Collateral upon the same becoming
subject to sale or other disposition under the Loan Documents following the
occurrence of an Event of Default).
8.09 Observe all Laws. Conform to and duly observe in all material
respects all laws, rules and regulations of any applicable regulatory authority
with respect to the conduct of its business.
8.10 Governmental Licenses. To the extent the Borrower or any Subsidiaries
provides goods or services giving rise to Accounts constituting Government
Receivables, maintain all licenses, permits, certifications and approvals and
take such other necessary action as shall entitle such Person to obtain payment
or reimbursement of such Account.
8.11 Covenants Extending to Subsidiaries. Cause each of its Subsidiaries
to do with respect to itself, its business and its assets, each of the things
required of the Borrower in Sections 8.02 through 8.10, inclusive.
8.12 Officer's Knowledge of Default. Upon the President, the chief
executive officer, the chief financial officer, the Treasurer or the Vice
President for Legal and Regulatory Affairs of the Borrower obtaining knowledge
of any Default or Event of Default hereunder or any default under any other
obligation of the Borrower or any Subsidiary when the amount of such other
obligation or obligations aggregates $250,000 or more, cause such officer or an
Authorized Representative to promptly notify the Agent of the
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nature thereof, the period of existence thereof, and what action the Borrower
proposes to take with respect thereto.
8.13 Suits or Other Proceedings. Upon the President, the chief executive
officer, the chief financial officer, the Treasurer or the Vice President for
Legal and Regulatory Affairs of the Borrower obtaining knowledge of any
litigation or other proceedings being instituted against the Borrower or any
Subsidiary, or any attachment, levy, execution or other process being instituted
against any assets of the Borrower or any Subsidiary, in an aggregate amount
greater than $500,000 and not otherwise covered by insurance (or, in the
alternative, not otherwise reserved against if self-insured), promptly deliver
to the Agent written notice thereof stating the nature and status of such
litigation, dispute, proceeding, levy, execution or other process.
8.14 Notice of Discharge of Hazardous Material or Environmental Complaint.
Promptly provide to the Agent true, accurate and complete copies of any and all
notices, complaints, orders, directives, claims, or citations received by the
Borrower or any Subsidiary relating to any material (a) violation or alleged
violation by the Borrower or any Subsidiary of any applicable Environmental Laws
or OSHA; (b) release or threatened release by the Borrower or any Subsidiary of
any Hazardous Material, except where occurring legally; or (c) liability or
alleged liability of the Borrower or any Subsidiary for the costs of cleaning
up, removing, remediating or responding to a release of Hazardous Materials.
8.15 Environmental Compliance. If the Borrower or any Subsidiary shall
receive written notice from any Governmental Authority that the Borrower or any
Subsidiary has violated any applicable Environmental Laws, the Borrower shall
promptly (and in any event within the time period permitted by the applicable
governmental authority) remove or remedy, or cause the applicable Subsidiary to
remove or remedy, such violation, unless the Borrower in good faith is disputing
such claim of violation by appropriate proceedings promptly commenced and
diligently pursued and such claim does not give rise to or result in the
imposition of any Lien against property of the Borrower or any Subsidiary.
8.16 Indemnification. The Borrower hereby agrees to defend, indemnify and
hold the Agent and the Lenders harmless from and against any and all claims,
losses, liabilities, damages and expenses (including, without limitation,
cleanup costs and reasonable attorneys' fees) arising directly or indirectly
from, out of or by reason of the handling, storage, treatment, emission or
disposal of any Hazardous Material by or in respect of the Borrower or any
Subsidiary or property owned or leased or operated by the Borrower or any
Subsidiary. The provisions of this Section 8.16 shall survive repayment of the
Obligations, occurrence of the Revolving Credit Termination Date and expiration
or termination of this Agreement.
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8.17 Further Assurances. At its cost and expense, upon request of the
Agent, duly execute and deliver or cause to be duly executed and delivered, to
the Agent such further instruments, documents, certificates, financing and
continuation statements, and do and cause to be done such further acts that may
be reasonably necessary or advisable in the reasonable opinion of the Agent to
carry out more effectively the provisions and purposes of this Agreement and the
other Loan Documents.
8.18 ERISA Requirement. Comply in all material respects with all
requirements of ERISA applicable to it and furnish to the Agent as soon as
possible and in any event (i) within thirty (30) days after the President or
chief executive officer of the Borrower or, with respect to financial matters,
the Treasurer, any Assistant Treasurer or the chief financial officer of the
Borrower knows or has reason to know that any reportable event with respect to
any employee benefit plan maintained by the Borrower or any Subsidiary which
could give rise to termination or the imposition of any material tax or penalty
has occurred, written statement of an Authorized Representative describing in
reasonable detail such reportable event and any action which the Borrower or
applicable Subsidiary proposes to take with respect thereto, together with a
copy of the notice of such reportable event given to the PBGC or a statement
that said notice will be filed with the annual report of the United States
Department of Labor with respect to such plan if such filing has been
authorized, (ii) promptly after receipt thereof, a copy of any notice that the
Borrower or any Subsidiary may receive from the PBGC relating to the intention
of the PBGC to terminate any employee benefit plan or plans of the Borrower or
any Subsidiary or to appoint a trustee to administer any such plan, and (iii)
within 10 days after a filing with the PBGC pursuant to Section 412(n) of the
Code of a notice of failure to make a required installment or other payment with
respect to a plan, a certificate of an Authorized Representative setting forth
details as to such failure and the action that the Borrower or its affected
Subsidiary, as applicable, proposes to take with respect thereto, together with
a copy of such notice given to the PBGC.
8.19 Continued Operations. Continue at all times (i) to conduct its
business and engage principally in the same or similar line or lines of business
substantially as heretofore conducted, and (ii) preserve, protect and maintain
free from Liens its material patents, copyrights, licenses, trademarks,
trademark rights, trade names, trade name rights, trade secrets and know-how
necessary or useful in the conduct of its operations.
8.20 Use of Proceeds. Use the proceeds of the Loans solely for the
purposes specified in Section 2.13 hereof.
8.21 Trade Names.
(a) Conduct, and cause each Guarantor to conduct, its business in
all respects and obtain and maintain title to all
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Collateral solely in the names set forth in Schedule 6.04 delivered to the
Agent simultaneously with the execution of this Agreement and not operate
under any other name unless the Borrower shall have (i) given (or caused
the appropriate Guarantor to give) the Agent ten (10) days prior written
notice of its intention to operate under another name, and (ii) caused to
be delivered to the Agent any additional financing statements necessary to
perfect a security interest in the Collateral to the extent contemplated
herein;
(b) Cause at its expense all filings to be made and other action to
be taken as the Agent may reasonably request to continue the perfection of
the Agent's first priority security interest in the Collateral (to the
extent contemplated hereunder); and
(c) Except as may be otherwise set forth in Schedule 7.01(m), at all
times have the lawful right, power and authority, and cause each Guarantor
to have the lawful right, power and authority, to utilize all trade names
or trade styles employed by Borrower or such Guarantor to provide services
giving rise to Accounts or to bill such Accounts.
8.22 New Guarantors. Upon the occurrence of a New Guaranty Event, the
Borrower shall, as soon as practicable but in any event within fifteen (15)
Business Days of such event, cause to be delivered to the Agent by each Required
New Guarantor for the benefit of the Lenders each of the following:
(i) a Guaranty substantially in the form attached hereto as Exhibit
J duly executed by such Required New Guarantor;
(ii) a Subsidiary Security Agreement in the form attached hereto as
Exhibit K duly executed by such Required New Guarantor;
(iii) an opinion of counsel to the Required New Guarantor dated as
of the date of delivery of the Guaranty provided in the foregoing clause
(i) and addressed to the Agent and the Lenders, substantially in the form
of the opinion of special counsel for the Borrower and the Guarantors
delivered on the Closing Date (the "Initial Opinion") with respect to
paragraphs (b), (g), (k) and (n) thereof regarding the organization, good
standing and foreign qualification of such Required New Guarantor, the
authorization of such Required New Guarantor to execute, deliver and
perform its obligations under the Guaranty and the Subsidiary Security
Agreement, the due execution and delivery of the Guaranty and the
Subsidiary Security Agreement on behalf of such Required New Guarantor as
valid and binding obligations of such Required New Guarantor, enforceable
against such Required New Guarantor in accordance with their respective
terms (subject to the exceptions set forth in paragraph (k) of the Initial
Opinion), and the
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creation and perfection of a security interest in the collateral described
in the Subsidiary Security Agreement (subject to the exceptions set forth
in paragraph (n) of the Initial Opinion);
(iv) current copies of the charter documents, including partnership
agreements and certificate of limited partnership, if applicable, and
bylaws of such Required New Guarantor, minutes of duly called and
conducted meetings (or duly effected consent actions) of the Board of
Directors, partners, or appropriate committees thereof (and, if required
by such charter documents, by-laws or by applicable laws, of the
shareholders or partners) of such Required New Guarantor authorizing the
actions and the execution and delivery of documents described in clauses
(i) and (ii) of this Section 8.22 and evidence satisfactory to the Agent
(confirmation of the receipt of which will be provided by the Agent to the
Lenders) that such Required New Guarantor is Solvent as of such date and
after giving effect to the Guaranty and applicable Subsidiary Security
Agreement;
(v) such duly executed Uniform Commercial Code financing statements
and other documents and instruments, each in form and content acceptable
to the Agent, as shall be necessary to perfect the Liens created under the
applicable Subsidiary Security Agreement to the extent contemplated
hereunder; and
(vi) the Subsidiary Stock (described in the definition of "Security
Documents" in Article I hereof) evidencing ownership of such Required New
Guarantor, together with duly executed stock powers in blank affixed
thereto.
For purposes of this Section 8.22, (i) "New Guaranty Event" means each
occurrence of any of the following: (A) the acquisition or creation after the
Closing Date of any Subsidiary (other than Strategic Investment Subsidiaries),
or (B) any Subsidiary in existence (but not a Guarantor) as of the Closing Date
or any Strategic Investment Subsidiary (whenever created or acquired) satisfying
the criteria in clause (ii) (x) of the definition of "Guarantors" in Article I
hereof, or (C) the aggregate operating revenues of all Subsidiaries who are not
Guarantors exceeding in any calendar month ten percent (10%) of the consolidated
operating revenues of the Borrower and its Subsidiaries, and (ii) "Required New
Guarantor" means (A) in the case of a New Guaranty Event described in clauses
(i) (A) or (i) (B) immediately above, the Subsidiary giving rise to such New
Guaranty Event, and (B) in the case of a New Guaranty Event described in clause
(i) (C) immediately above, the Subsidiary (or Subsidiaries, to the extent
necessary to eliminate the occurrence of the New Guaranty Event) not then
Guarantors having the largest operating revenues in the relevant calendar month.
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ARTICLE IX
Negative Covenants
Until the Obligations have been paid and satisfied in full and this
Agreement has been terminated in accordance with the terms hereof, unless the
Required Lenders shall otherwise consent in writing, the Borrower will not, nor
will it permit any Subsidiary to:
9.01 Consolidated Shareholders' Equity. Permit Consolidated Shareholders'
Equity to be less than (i) $22,000,000 at the Closing Date and (ii) as at the
last day of each fiscal quarter of the Borrower and until (but excluding) the
last day of the next following fiscal quarter of the Borrower, the sum of (A)
the amount of Consolidated Shareholders' Equity required to be maintained
pursuant to this Section 9.01 as at the end of the immediately preceding fiscal
quarter, plus (B) 50% of positive Consolidated Net Income during the immediately
preceding fiscal quarter of the Borrower ending on such day (including in
Consolidated Net Income for purposes of this Section 9.01 only any net gain or
credit of an extraordinary nature) plus (C) 80% of the net proceeds (less, only
in connection with the consummation of the Borrower's offering of Qualified
Equity Securities, an amount equal to the lesser of (i) the amount required to
redeem the 9% Preferred Stock, reduced by the net proceeds to the Borrower from
the exercise of Warrant A dated December 17, 1991 or Warrant B dated December
17, 1991, as applicable, and (ii) $17,000,000) of each sale of equity interest
(or securities other than those constituting Indebtedness exchangeable,
convertible or exercisable into equity interests) in the Borrower or any
Subsidiary.
9.02 Current Ratio. Permit at any time the ratio of Consolidated Current
Assets to Consolidated Current Liabilities (before giving effect to any
prepayment obligation arising under Section 2.05(c) (iv)) to be less than 1.00
to 1.00.
9.03 Consolidated Interest Coverage Ratio. Permit at any time during the
periods set forth below the Consolidated Interest Coverage Ratio to be less than
the respective amount set forth opposite each such period:
Period Ratio
- ------ -----
From the Closing Date through 1.75 to 1.00
December 31, 1996
From January 1, 1997 and
thereafter 2.25 to 1.00
9.04 Consolidated Leverage Ratio. Permit at any time during the periods
set forth below the Consolidated Leverage Ratio to be more than the respective
amount set forth opposite each such period:
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Period Ratio
- ------ -----
From the Closing Date through
December 31, 1995 .75 to 1.00
From and including
January 1, 1996 through
December 31, 1996 .70 to 1.00
From and including
January 1, 1997 through
December 31, 1997 .55 to 1.00
From and including
January 1, 1998 and thereafter .50 to 1.00
9.05 Consolidated Fixed Charge Ratio. Permit at any time during the
respective periods set forth below the Consolidated Fixed Charge Ratio to be
less than the respective amount set forth opposite such period:
Period Ratio
- ------ -----
From the Closing Date through
December 31, 1995 1.00 to 1.00
From and including
January 1, 1996 through
December 31, 1996 1.10 to 1.00
From and including
January 1, 1997 through
December 31, 1997 1.25 to 1.00
From and including
January 1, 1998 and thereafter 1.40 to 1.00
9.06 Indebtedness. Incur, create, assume or permit to exist any
Indebtedness, howsoever evidenced, except
(i) Indebtedness existing as of the date hereof and as set forth in
Schedule 9.06 delivered to the Agent simultaneously with the execution of
this Agreement and incorporated herein by reference;
(ii) Indebtedness owed the Agent or the Lenders in connection with
this Agreement or under the ESOP Loan Documents;
(iii) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(iv) additional Indebtedness not to exceed in the aggregate
$3,000,000 during each of the Fiscal Years ending
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September 30, 1995 and 1996 (on a non-cumulative basis, so that amounts
not incurred in one Fiscal Year may not be carried over to a subsequent
Fiscal Year) incurred to acquire computer hardware and software and
related components or telecommunications equipment, systems and services
and other equipment;
(v) Indebtedness of the Borrower or Vitas California evidenced by
the Seller Notes and the Borrower's guaranty thereof or otherwise arising
under the CHC Transaction Documents; and
(vi) the guaranty by the Borrower of lease obligations of Vitas
California.
9.07 Liens. Incur, create or permit to exist any pledge, Lien, charge or
other encumbrance of any nature whatsoever with respect to any property or
assets now owned or hereafter acquired by the Borrower or any of its
Subsidiaries, other than
(i) Liens existing as of the date hereof and as set forth in
Schedule 7.01(g) delivered to the Agent simultaneously with the execution
of this Agreement;
(ii) Liens imposed by law for taxes, assessments or charges of any
Governmental Authority for claims not yet due or which are being contested
in good faith by appropriate proceedings and with respect to which
adequate reserves or other appropriate provisions are being maintained in
accordance with Generally Accepted Accounting Principles;
(iii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law or
created in the ordinary course of business and in existence less than 120
days from the date of creation thereof for amounts not yet due or which
are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves or other appropriate provisions are
being maintained in accordance with Generally Accepted Accounting
Principles;
(iv) Liens incurred or deposits made in the ordinary course of
business (including, without limitation, surety bonds and appeal bonds) in
connection with workers' compensation, unemployment insurance and other
types of social security benefits or to secure the performance of tenders,
bids, leases, contracts (other than for the repayment of Indebtedness),
statutory obligations and other similar obligations or arising as a result
of progress payments under government contracts;
(v) easements (including, without limitation, reciprocal easement
agreements and utility agreements), rights-of-way,
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covenants, consents, reservations, encroachments, variations and zoning
and other restrictions, charges or encumbrances (whether or not recorded),
which do not interfere materially with the ordinary conduct of the
business of the Borrower or any Subsidiary and which do not materially
detract from the value of the property to which they attach or materially
impair the use thereof to the Borrower or any Subsidiary;
(vi) Liens arising under the Loan Documents and the ESOP Loan
Documents in favor of the Agent and the Lenders;
(vii) purchase money Liens to secure Indebtedness permitted under
Section 9.06(iv) hereof so long as such Indebtedness is incurred to
purchase computer hardware and software, the Indebtedness represents not
less than 75% of the purchase price of such assets, and no other property
other than the property acquired with the proceeds of such Indebtedness
secures such Indebtedness; and
(viii) the right of the Sellers to payments from certain accounts
and funds pursuant to Sections 2.6 and 2.7 of the Asset Purchase Agreement
and the Joint Account Agreement (as such term is defined in the Asset
Purchase Agreement).
9.08 Transfer of Assets. Sell, lease, transfer or otherwise dispose of (i)
any interest in any Guarantor, or (ii) any other asset of Borrower or any
Guarantor except, in each case, (a) assets sold in the ordinary course of
business, (b) assets which are worn out, obsolete or no longer necessary or (c)
assets transferred by the Borrower to any Guarantor, by one Guarantor to another
Guarantor, or by any Guarantor to the Borrower.
9.09 Investments; Acquisitions. Purchase, own, invest in or otherwise
acquire, directly or indirectly, any stock or other securities or all or
substantially all of the assets, or make or permit to exist any interest
whatsoever in any other Person other than a Guarantor or permit to exist any
loans or advances to any Person; provided, Borrower and its Subsidiaries may
consummate the CHC Transaction in accordance with the CHC Transaction Documents
and otherwise may maintain investments or invest in, own, make loans or advances
to, or acquire
(i) Eligible Securities;
(ii) loans, advances and investments existing as of the date hereof
and as set forth in Schedule 7.01(d) delivered to the Agent simultaneously
with the execution of this Agreement;
(iii) accounts receivable arising and trade credit granted in the
ordinary course of business and any securities received in satisfaction or
partial satisfaction thereof in connection with accounts of financially
troubled Persons to the extent reasonably necessary in order to prevent or
limit loss;
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(iv) loans and advances to other Persons in an aggregate outstanding
amount not exceeding at any time $750,000, except the dollar limit
restriction contained in this clause (iv) shall not apply to non-cash
loans and advances made to Persons in connection with the exercise of
stock options or other equity interests in the Borrower so long as such
loan or advance is repaid within five (5) Business Days;
(v) Strategic Investments (including Strategic Investment
Subsidiaries not constituting Guarantors), provided that no such Strategic
Investment shall be made if after giving effect thereto (W) the aggregate
investment in any one Person shall exceed $1,000,000 (valued at cost), (X)
the aggregate amount of Strategic Investments made in any Fiscal Year (on
a noncumulative basis, with the effect that amounts not expended in any
Fiscal Year may not be expended in any subsequent Fiscal Year) shall
exceed $2,000,000, (Y) the aggregate amount of Strategic Investments made
in any Fiscal Year (on a noncumulative basis, with the effect that amounts
not expended in any Fiscal Year may not be expended in any subsequent
Fiscal Year), together with the aggregate amount of Costs of Acquisitions
(excluding the CHC Transaction) incurred during such Fiscal Year
(similarly computed on a noncumulative basis), shall exceed $5,000,000 or
(Z) the aggregate amount of Strategic Investments shall exceed five
percent (5%) of Consolidated Shareholders' Equity, provided that each of
the limitations described in this Section 9.09(v) shall be applied after
giving effect to reductions in Strategic Investments from receipt of cash
distributions and cash management fees; and
(vi) Permitted Acquisitions, provided that if the Cost of
Acquisition exceeds $2,500,000 the Borrower shall have furnished to the
Agent a certificate in the form of Exhibit I prepared on a historical pro
forma basis giving effect to such Permitted Acquisition which certificate
shall demonstrate that no Default or Event of Default will exist;
provided, further, the aggregate Costs of Acquisitions (excluding the CHC
Transaction) in any Fiscal Year (on a noncumulative basis, with the effect
that amounts not expended in any Fiscal Year may not be expended in any
subsequent Fiscal Year), together with the aggregate amount of Strategic
Investments in such Fiscal Year (similarly computed on a non-cumulative
basis), shall not exceed $5,000,000.
9.10 Dividends or Distributions. Declare or pay any dividends (other than
those payable solely in capital stock) or distribution in reduction of capital
or otherwise in respect of any equity interest, or purchase, redeem or otherwise
retire any such equity interest except (i) dividends paid with respect to
Preferred Stock, (ii) Preferred Stock Redemptions, (iii) redemptions of the
Preferred Stock with the net proceeds from the issuance and sale of Qualified
Equity Securities, (iv) payments to purchase stock of the
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Borrower pursuant to the exercise by beneficiaries of the Plan (as defined in
the ESOP Loan Documents) of put rights under Section 16(b) of the Plan, and (v)
pursuant to the exercise of rights of first refusal or similar rights relating
to stock options or securities issuable upon the exercise of stock options in an
aggregate amount in any Fiscal Year not exceeding $300,000 (on a non-cumulative
basis, with the effect that amounts not expended in any Fiscal Year may not be
expended in a subsequent Fiscal Year), provided that after giving effect to
payment of such dividend or Preferred Stock Redemption no Default or Event of
Default exist hereunder; provided further that, without limiting other rights of
the Agent and the Lenders under the Loan Documents, the provisions of this
Section 9.10 shall not prohibit any Preferred Stock Redemption after December
30, 1996.
9.11 Merger or Consolidation. (a) Consolidate with or merge into any other
Person, or permit any other Person to merge into it; or (b) liquidate, wind-up
or dissolve or sell, transfer or lease or otherwise dispose of all or a
substantial part of its assets (other than sales in the ordinary course of
business or transfers from a Guarantor to the Borrower or another Guarantor or
from the Borrower to a Guarantor); provided, however, (i) any Subsidiary of the
Borrower may merge into or transfer all or substantially all of its assets to or
consolidate with any wholly-owned Subsidiary of the Borrower, and (ii) any
Person may merge with the Borrower or any wholly-owned Subsidiary of the
Borrower (whether or not such Subsidiary is the survivor, provided such Person
becomes a Subsidiary and, if required, a Guarantor) if the Borrower or such
wholly-owned Subsidiary shall be the survivor thereof and, if required, a
Guarantor, and such merger shall not cause, create or result in the occurrence
of any Default or Event of Default hereunder.
9.12 Change in Control. Cause, suffer or permit any Person or group of
Persons, other than the owners existing as of the Closing Date, to own
beneficially more than 49% (and after an initial public offering of the
Borrower's capital stock, 25%) of the outstanding securities of (on a fully
diluted basis and taking into account any outstanding securities or contract
rights exercisable, exchangeable or convertible into equity interests) the
Borrower having voting rights in the election of directors.
9.13 Transactions with Affiliates. Enter into any transaction after the
date hereof, including, without limitation, the purchase, sale, leasing or
exchange of property, real or personal, or the rendering of any service with any
Affiliate of the Borrower, except for the following: (a) such Persons may render
services to the Borrower or its Subsidiaries for compensation at the same rates
generally paid by Persons engaged in the same or similar businesses for the same
or similar services, and (b) such transactions may be entered into in the
ordinary course of and pursuant to the reasonable requirements of the Borrower's
(or any Subsidiary's) business and upon fair and
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reasonable terms no less favorable to the Borrower (or any Subsidiary) than
would be obtained in a comparable arm's-length transaction with a Person not an
Affiliate and (C) the limitation contained in the Section does not apply to
compensation arrangements (present and deferred) for Affiliates who are or were
officers or employees of the Borrower or any Subsidiary as of or prior to the
Closing Date if such compensation arrangements are (i) approved by a majority of
the non-employee directors of the Board of Directors or the Compensation
Committee of the Board of Directors and (ii) such compensation is paid for
services rendered to the Borrower or such Subsidiary in the ordinary course of
business.
9.14 ERISA. With respect to all employee pension benefit plans maintained
by the Borrower or any Subsidiary:
(i) terminate any of such employee pension benefit plans so as to
incur any liability to the Pension Benefit Guaranty Corporation
established pursuant to ERISA;
(ii) allow or suffer to exist any prohibited transaction involving
any of such employee pension benefit plans or any trust created thereunder
which would subject the Borrower or a Subsidiary to a tax or penalty or
other liability on prohibited transactions imposed under Internal Revenue
Code Section 4975 or ERISA;
(iii) fail to pay to any such employee pension benefit plan any
contribution which it is obligated to pay under the terms of such plan;
(iv) allow or suffer to exist any accumulated funding deficiency,
whether or not waived, with respect to any such employee pension benefit
plan;
(v) allow or suffer to exist any occurrence of a reportable event or
any other event or condition, which presents a material risk of
termination by the Pension Benefit Guaranty Corporation of any such
employee pension benefit plan that is a Single Employer Plan, which
termination could result, in any liability to the Pension Benefit Guaranty
Corporation; or
(vi) incur any withdrawal liability with respect to any
Multi-employer Plan.
9.15 Fiscal Year. Change its Fiscal Year unless the Borrower demonstrates
compliance with the covenants contained herein for both the Fiscal Year in
effect prior to any change and the new fiscal year period by delivery to the
Agent (together with sufficient copies for the Lenders) of appropriate interim
and annual pro forma historical and current compliance certificates for
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such periods and such other information as the Agent or any Lender may
reasonably request.
9.16 Dissolution, etc. Wind up, liquidate or dissolve (voluntarily or
involuntarily) or commence or suffer any proceedings seeking any such winding
up, liquidation or dissolution, except in connection with (i) the merger or
consolidation of Subsidiaries into each other or into the Borrower permitted
pursuant to Section 9.11 and (ii) the dissolution of Vitas Healthcare
Corporation of Texas so long as it remains an inactive Subsidiary of the
Borrower prior to such dissolution).
9.17 Rate Hedging Obligations. Incur any Rate Hedging Obligations or enter
into any agreements, arrangements, devices or instruments relating to Rate
Hedging Obligations, except Swap Agreements.
9.18 Subordinated Obligations. Cause, suffer or permit to be made any
payments in respect of Subordinated Obligations except to the extent expressly
permitted by the Subordination Agreements.
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ARTICLE X
Events of Default and Acceleration
10.01 Events of Default. If any one or more of the following events
(herein called "Events of Default") shall occur for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body), that is to say:
(a) if default shall be made in the due and punctual payment of the
principal of any Loan or Reimbursement Obligation, when and as the same
shall be due and payable whether pursuant to any provision of Article II
or Article III hereof, at maturity, by acceleration or otherwise; or
(b) if default shall be made in the due and punctual payment of any
amount of interest on any Loan or of any fees or other amounts payable to
the Lenders, the Agent or NationsBank under the Loan Documents on the date
on which the same shall be due and payable; or
(c) if default shall be made in the performance or observance of any
covenant set forth in Sections 8.06, 8.07(a), 8.08, 8.12, 8.13, 8.22 or
Article IX hereof and, in the case of Sections 9.01 through 9.05, 9.07 and
9.14 only, such default shall continue for a period of five (5) days;
(d) if a default shall be made in the performance or observance of,
or shall occur under, any covenant, agreement or provision contained in
this Agreement or the Notes (other than as described in clauses (a), (b)
or (c) above) and such default shall continue for 30 or more days after
the earlier of receipt of notice of such default by the Authorized
Representative from the Agent or the President, the chief executive
officer, the chief financial officer, the Treasurer or the Vice President
for Legal and Regulatory Affairs of the Borrower becomes aware of such
default, or if a default shall be made in the performance or observance
of, or shall occur under, any covenant, agreement or provision contained
in any of the other Loan Documents (beyond any applicable grace period, if
any, contained therein) or in any instrument or document evidencing or
creating any obligation, guaranty, or Lien in favor of the Agent or the
Lenders or delivered to the Agent or the Lenders in connection with or
pursuant to this Agreement or any of the Obligations, or if any Loan
Document ceases to be in full force and effect (other than by reason of
any action by the Agent or any Lender), or if without the written consent
of the Agent, this Agreement or any other Loan Document shall be
disaffirmed or shall terminate, be terminable or be terminated or become
void or unenforceable
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for any reason whatsoever (other than in accordance with its terms in the
absence of default or by reason of any action by the Agent or any Lender);
or
(e) if a default shall occur, which is not waived, (i) in the
payment of any principal, interest, premium or other amounts with respect
to any Indebtedness (other than the Loans) of the Borrower or of any
Subsidiary in an amount not less than $250,000 in the aggregate
outstanding, or (ii) in the performance, observance or fulfillment of any
term or covenant contained in any agreement or instrument under or
pursuant to which any such Indebtedness may have been issued, created,
assumed, guaranteed or secured by the Borrower or any subsidiary, and such
default shall continue for more than the period of grace, if any, therein
specified, or if such default shall permit the holder of any such
Indebtedness to accelerate the maturity thereof; or
(f) if any representation, warranty or other statement of fact
contained herein or any other Loan Document or in any writing,
certificate, report or statement at any time furnished to the Agent or any
Lender by or on behalf of the Borrower or any Guarantor pursuant to or in
connection with this Agreement or the other Loan Documents, or otherwise,
shall be false or misleading in any material respect when given; or
(g) if the Borrower or any Subsidiary shall be unable to pay its
debts generally as they become due; file a petition to take advantage of
any insolvency statute; make an assignment for the benefit of its
creditors; commence a proceeding for the appointment of a receiver,
trustee, liquidator or conservator of itself or of the whole or any
substantial part of its property; file a petition or answer seeking
reorganization or arrangement or similar relief under the federal
bankruptcy laws or any other applicable law or statute; or
(h) if a court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee, liquidator
or conservator of the Borrower or any Subsidiary or of the whole or any
substantial part of its properties and such order, judgment or decree
continues unstayed and in effect for a period of sixty (60) days, or
approve a petition filed against the Borrower or any Subsidiary seeking
reorganization or arrangement or similar relief under the federal
bankruptcy laws or any other applicable law or statute of the United
States of America or any state, which petition is not dismissed within
sixty (60) days; or if, under the provisions of any other law for the
relief or aid of debtors, a court of competent jurisdiction shall assume
custody or control of the Borrower or any Subsidiary or of the whole or
any substantial part of its
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properties, which control is not relinquished within sixty (60)
days; or if there is commenced against the Borrower or any
Subsidiary any proceeding or petition seeking reorganization,
arrangement or similar relief under the federal bankruptcy laws or
any other applicable law or statute of the United States of America
or any state which proceeding or petition remains undismissed for a
period of thirty (30) days; or if the Borrower or any Subsidiary
takes any action to indicate its consent to or approval of any such
proceeding or petition; or
(i) if (i) any final, non-appealable judgment where the amount not
covered by insurance (or the amount as to which the insurer denies
liability) is in excess of $250,000 is rendered against the Borrower or
any Subsidiary, or (ii) there is any attachment, injunction or execution
against any of the Borrower's or any Subsidiary's properties for any
amount in excess of $250,000; and in either case such judgment,
attachment, injunction or execution remains unpaid, unstayed,
undischarged, unbonded or undismissed for a period of sixty (60) days; or
(j) if the Borrower or any Subsidiary shall, other than in the
ordinary course of business (as determined by past practices), suspend all
or any part of its operations material to the conduct of the business of
the Borrower and its Subsidiaries, taken as a whole; or
(k) if (i) the Borrower or any Subsidiary shall engage in any
prohibited transaction (as described in Section 9.14(ii) hereof), which is
not subject to a statutory or administrative exemption, involving any
employee pension benefit plan of the Borrower or any Subsidiary, (ii) any
accumulated funding deficiency (as referred to in Section 9.14(iv)
hereof), whether or not waived, shall exist with respect to any Single
Employer Plan, (iii) a reportable event (as referred to in Section 9.14(v)
hereof) (other than a reportable event for which the statutory notice
requirement to the Pension Benefit Guaranty Corporation has been waived by
regulation) shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed to administer or
to terminate, any Single Employer Plan, which reportable event or
institution or proceedings is, in the reasonable opinion of the Required
Lenders, likely to result in the termination of such Single Employer Plan
for purposes of Title IV of ERISA, and in the case of such a reportable
event, the continuance of such reportable event shall be unremedied for
sixty (60) days after notice of such reportable event pursuant to Section
4043(a), (c) or (d) of ERISA is given, as the case may be, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, and such
termination results in a material liability of the Borrower or any
Subsidiary to such Single Employer Plan or the
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Pension Benefit Guaranty Corporation, or (v) the Borrower or any
Subsidiary shall withdraw from a Multi-employer Plan for purposes of Title
IV of ERISA, and, as a result of any such withdrawal, the Borrower or any
Subsidiary shall incur withdrawal liability to such Multi-employer Plan;
and in each case in clauses (i) through (v) of this Section 10.01(k), such
event or condition, together with all other such events or conditions, if
any, would subject the Borrower or any Subsidiary to any tax, penalty or
other liabilities, and in each such case the event or condition is not
remedied to the satisfaction of the Required Lenders within ninety (90)
days after the earlier of (i) receipt of notice of such event or condition
by the Authorized Representative from the Agent or (ii) the Borrower
becomes aware of such event or condition; or
(l) if the Borrower or any Subsidiary shall breach any of the terms
or conditions of any agreement under which any Rate Hedging Obligation
permitted pursuant to Section 9.17 is created and such breach shall
continue beyond any grace period, if any, relating thereto pursuant to the
terms of such Obligation, or the Borrower or any Subsidiary shall
disaffirm or seek to disaffirm any such agreement or any of its
obligations thereunder; or
(m) if there shall occur and not be waived an Event of Default as
defined in any of the other Loan Documents or in any of the ESOP Loan
Documents; or
(n) if there shall occur any loss of any permits, licenses,
authorizations, certifications or approvals from any federal, state or
local governmental or administrative authority or termination of any
contract with any such authority, which loss or termination (i) continues
for a period greater than 60 days and (ii) results in the suspension or
termination of operations of the Borrower or any Subsidiary which produces
5% or more of the Borrower's gross revenues;
then, and in any such event and at any time thereafter, if such Event of Default
or any other Event of Default shall have not been waived,
(A) either or both of the following actions may be taken: (i)
the Agent, with the consent of the Required Lenders, may, and at the
direction of the Required Lenders shall, declare any obligation of
the Lenders to make further Revolving Credit Loans or issue Letters
of Credit terminated, whereupon the obligation of each Lender to
make further Revolving Credit Loans or issue Letters of Credit,
hereunder shall terminate immediately, and (ii) the Agent shall at
the direction of the Required Lenders, at their option, declare by
notice to the Borrower any or all of the Obligations to be
immediately due and payable, and the same, including all interest
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accrued thereon and all other obligations of the Borrower to the
Agent and the Lenders, shall forthwith become immediately due and
payable without presentment, demand, protest, notice or other
formality of any kind, all of which are hereby expressly waived,
anything contained herein or in any instrument evidencing the
Obligations to the contrary notwithstanding; provided, however, that
notwithstanding the above, if there shall occur an Event of Default
under clause (g) or (h) above, then the obligation of the Lenders to
lend and issue Letters of Credit hereunder shall automatically
terminate and any and all of the Obligations shall be immediately
due and payable without the necessity of any action by the Agent or
the Required Lenders or notice to the Agent or the Lenders;
(B) the Borrower shall, upon demand of the Agent or the
Required Lenders, deposit cash with the Agent in accordance with the
LC Account Agreement in an amount equal to the amount of any Letters
of Credit remaining undrawn or unpaid, as collateral security for
the repayment of any future drawings or payments under such Letters
of Credit and the Borrower shall forthwith deposit and pay such
amounts and such amounts shall be held by the Agent pursuant to the
terms of the applicable Application and Agreement for Letter of
Credit;
(C) the Agent and the Lenders shall have all of the rights and
remedies available under the Loan Documents or under any applicable
law.
10.02 Agent to Act. In case any one or more Events of Default shall occur
and not have been waived, the Agent may, and at the direction of the Required
Lenders shall, proceed to protect and enforce their rights or remedies either by
suit in equity or by action at law, or both, whether for the specific
performance of any covenant, agreement or other provision contained herein or in
any other Loan Document, or to enforce the payment of the Obligations or any
other legal or equitable right or remedy.
10.03 Cumulative Rights. No right or remedy herein conferred upon the
Lenders or the Agent is intended to be exclusive of any other rights or remedies
contained herein or in any other Loan Document, and every such right or remedy
shall be cumulative and shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law or in equity or
by statute, or otherwise.
10.04 No Waiver. No course of dealing between the Borrower and any Lender
or the Agent or any failure or delay on the part of any Lender or the Agent in
exercising any rights or remedies under any Loan Document or otherwise available
to it shall operate as a waiver of any rights or remedies and no single or
partial exercise
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of any rights or remedies shall operate as a waiver or preclude the exercise of
any other rights or remedies hereunder or of the same right or remedy on a
future occasion.
10.05 Allocation of Proceeds. If an Event of Default has occurred and not
been waived, and the maturity of the Notes has been accelerated pursuant to
Article X hereof, all payments received by the Agent hereunder, in respect of
any principal of or interest on the Obligations or any other amounts payable by
the Borrower hereunder shall be applied by the Agent in the following order:
(i) amounts due to the Lenders pursuant to Sections 2.11, 3.03,
8.16, 12.05 and 12.11 hereof;
(ii) amounts due to (A) NationsBank pursuant to Section 3.04 hereof,
and (B) the Agent pursuant to Section 11.11 hereof;
(iii) payments of interest on Loans, to be applied for the ratable
benefit of the Lenders;
(iv) payments of principal on Loans, to be applied for the ratable
benefit of the Lenders;
(v) payment of cash amounts to the Agent in respect of Outstanding
Letters of Credit pursuant to Section 10.01(B) hereof;
(vi) payment of Obligations owed a Lender or Lenders pursuant to
Swap Agreements on a pro rata basis according to amounts owed;
(vii) payments of all other Obligations due under the Loan
Documents, if any, to be applied for the ratable benefit of the Lenders; and
(viii) any surplus remaining after application as provided for
herein, to the Borrower or otherwise as may be required by applicable law.
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ARTICLE XI
The Agent
11.01 Appointment. Each Lender (including NationsBank in its capacity as
issuer of the Letters of Credit) hereby irrevocably designates and appoints
NationsBank as the Agent of the Lenders under this Agreement, and each of the
Lenders hereby irrevocably authorizes NationsBank as the Agent for such Lender,
to take such action on its behalf under the provisions of this Agreement and the
other Loan Documents and to exercise such powers as are expressly delegated to
the Agent by the terms of this Agreement, together with such other powers as are
reasonably incidental thereto. The Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any of the Lenders, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Agent.
11.02 Attorneys-in-fact. The Agent may execute any of its duties under
this Agreement by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence, gross negligence or willful
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.
11.03 Limitation on Liability. Neither the Agent nor any of its officers,
directors, employees, agents or attorneys-in-fact shall be liable to the Lenders
for any action lawfully taken or omitted to be taken by it or them under or in
connection with this Agreement except for its or their own gross negligence or
willful misconduct. Neither the Agent nor any of its affiliates shall be
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or any of its Subsidiaries,
or any officer or representative thereof contained in this Agreement or in any
of the other Loan Documents, or in any certificate, report, statement or other
document referred to or provided for in or received by the Agent under or in
connection with this Agreement, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any of the other
Loan Documents, or for any failure of the Borrower or any Guarantor to perform
its obligations thereunder, or for any recitals, statements, representations or
warranties made, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of any collateral. The Agent shall not be under
any obligation to any of the Lenders to ascertain or to inquire as to the
observance or performance of any of the terms, covenants or conditions of this
Agreement or any of the other Loan Documents on the part of the Borrower or any
Guarantor or to inspect the properties, books or records of the Borrower or its
Subsidiaries.
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11.04 Reliance. The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any Note, writing, resolution, notice, consent
certificate, affidavit, letter, cablegram, telegram, telecopy or telex message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by the Agent. The Agent may deem and treat the payee of any Note as the
owner thereof for all purposes unless an Assignment shall have been filed with
and accepted by the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Agreement unless it shall first receive
advice or concurrence of the Lenders or the Required Lenders as provided in this
Agreement or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement
and the other Loan Documents in accordance with a request of the Required
Lenders, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all present and future holders
of the Notes.
11.05 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default hereunder unless
the Agent has received notice from a Lender, the Authorized Representative or
the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Agent receives such a notice, the Agent shall promptly give notice thereof
to the Lenders. The Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders;
provided that, unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Event of Default as it shall deem
advisable in the best interests of the Lenders.
11.06 No Representations. Each Lender expressly acknowledges that neither
the Agent nor any of its affiliates has made any representations or warranties
to it and that no act by the Agent hereafter taken, including any review of the
affairs of the Borrower or any of its Subsidiaries, shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the financial condition, creditworthiness, affairs, status and nature of the
Borrower and its Subsidiaries and made its own decision to enter into this
Agreement. Each Lender also represents that it will,
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independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and to make such investigation as it
deems necessary to inform itself as to the status and affairs, financial or
otherwise, of the Borrower and its Subsidiaries. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of the Borrower or any of its Subsidiaries which may come
into the possession of the Agent or any of its affiliates.
11.07 Indemnification. The Lenders agree to indemnify the Agent in its
capacity as such (to the extent not reimbursed by the Borrower or its
Subsidiaries and without limiting any obligations of the Borrower or any
Subsidiary so to do), ratably according to the respective principal amount of
the Notes held by them (or, if no Notes are outstanding, ratably in accordance
with their respective Applicable Commitment Percentages as then in effect) from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may at any time (including without limitation at any
time following the payment of the Notes) be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of this Agreement or any
other document contemplated by or referred to herein or the transactions
contemplated hereby or any action taken or omitted by the Agent under or in
connection with any of the foregoing; provided that no Lender shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct. The
agreements in this Section 11.07 shall survive the payment of the Obligations
and the termination of this Agreement.
11.08 Lender. The Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Borrower and
its Subsidiaries as though it were not the Agent hereunder. With respect to its
Loans made or renewed by it and any Note issued to it, the Agent shall have the
same rights and powers under this Agreement as any Lender and may exercise the
same as though it were not the Agent, and the terms "Lender" and "Lenders"
shall, unless the context otherwise indicates, include the Agent in its
individual capacity.
11.09 Resignation. If the Agent shall resign as Agent under this
Agreement, then the Required Lenders may appoint, with the consent, so long as
there shall not have occurred and be continuing a Default or Event of Default,
of the Borrower, which consent shall
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not be unreasonably withheld, a successor Agent for the Lenders, which successor
Agent shall be a commercial bank Organized under the laws of the United States
or any state thereof, having a combined surplus and capital of not less than
$500,000,000, whereupon such successor Agent shall succeed to the rights, powers
and duties of the former Agent and the obligations of the former Agent shall be
terminated and canceled, without any other or further act or deed on the part of
such former Agent or any of the parties to this Agreement; provided, however,
that the former Agent's resignation shall not become effective until such
successor Agent has been appointed and has succeeded of record to all right,
title and interest in any collateral held by the Agent; provided, further, that
if the Required Lenders and, if applicable, the Borrower cannot agree as to a
successor Agent within ninety (90) days after such resignation, the Agent shall
appoint a successor Agent which satisfies the criteria set forth above in this
Section 11.09 for a successor Agent and the parties hereto agree to execute
whatever documents are necessary to effect such action under this Agreement or
any other document executed pursuant to this Agreement; provided, however that
in such event all provisions of this Agreement and the Loan Documents, shall
remain in full force and effect. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article XI shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement.
11.10 Sharing of Payments. etc. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, set-off, counterclaim or
otherwise, obtain payment with respect to its Obligations (other than pursuant
to Article IV) which results in its receiving more than its pro rata share of
the aggregate payments with respect to all of the Obligations (other than any
payment pursuant to Article IV), then (A) such Lender shall be deemed to have
simultaneously purchased from the other Lenders a share in their Obligations so
that the amount of the Obligations held by each of the Lenders shall be pro rata
and (B) such other adjustments shall be made from time to time as shall be
equitable to insure that the Lenders share such payments ratably; provided,
however, that for purposes of this Section 11.10 the term "pro rata" shall be
determined with respect to both the Revolving Credit Commitment of each Lender
and to the Total Revolving Credit Commitments after subtraction in each case of
amounts, if any, by which any such Lender has not funded its share of the
outstanding Loans and Reimbursement Obligations. If all or any portion of any
such excess payment is thereafter recovered from the Lender which received the
same, the purchase provided in this Section 11.10 shall be rescinded to the
extent of such recovery, without interest. The Borrower expressly consents to
the foregoing arrangements and agrees that each Lender so purchasing a portion
of the other Lenders' Obligations may exercise all rights of payment (including,
without limitation, all rights of set-off, banker's lien or counterclaim) with
respect to such portion as fully as if such Lender were the direct holder of
such portion.
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11.11 Fees. The Borrower agrees to pay to the Agent, for its individual
account, an annual Agent's fee in such amount as the Borrower and the Agent may
agree to in writing from time to time.
11.12 One Lender. Notwithstanding anything to the contrary contained
herein or in any of the Loan Documents, so long as NationsBank shall be the sole
Lender, all references to and rights, powers and privileges exercisable by the
"Agent" shall be deemed to refer to NationsBank.
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ARTICLE XII
Miscellaneous
12.01 Assignments and Participations.
(a) At any time after the Closing Date each Lender may, with the prior
consent of the Agent and the Borrower, which consents shall not be unreasonably
withheld (it being understood that consent may be withheld by the Borrower if
such assignment would subject the Borrower to the payment of any additional
amounts pursuant to the provisions of Section 4.06 hereof), assign to one or
more banks or financial institutions all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of the Note payable to its order); provided, that (i) each such
assignment shall be of a constant, and not a varying, percentage of all of the
assigning Lender's rights and obligations (including Loans and Participations)
under this Agreement, (ii) for each assignment involving the issuance and
transfer of Notes, the assigning Lender shall execute an Assignment and
Acceptance and the Borrower hereby consents to execute replacement Notes to give
effect to the assignment, (iii) the minimum aggregate Revolving Credit
Commitment (together with which the assigning Lender's applicable portion of
Participations and the Letter of Credit Commitment shall also be assigned) and
Term Loan Commitment which shall be assigned is $5,000,000 (with any aggregate
assigned amount being applied ratably to the Revolving Credit Commitment and the
Term Loan Commitment), and (iv) such assignee shall have an office located in
the United States. Upon such execution, delivery, approval and acceptance, from
and after the effective date specified in each Assignment and Acceptance, (x)
the assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder or under such Notes have been assigned or negotiated
to it pursuant to such Assignment and Acceptance have the rights and obligations
of a Lender hereunder and a holder of such Notes and (y) the assignor thereunder
shall, to the extent that rights and obligations hereunder or under such Notes
have been assigned or negotiated by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement, but no Lender shall be released from any claims arising from
actions that occur prior to the date of such assignment. No assignee shall have
the right to further assign its rights and obligations pursuant to this Section
12.01. Any Lender who makes an assignment shall pay to the Agent a one-time
administrative fee of $3,000.00 which fee shall not be reimbursed by the
Borrower.
(b) By executing and delivering an Assignment and Acceptance, the Lender
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) the assignment made under
such Assignment and Acceptance is made under such Assignment and Acceptance
without recourse; (ii) such assigning Lender makes no representation or
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warranty and assumes no responsibility with respect to the financial condition
of the Borrower or any Subsidiary or the performance or observance by the
Borrower or any Subsidiary of any of its obligations under any Loan Document or
any other instrument or document furnished pursuant hereto; (iii) such assignee
confirms that it has received a copy of this Agreement, together with copies of
the financial statements delivered pursuant to Section 7.01(f) or Section 8.01,
as the case may be, and such other Loan Documents and 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, such assigning Lender or any
other Lender 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; (v) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement, the Notes and the other Loan Documents as are
delegated to the Agent by the terms hereof and thereof, together with such
powers as are reasonably incidental thereto; and (vi) such assignee agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of this Agreement are required to be performed by it as a Lender and a
holder of such Notes.
(c) The Agent shall maintain at its address referred to herein a copy of
each Assignment and Acceptance delivered to and accepted by it.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender, the Agent shall give prompt notice thereof to Borrower.
(e) Each Lender may sell participations at its expense, and subject to the
prior written approval by Borrower of such participant, which approval shall not
be unreasonably withheld, to one or more banks or other financial institutions
as to all or a portion of its rights and obligations under this Agreement;
provided, that (i) such Lender's obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) such Lender shall remain
the holder of any Note issued to it for the purpose of this Agreement, (iv) such
participations shall be in a minimum amount of $1,000,000 and shall include an
allocable portion of such Lender's Participation, and (v) Borrower, the Agent
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement and with regard to any and all payments to be made under this
Agreement; provided, that the participation agreement between a Lender and its
participants may provide that such Lender will obtain the approval of such
participant prior to such Lender's agreeing to any amendment or waiver of any
provisions of this Agreement which would (A) extend the maturity of any Note,
(B) reduce the interest rate
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hereunder, (C) increase the Revolving Credit Commitment or Term Loan Commitment
of the Lender granting the participation other than as permitted by Section 2.07
or (D) release any Guarantor, and (vi) the sale of any such participations which
require Borrower to file a registration statement with the United States
Securities and Exchange Commission or under the securities regulations or laws
of any state shall not be permitted. The participation of any portion of the
rights and obligations hereunder shall not give rise to any obligation of the
Borrower to pay an Agent fee under Section 11.11. Notwithstanding anything to
the contrary contained herein or in any of the other Loan Documents, any Lender
may assign all or any portion of its rights and obligations under the Loan
Documents and the Notes to any Affiliate of such Lender, and any Lender may
pledge all or any portion of its interest under the Loan Documents and the Notes
to the Board as security for obligations of such Lender to the Board, without
the consent of the Borrower, the Agent or any other Lender and without the
payment of the administrative fee referred to in Section 11.01(a).
12.02 Notices. Except as otherwise provided with respect to Borrowing
Notices and Interest Rate Selection Notices, all notices, demands or requests
provided for or permitted to be given pursuant to this Agreement shall be deemed
to have been properly given or served by personal delivery, by telecopy with
telephone or telecopied confirmation of receipt, or by depositing in the United
States mail, postpaid and registered or certified, return receipt requested, and
addressed to the parties at their addresses set forth below. All notices,
demands and requests shall be effective upon being personally delivered at the
address specified herein, upon confirmation of receipt by telecopy, or three (3)
Business Days after being deposited in the United States mail. The time period
for which a response to any notice, demand or request must be given, if any,
shall commence to run from the date of delivery at the address specified herein,
the date of receipt of telecopy notice, or the date of receipt of the notice,
demand, or request, by the addressees thereof as disclosed by the return
receipt. Rejection or other refusal to accept or the inability to deliver
because of changed address of which no notice was given shall be deemed to be
receipt of the notice, demand or request sent. Any party hereto shall have the
right from time to time and at any time during the term of this Agreement to
change its address or addressee and each shall have the right to specify as its
address any other address within the United States by giving notice in
accordance with the terms hereof. For the purposes of this Agreement, the
addresses of the parties are as follows:
(a) if to the Borrower:
Vitas Healthcare Corporation
100 South Biscayne Boulevard
Miami, Florida 33131
Attention: Mark Ohlendorf, Chief Financial Officer
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Telephone: 305/350-5922
Telefacsimile: 305/374-4765
with a copy (which shall not constitute notice) to:
Vitas Healthcare Corporation
100 South Biscayne Boulevard
Miami, Florida 33131
Attention: Mark A. Sterling
Vice President for Legal and Regulatory Affairs
Telephone: 305/350-6044
Telefacsimile: 305/350-6059
(b) if to the Agent:
NationsBank of Florida, National Association
150 S.E. Third Avenue
Miami, Florida 33131
Attention: Corporate Banking Department
Allison Freeland
Telephone: 305/577-5992
Telefacsimile: 305/577-5745
with a copy to:
NationsBank of Florida, National Association
One Independence Center
101 North Tryon Street
NCl-001-15-04
Charlotte, North Carolina 28255
Attention: Margaret Lydon
Agency Services
Telephone: 704/386-9371
Telefacsimile: 704/386-9923
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(c) if to NationsBank in its capacity as issuer of the
Letters of Credit:
NationsBank of Florida, National Association
One NationsBank Plaza, T21-3
Charlotte, North Carolina 28255
Attention: Rozaland Smith, Letter of Credit
Department
Telephone: 704/386-6266
Telefacsimile: 704/386-2149
(d) if to the Lenders:
At the addresses set forth on the signature pages hereof and
on the signature page of each Assignment and Acceptance.
12.03 Setoff. The Borrower agrees that the Agent and each Lender shall
have a lien for all the Obligations of the Borrower upon all deposits or deposit
accounts, of any kind (other than deposits identified as for the benefit of
third parties), or any interest in any such deposits or deposit accounts
thereof, now or hereafter pledged, mortgaged, transferred or assigned to the
Agent or such Lender or otherwise in the possession or control of the Agent or
such Lender (other than for safekeeping) for any purpose for the account or
benefit of the Borrower and including any balance of any deposit account or of
any credit of the Borrower with the Agent or such Lender, whether now existing
or hereafter established, hereby authorizing the Agent and each Lender at any
time or times with or without prior notice (but if prior notice is not given
then notice following such setoff shall be given with reasonable promptness) to
apply such balances or any part thereof to such of the Obligations of the
Borrower to the Lenders then past due and in such amounts as they may elect, and
whether or not the collateral or the responsibility of other Persons primarily,
secondarily or otherwise liable may be deemed adequate. For the purposes of this
paragraph, all remittances and property shall be deemed to be in the possession
of the Agent or such Lender as soon as the same may be put in transit to it by
mail or carrier or by other bailee.
12.04 Survival. All covenants, agreements, representations and warranties
made herein shall survive the making by the Lenders of the Loans and the
expiration of the Letters of Credit and the execution and delivery to the
Lenders of this Agreement and the Notes and shall continue in full force and
effect so long as any of Obligations remain outstanding or any Lender has any
commitment hereunder or the Borrower has continuing obligations hereunder unless
otherwise provided herein. Whenever in this Agreement, any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
permitted assigns of such party and all covenants, provisions and agreements by
or on behalf
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of the Borrower which are contained in this Agreement, the Notes and the other
Loan Documents shall inure to the benefit of the successors and permitted
assigns of the Lenders or any of them.
12.05 Expenses. The Borrower agrees (a) to pay or reimburse the Agent and
NCMI for all its reasonable and customary out-of-pocket costs and expenses
incurred in connection with the preparation, negotiation and execution of, this
Agreement or any of the other Loan Documents (including travel expenses relating
to closing), and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, the reasonable and customary fees and
disbursements of counsel to the Agent, as well as all such expenses and costs
arising in connection with any amendment, supplement or modification to this
Agreement or any other Loan Documents and the ESOP Loan Documents, (b) to pay or
reimburse the Agent and the Lenders for all their reasonable costs and expenses
incurred in connection with the enforcement (only from and after the occurrence
of a Default or Event of Default) or preservation of any rights under this
Agreement and the other Loan Documents, including without limitation, the
reasonable fees and disbursements of their counsel and any payments in
indemnification or otherwise payable by the Lenders to the Agent pursuant to the
Loan Documents, (c) to pay, indemnify and hold the Agent and the Lenders
harmless from any and all recording and filing fees and any and all liabilities
with respect to, or resulting from any failure to pay or delay in paying,
documentary, stamp, excise and other similar taxes, if any, which may be payable
or determined to be payable in connection with the execution and delivery of
this Agreement or any other Loan Documents, or consummation of any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement or any other Loan Documents, and (d) to pay, indemnify, and hold
the Agent, NCMI and the Lenders harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement and the other Loan Documents or in any respect relating to the
transactions contemplated hereby or thereby, including without limitation the
transactions contemplated by the CHC Transaction Documents (all the foregoing,
collectively, the "indemnified liabilities"); provided, however, that the
Borrower shall have no obligation hereunder with respect to indemnified
liabilities arising from (i) the willful misconduct, bad faith or gross
negligence of or the willful breach of the Loan Documents by the party seeking
indemnification, (ii) legal proceedings commenced against the Agent, NCMI or any
Lender by any security holder or creditor thereof arising out of and based upon
rights afforded any such security holder or creditor solely in its capacity as
such, (iii) any taxes imposed upon the Agent or any Lender other than the
documentary, stamp, excise and similar taxes described in clause (c) above or
any tax resulting from any Regulatory Change, which tax would be payable to
Lenders by Borrower pursuant to Article IV hereof, (iv) taxes imposed and
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costs and expenses incurred as a result of a transfer or assignment of any Note,
participation or assignment of a portion of its rights or (v) any taxes imposed
upon or any costs or expenses incurred by any transferee of any Note. The
agreements in this subsection shall survive repayment of the Notes and all other
Obligations hereunder and termination of this Agreement.
12.06 Amendments. No amendment, modification or waiver of any provision
of this Agreement or any of the Loan Documents and no consent by the Lenders to
any departure therefrom by the Borrower shall be effective unless such
amendment, modification or waiver shall be in writing and signed by the Agent,
but only upon having received the written consent of the Required Lenders, and
the same shall then be effective only for the period and on the conditions and
for the specific instances and purposes specified in such writing; provided,
however, that, no such amendment, modification or waiver
(i) which changes, extends or waives any provision of Section 11.10
or this Section 12.06, the amount of or the due date of any scheduled
installment of or the rate of interest payable on any Obligation, changes
the definition of Required Lenders, which permits an assignment by
Borrower of its Obligations hereunder, which reduces the required consent
of Lenders provided hereunder (other than as provided in Section 4.05
hereof), which increases, decreases or extends the Revolving Credit
Commitment or Term Loan Commitment of any Lender or which increases or
extends the Letter of Credit Facility or which waives any condition to the
making of any Loan shall be effective unless in writing and signed by each
of the Lenders; provided, however, the Required Lenders may in their sole
discretion waive any Default or Event of Default (other than any Event of
Default under Section 10.01(a), (b), (g) or (h));
(ii) which releases Collateral or the obligation of any Guarantor
shall be effective unless with the written consent of each of the Lenders;
or
(iii) which affects the rights, privileges, immunities or indemnities
of the Agent or NCMI shall be effective unless in writing and signed by the
Agent or NCMI, as the case may be.
Notwithstanding any provision of the other Loan Documents to the contrary, as
between the Agent and the Lenders, execution by the Agent shall not be deemed
conclusive evidence that the Agent has obtained the written consent of the
Required Lenders. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances, except as otherwise expressly provided herein. No delay or
omission on any Lender's or the Agent's part in exercising any right, remedy or
option shall operate as a waiver of such or
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any other right, remedy or option or of any Default or Event of Default.
12.07 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such fully-executed counterpart.
12.08 Waivers by Borrower. In any litigation in any court with respect to,
in connection with, or arising out of this Agreement, the Loans, any of the
Notes, any of the other Loan Documents, the Obligations, or any instrument or
document delivered pursuant to this Agreement or the other Loan Documents, or
the validity, protection, interpretation, collection or enforcement thereof, or
any other claim or dispute howsoever arising between the Borrower and the
Lenders or the Agent, the Borrower and each Lender and the Agent hereby waive,
to the extent permitted by applicable law, trial by jury in connection with any
such litigation.
12.09 Termination. The termination of this Agreement shall not affect any
rights of the Borrower, the Lenders or the Agent or any obligation of the
Borrower, the Lenders or the Agent, arising prior to the effective date of such
termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into or rights created or obligations incurred
prior to such termination have been fully disposed of, concluded or liquidated
and the Obligations arising prior to or after such termination have been
irrevocably paid in full. The rights granted to the Agent for the benefit of the
Lenders hereunder and under the other Loan Documents shall continue in full
force and effect, notwithstanding the termination of this Agreement, until all
of the Obligations have been paid in full after the termination hereof (other
than Obligations in the nature of continuing indemnities or expense
reimbursement obligations not yet due and payable) or the Borrower has furnished
the Lenders and the Agent with an indemnification satisfactory to the Agent and
each Lender with respect thereto. All representations, warranties, covenants,
waivers and agreements contained herein shall survive termination hereof until
payment in full of the Obligations unless otherwise provided herein.
Notwithstanding the foregoing, if after receipt of any payment of all or any
part of the Obligations, any Lender is for any reason compelled to surrender
such payment to any Person because such payment is determined to be void or
voidable as a preference, impermissible setoff, a diversion of trust funds or
for any other reason, this Agreement shall continue in full force and the
Borrower shall be liable to, and shall indemnify and hold such Lender harmless
for, the amount of such payment surrendered until such Lender shall have been
finally and irrevocably paid in full. The provisions of the foregoing sentence
shall be and remain effective notwithstanding any contrary action which may have
been taken by the Lenders in reliance upon such payment, and any such
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contrary action so taken shall be without prejudice to the Lenders' rights under
this Agreement and shall be deemed to have been conditioned upon such payment
having become final and irrevocable.
12.10 Governing Law. All documents executed pursuant to the transactions
contemplated herein, including, without limitation, this Agreement and each of
the Loan Documents shall be deemed to be contracts made under, and for all
purposes shall be construed in accordance with, the internal laws and judicial
decisions of the State of Florida; provided that this section 12.10 shall not
affect the applicability of, and interpretation or construction of appropriate
terms and provisions under the Uniform Commercial Code of any jurisdiction which
govern the Liens on any of the Collateral. The Borrower hereby submits to the
jurisdiction and venue of the state and federal courts of Florida for the
purposes of resolving disputes hereunder or for the purposes of collection.
12.11 Indemnification. (a) In consideration of the execution and delivery
of this Agreement by the Agent and each Lender and the extension of the
Revolving Credit Commitments and the Term Loan Commitments, the Borrower hereby
indemnifies, exonerates and holds the Agent, NCMI and each Lender and each of
their respective officers, directors, employees and agents (collectively, the
"Indemnified Parties") free and harmless from and against any and all actions,
causes of action, suits, losses, costs, liabilities and damages, and expenses
incurred in connection therewith (irrespective of whether any such Indemnified
Party is a party to the action for which indemnification hereunder is sought),
including reasonable attorneys' fees and disbursements (collectively, the
"Indemnified Liabilities"), incurred by the Indemnified Parties or any of them
as a result of, or arising out of, or relating to any transaction financed or to
be financed in whole or in part, directly or indirectly, with the proceeds of
any Loan or supported by any Letter of Credit, except for any such Indemnified
Liabilities arising for the account of a particular Indemnified Party by reason
of the bad faith, gross negligence or willful misconduct of, or willful breach
of the Loan Documents by, such Indemnified Party or an officer, co-officer,
director, co-director, employee, co-employee, agent or co-agent of such
Indemnified Party or a transfer or disposition of a Note by an Indemnified
Party, and if and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
(b) If a claim is to be made by a party entitled to indemnification
under this Section 12.11 or Section 8.16 against the indemnifying party, the
party entitled to such indemnification shall give written notice to the
indemnifying party promptly after the party entitled to indemnification
receives actual notice of any claim, action, suit, loss, cost, liability,
damage or expense incurred or instituted for which the indemnification is
sought. If
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requested by Borrower in writing, and so long as no Default or Event of Default
shall have occurred and be continuing, such indemnitee shall contest the
validity, applicability and/or amount of such suit, action, or cause of action
to the extent such contest may be conducted in good faith on legally supportable
grounds. If any lawsuit or enforcement action is filed against any party
entitled to the benefit of indemnity under this Section 12.11, written notice
thereof shall be given to the indemnifying party as soon as practicable (and in
any event within 15 days after the service of the citation or summons).
Notwithstanding the foregoing, the failure so to notify the indemnifying party
as provided in this Section 12.11 will relieve the indemnifying party from
liability hereunder only if and to the extent that such failure results in the
forfeiture by the indemnifying party of substantive rights and defenses. After
such notice, if the indemnifying party shall acknowledge in writing to the
indemnified party that the indemnifying party shall be obligated under the terms
of its indemnity hereunder in connection with such lawsuit or action, then, so
long as no Default or Event of Default shall occur and be continuing, the
indemnifying party shall be entitled, if it so elects, to take control of the
defense and investigation of such lawsuit or action and to employ and engage
counsel of its own choice reasonably acceptable to the indemnified party to
handle and defend the same, at the indemnifying party's cost, risk and expense,
provided, however, that the indemnifying party and its counsel shall proceed
with diligence and in good faith with respect thereto. If (i) the engagement of
such counsel by the indemnifying party would present a conflict of interest
which would prevent such counsel from effectively defending such action on
behalf of the indemnified party, (ii) the defendants in, or targets of, any such
lawsuit or action include both the indemnified party and indemnifying party, and
the indemnified party reasonably concludes that there may be legal defenses
available to it that are different from or in addition to those available to the
indemnifying party, (iii) the indemnifying party fails to assume the defense of
the lawsuit or action or to employ counsel reasonably satisfactory to such
indemnified party, in either case in a timely manner, or (iv) a Default or Event
of Default shall occur and be continuing, then such indemnified party may employ
separate counsel to represent or defend it in any such action or proceeding and
the indemnifying party will pay the fees and disbursements of such counsel,
provided, however, that each indemnitee shall endeavor, but shall not be
obligated, in connection with any matter covered by this Section 12.11 which
also involves other indemnities, to use reasonable efforts to avoid unnecessary
duplication of efforts by counsel for all indemnities and provided further, that
in no event shall the Borrower be liable for the fees and expenses of more than
one separate firm for the indemnified parties. The indemnified party shall
cooperate (with all out of pocket costs and expenses associated therewith to be
paid by the indemnifying party) in all reasonable respects with the indemnifying
party and such attorneys in the investigation, trial and defense of such lawsuit
or action and any appeal arising therefrom; provided, however, that the
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indemnified party may, at its own cost (except as set forth in, and in
accordance with, the foregoing sentence), participate in the investigation,
trial and defense of such lawsuit or action and any appeal arising therefrom. If
the indemnifying party has acknowledged to the indemnified party its obligation
to indemnify hereunder, the indemnified party, so long as no Default or Event of
Default shall have occurred and be continuing, shall not settle such lawsuit or
enforcement action without the prior written consent of the indemnifying party
and, if the indemnifying party has not so acknowledged its obligation, the
indemnified party shall not settle such lawsuit or enforcement action within 20
days' prior written notice to the indemnifying party.
(c) The provisions of this Section 12.11 shall survive the payment of the
Obligations and the termination of this Agreement.
12.12 Headings and References. The headings of the Articles and Sections
of this Agreement are inserted for convenience of reference only and are not
intended to be a part of, or to affect the meaning or interpretation of this
Agreement. Words such as "hereof", "hereunder", "herein" and words of similar
import shall refer to this Agreement in its entirety and not to any particular
Section or provisions hereof, unless so expressly specified. As used herein, the
singular shall include the plural, and the masculine shall include the feminine
or a neutral gender, and vice versa, whenever the context requires.
12.13 Severability. If any provision of this Agreement or the other Loan
Documents shall be determined to be illegal or invalid as to one or more of the
parties hereto, then such provision shall remain in effect with respect to all
parties, if any, as to whom such provision is neither illegal nor invalid, and
in any event all other provisions hereof shall remain effective and binding on
the parties hereto.
12.14 Entire Agreement. This Agreement, together with the other Loan
Documents, constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all previous proposals, negotiations,
representations, commitments and other communications between or among the
parties, both oral and written, with respect thereto.
12.15 Agreement Controls. In the event that any term of any of the Loan
Documents other than this Agreement conflicts with any term of this Agreement,
the terms and provisions of this Agreement shall control.
12.16 Usury Savings Clause. Notwithstanding any other provision herein,
the aggregate interest rate charged under any of the Notes, including all
charges or fees in connection therewith deemed in the nature of interest under
Florida law, shall not exceed the Highest Lawful Rate (as such term is defined
below). If the rate of interest (determined without regard to the preceding
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sentence) under this Agreement at any time exceeds the Highest Lawful Rate (as
defined below), the outstanding amount of the Loans made hereunder shall bear
interest at the Highest Lawful Rate until the total amount of interest due
hereunder equals the amount of interest which would have been due hereunder if
the stated rates of interest set forth in this Agreement had at all times been
in effect. In addition, if when the Loans made hereunder are repaid in full the
total interest due hereunder (taking into account the increase provided for
above) is less than the total amount of interest which would have been due
hereunder if the stated rates of interest set forth in this Agreement had at all
times been in effect, then to the extent permitted by law, the Borrower shall
pay to the Agent an amount equal to the difference between the amount of
interest paid and the amount of interest which would have been paid if the
Highest Lawful Rate had at all times been in effect. Notwithstanding the
foregoing, it is the intention of the Lenders and the Borrower to conform
strictly to any applicable usury laws. Accordingly, if any Lender contracts for,
charges, or receives any consideration which constitutes interest in excess of
the Highest Lawful Rate, then any such excess shall be cancelled automatically
and, if previously paid, shall at such Lender's option be applied to the
outstanding amount of the Loans made hereunder or be refunded to the Borrower.
As used in this paragraph, the term "Highest Lawful Rate" means the maximum
lawful interest rate, if any, that at any time or from time to time may be
contracted for, charged, or received under the laws applicable to such Lender
which are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
12.17 Confidentiality. Except as provided in Section 8.01(e) hereof, the
Lenders shall hold all non-public information obtained pursuant to the
requirements of this Agreement in accordance with their reasonable and customary
procedures for handling confidential information of this nature but may, in any
event, make disclosures reasonably required in connection with the contemplated
transfer or assignment of any of the Loans or participations or as required or
requested by any legal process; provided that, unless specifically prohibited by
applicable law or court order, each Lender shall notify the Borrower of any
request under legal process by any governmental agency or representative thereof
for disclosure of such information with reasonable promptness after receiving
such written request. The covenants in this Section 12.17 shall survive the
termination of this Agreement, payment in full of the Obligations and the
occurrence of the Revolving Credit Termination Date and the Term Loan Maturity
Date.
12.18 Savings Clause. Notwithstanding anything to the contrary
contained in this Agreement, in any other Loan Document, or in the ESOP Loan
Documents, the Borrower or its Subsidiaries shall not be required, in order
to fulfill its obligations hereunder and thereunder, to breach or violate any
law, rule,
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regulation or policy having the force of law of any Governmental Authority,
including, without limitation, any such laws, rules, regulations or policies
relating to rights of privacy, confidentiality of patient or family-related
information or records, or privileged information (collectively, "Governmental
Restraints"); provided, however, that in the event that there shall occur any
Default or Event of Default by reason of any Governmental Restraint, the Agent
and the Lenders shall nevertheless have all rights, privileges and powers
available to them under the Loan Documents, at law or in equity upon the
occurrence of any such Default or Event of Default, to the same extent as in the
case of any such occurrence not arising from a Governmental Restraint. The
provisions of this Section 12.18 shall survive the termination of this
Agreement, payment in full of the Obligations hereunder and under the ESOP Loan
Documents and the occurrence of the Revolving Credit Termination Date and the
Term Loan Maturity Date.
12.19 Consents. Whenever pursuant to the terms of the Loan Documents the
consent of a party to the Loan Documents shall be required for any other Person
to take any action or obtain any right, privilege or other benefit thereunder,
the party entitled to give or withhold consent shall respond to any such request
for consent duly made hereunder within the time for such response expressly
provided therefor in the Loan Documents or, if no such time is so provided,
within a reasonable time following receipt thereof; provided that (i) nothing in
this section shall impair the effect of any other provision of the Loan
Documents expressly providing in certain circumstances that the failure to give
consent shall constitute a refusal to consent, (ii) in no event shall the Agent
or the Lenders be required to respond to any such request for consent more
rapidly than thirty (30) days following the latest date upon which the Agent or
any Lender receives such request for consent and all information relating
thereto which the Agent or any Lender may request in connection therewith, and
(iii) failure of the Agent or any Lender to respond to any request for consent
as provided in this Section 12.19 shall not discharge, diminish or constitute a
defense to enforcement of the Obligations.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
made, executed and delivered by their duly authorized officers as of the day and
year first above written.
VITAS HEALTHCARE CORPORATION
BY: /s/ Mark W. Ohlendorf
---------------------------
Mark W. Ohlendorf, Vice President
WITNESS:
/s/ Meganne Cusato
- -----------------------
/s/ Terry L. Scaggs
- -----------------------
106
<PAGE>
WITNESS: NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION
as Agent for the Lenders
/s/ Meganne Cusato By: /s/ Allison S. Freeland
- -------------------- ----------------------------------
Allison S. Freeland
Vice President
/s/ Terry L. Scaggs
- --------------------
WITNESS: NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION
/s/ Meganne Cusato By: /s/ Allison S. Freeland
- -------------------- --------------------------------------
Allison S. Freeland
Vice President
/s/ Terry L. Scaggs
- --------------------
Lending Office:
One NationsBank Plaza, T-17
Charlotte, North Carolina 28255
Wire Transfer Instructions:
NationsBank of Florida, National Association
Miami, Florida
ABA# 063100277
Reference Vitas Healthcare
Attention: Specialized Loan Support,
Margaret Lydon
Account No.: 1366212163
REF. VITAS
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<PAGE>
EXHIBIT 10.39
Amended and Restated Revolving Credit Note
$20,000,000.00 Charlotte, North Carolina
February 17, 1995
FOR VALUE RECEIVED, VITAS HEALTHCARE CORPORATION, a Delaware corporation
having its principal place of business located in Miami, Florida (the
"Borrower"), hereby promises to pay to the order of
NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION (the "Lender"), in its
individual capacity, at the office of NationsBank of Florida, National
Association, as agent for the Lender (the "Agent"), located at One Independence
Center, 101 North Tryon Street, 15th Floor, Charlotte, North Carolina 28255 (or
at such other place or places as the Agent may designate) at the times set forth
in the Amended and Restated Revolving Credit, Term Loan and Reimbursement
Agreement dated as of February 17, l995 among the Borrower, the financial
institutions party thereto (collectively, the "Lenders") and the Agent (the
"Agreement" - all capitalized terms not otherwise defined herein shall have the
respective meanings set forth in the Agreement) in lawful money of the United
States of America, in immediately available funds, the principal amount of
TWENTY MILLION AND NO/100 DOLLARS ($20,000,000.00) or, if less than such
principal amount, the aggregate unpaid principal amount of all Revolving Credit
Loans made by the Lender to the Borrower pursuant to the Agreement on the
Revolving Credit Termination Date or such earlier date as may be required
pursuant to the terms of the Agreement; and to pay interest thereon from the
date of each such Revolving Credit Loan, in like money, at said office, on the
dates and at the rates provided in Article II of the Agreement. All or any
portion of the principal amount of Revolving Credit Loans may be prepaid as
provided in the Agreement.
If payment of all sums due hereunder is accelerated under the terms of the
Agreement or under the terms of the other Loan Documents executed in connection
with the Agreement, the then remaining principal amount and accrued but unpaid
interest shall bear interest which shall be payable on demand (i) in the case of
a LIBOR Loan, until the end of the Interest Period with respect to such LIBOR
Loan, at a rate of two percent (2%) above the LIBOR Rate applicable to such
LIBOR Loan, and (ii) thereafter, and with respect to Floating Rate Loans, at a
rate two percent (2%) per annum in excess of the Floating Rate or the maximum
rate permitted under applicable law, if lower, until such principal and interest
have been paid in full. Further, in the event of such acceleration, this
Revolving Credit Note, and all other indebtedness of the Borrower to the Lenders
shall become immediately due and payable, without presentation, demand, protest
<PAGE>
or notice of any kind, all of which are hereby waived by the Borrower.
In the event this Revolving Credit Note is not paid when due at any stated
or accelerated maturity, the Borrower agrees to pay, in addition to the
principal and interest, all costs of collection, including reasonable attorneys'
fees, and interest thereon at the rates set forth above.
Interest hereunder shall be computed on the basis of a 360 day year for
the actual number of days elapsed in the interest period.
This Revolving Credit Note is one of the Revolving Credit Notes in the
aggregate principal amount of $20,000,000 referred to in the Agreement and is
issued pursuant to and entitled to the benefits and security of the Agreement to
which reference is hereby made for a more complete statement of the terms and
conditions upon which the Revolving Credit Loans evidenced hereby were or are
made and are to be repaid. This Revolving Credit Note is subject to certain
restrictions on transfer or assignment as provided in the Agreement. The
obligations evidenced by this Revolving Credit Note are secured, inter alia,
by an Amended and Restated Pledge and Security Agreement of even date with the
Agreement from the Borrower to the Agent for the benefit of the Lenders.
All Persons bound on this obligation, whether primarily or secondarily
liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive
to the full extent permitted by law the benefits of all provisions of law for
stay or delay of execution or sale of property or the satisfaction of judgment
against any of them on account of liability hereon until judgment be obtained
and execution issues against any other of them and returned satisfied or until
it can be shown that the maker or any other party hereto had no property
available for the satisfaction of the debt evidenced by this instrument, or
until any other proceedings can be had against any of them, also their right, if
any, to require the holder hereof to hold as security for this Revolving Credit
Note any collateral deposited by any of said Persons as security. Protest,
notice of protest, notice of dishonor, diligence or any other formality are
hereby waived by all parties bound hereon.
2
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Revolving Credit Note to
be made, executed and delivered by its duly authorized representative as of the
date and year first above written, all pursuant to authority duly granted.
VITAS HEALTHCARE CORPORATION
WITNESS:
/s/ [Signature Illegible] By: /s/ Mark W. Ohlendorf
- ------------------------- ---------------------------------
Name: Mark W. Ohlendorf
/s/ [Signature Illegible] Title: Vice President
- -------------------------
3
<PAGE>
ACKNOWLEDGEMENT OF EXECUTION
ON BEHALF OF
VITAS HEALTHCARE CORPORATION
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
Before me, the undersigned, a Notary Public in and for said County and
State on this 13th day of February, 1995, personally appeared Mark W. Ohlendorf,
being by me duly sworn says he works at 100 S. Biscayne Boulevard, Miami,
Florida, known to be the Vice President of Vitas Healthcare Corporation, (the
"Company"), who, being by me duly sworn, says that by authority duly given by,
and as the act of the Company, the foregoing and annexed Note dated February 17,
1995, was signed by him as said Vice President on behalf of the Company.
Witness my hand and official seal this 13th day of February, 1995.
/s/ Sharon Williams
------------------------
Notary Public
(SEAL)
My Commission Expires: 11-18-98
4
<PAGE>
AFFIDAVIT OF ALLISON S. FREELAND
The undersigned, being first duly sworn, deposes and says that:
1. She is a Vice President with NationsBank of Florida, National
Association and works at 150 S.E. Third Avenue, Miami, Florida 33131.
2. The Promissory Note of Vitas Healthcare Corporation to NationsBank of
Florida, National Association (the "Bank") in the principal amount of
$20,000,000 dated February 17, 1995 was executed before her and delivered to her
on behalf of the Bank in Charlotte, North Carolina on February 17, 1995.
This the 17th day of February, 1995.
/s/ Allison S. Freeland
-------------------------
Allison S. Freeland
Vice President
Acknowledgement of Execution
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
Before me, the undersigned, a Notary Public in and for said County and
State on the 13th day of February, 1995, A.D., personally appeared Allison S.
Freeland being and by me duly sworn affixed her signature to the above
Affidavit.
Witness my hand and official seal this 13th day of February, 1995.
/s/ Sharon Williams
------------------------
Notary Public
(SEAL)
My Commission Expires: 11-18-98
5
<PAGE>
EXHIBIT 10.40
Term Note
$25,000,000.00
Charlotte, North Carolina
February 17, 1995
FOR VALUE RECEIVED, VITAS HEALTHCARE CORPORATION, a Delaware corporation
having its principal place of business located in Miami, Florida (the
"Borrower"), hereby promises to pay to the order of
NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION (the "Lender"), in its
individual capacity, at the office of NationsBank of Florida, National
Association, as agent for the Lender (the "Agent"), located at One Independence
Center, 101 North Tryon Street, 15th Floor, Charlotte, North Carolina 28255 (or
at such other place or places as the Agent may designate at the times set forth
in the Amended and Restated Revolving Credit, Term Loan and Reimbursement
Agreement dated as of February 17, 1995 among the Borrower, the financial
institutions party thereto (collectively, the "Lenders") and the Agent (the
"Agreement" - all capitalized terms not otherwise defined herein shall have the
respective meanings set forth in the Agreement) in lawful money of the United
States of America, in immediately available funds, the principal amount of
TWENTY-FIVE MILLION AND NO/100 DOLLARS ($25,000,000.00), together with
interest thereon as herein provided. The principal amount of this Term Note
shall be due and payable (a) if the Term Loan Maturity Date shall not be
extended pursuant to Section 2.14 of the Agreement, in full on the Term Loan
Maturity Date, and (b) if the Term Loan Maturity Date shall be extended pursuant
to Section 2.14 of the Agreement, then an amount of principal equal to forty
percent (40%) of the then outstanding principal balance hereunder shall be due
and payable on September 30, 1997, and the entire remaining outstanding
principal balance outstanding hereunder shall be due and payable in full on the
Term Loan Maturity Date. In addition, payments or prepayments of all or a
portion of the principal amount outstanding hereunder shall be due and payable
on such earlier date or dates as otherwise may be required pursuant to the terms
of the Agreement. The Borrower further agrees to pay interest on the outstanding
principal balance hereunder from time to time from the date hereof in like
money, at said office, on the dates and at the rates provided in Article II of
the Agreement. All or any portion of the principal amount of the Term Loan
evidenced hereby may be prepaid as provided in and subject to the terms of the
Agreement.
If payment of all sums due hereunder is accelerated under the terms of the
Agreement or under the terms of the other Loan Documents executed in connection
with the Agreement, the then remaining principal amount and accrued but unpaid
interest shall bear interest which shall be payable on demand (i) in the case of
<PAGE>
a LIBOR Loan, until the end of the Interest Period with respect to such LIBOR
Loan, at a rate of two percent (2%) above the LIBOR Rate applicable to such
LIBOR Loan, and (ii) thereafter, and with respect to Floating Rate Loans, at a
rate two percent (2%) per annum in excess of the Floating Rate or the maximum
rate permitted under applicable law, if lower, until such principal and interest
have been paid in full. Further, in the event of such acceleration, this Term
Note, and all other indebtedness of the Borrower to the Lenders shall become
immediately due and payable, without presentation, demand, protest or notice of
any kind, all of which are hereby waived by the Borrower.
In the event this Term Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees, and
interest thereon at the rates set forth above.
Interest hereunder shall be computed on the basis of a 360 day year for
the actual number of days elapsed in the interest period.
This Term Note is one of the Term Notes in the aggregate principal amount
of $25,000,000 referred to in the Agreement and is issued pursuant to and
entitled to the benefits and security of the Agreement to which reference is
hereby made for a more complete statement of the terms and conditions upon which
the Loans evidenced hereby were or are made and are to be repaid. This Term Note
is subject to certain restrictions on transfer or assignment as provided in the
Agreement. The obligations evidenced by this Term Note are secured, inter alia,
by an Amended and Restated Pledge and Security Agreement of even date with the
Agreement from the Borrower to the Agent for the benefit of the Lenders.
All Persons bound on this obligation, whether primarily or secondarily
liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive
to the full extent permitted by law the benefits of all provisions of law for
stay or delay of execution or sale of property or other satisfaction of judgment
against any of them on account of liability hereon until judgment be obtained
and execution issues against any other of them and returned satisfied or until
it can be shown that the maker or any other party hereto had no property
available for the satisfaction of the debt evidenced by this instrument, or
until any other proceedings can be had against any of them, also their right, if
any, to require the holder hereof to hold as security for this Term Note any
collateral deposited by any of said Persons as security. Protest, notice of
protest, notice of dishonor, diligence or any other formality are hereby waived
by all parties bound hereon.
2
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Term Note to be made,
executed and delivered by its duly authorized representative as of the date and
year first above written, all pursuant to authority duly granted.
VITAS HEALTHCARE CORPORATION
WITNESS:
/s/ [Illegible] By: /s/ Mark W. Ohlendorf
- ------------------------ ---------------------------------
Name: Mark W. Ohlendorf
/s/ Illegible] Title: Vice President
- ------------------------
3
<PAGE>
ACKNOWLEDGEMENT OF EXECUTION
ON BEHALF OF
VITAS HEALTHCARE CORPORATION
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
Before me, the undersigned, a Notary Public in and for said County and
State on this 13th day of February, 1995, personally appeared Mark W. Ohlendorf,
being by me duly sworn says he works at 100 S. Biscayne Boulevard, Miami,
Florida, known to be the Vice President of Vitas Healthcare Corporation, (the
"Company"), who, being by me duly sworn, says that by authority duly given by,
and as the act of the Company, the foregoing and annexed Note dated February 17,
1995, was signed by him as said Vice President on behalf of the Company.
Witness my hand and official seal this 13th day of February, 1995.
/s/ Sharon Williams
------------------------
Notary Public
(SEAL)
My Commission Expires: 11-18-98
4
<PAGE>
AFFIDAVIT OF ALLISON S. FREELAND
The undersigned, being first duly sworn, deposes and says that:
1. She is a Vice President with NationsBank of Florida, National
Association and works at 150 S.E. Third Avenue, Miami, Florida 33131.
2. The Promissory Note of Vitas Healthcare Corporation to NationsBank of
Florida, National Association (the "Bank") in the principal amount of
$25,000,000 dated February 17, 1995 was executed before her and delivered to her
on behalf of the Bank in Charlotte, North Carolina on February 17, 1995.
This the 17th day of February, 1995.
/s/ Allison S. Freeland
-------------------------
Allison S. Freeland
Vice President
Acknowledgement of Execution
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
Before me, the undersigned, a Notary Public in and for said County and
State on the 13th day of February, 1995, A.D., personally appeared Allison S.
Freeland being and by me duly sworn affixed her signature to the above
Affidavit.
Witness my hand and official seal this 13th day of February, 1995.
/s/ Sharon Williams
------------------------
Notary Public
(SEAL)
My Commission Expires: 11-18-98
5
<PAGE>
EXHIBIT 10.41
AMENDED AND RESTATED LC ACCOUNT AGREEMENT
THIS AMENDED AND RESTATED LC ACCOUNT AGREEMENT (the "Agreement") dated as
of February 17, 1995, is made between VITAS HEALTHCARE CORPORATION, a Delaware
corporation (the "Pledgor"), and NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION
("NationsBank"), as Agent (in such capacity herein and together with any
successors in such capacity, the "Agent") for the Lenders (the "Lenders") party
to the Credit Agreement (as hereinafter defined).
RECITALS
WHEREAS, Pledgor, NationsBank as lender and NationsBank as agent entered
into a Revolving Credit and Reimbursement Agreement dated as of August 11, 1994
(the "Prior Credit Agreement") providing, inter alia, for the issuance of
letters of credit for the account of the Pledgor and, in connection therewith,
the Pledgor entered into an LC Account Agreement of even date with the Prior
Agreement between Pledgor and NationsBank as agent under the Prior Agreement
(the "Prior LC Account Agreement"); and
WHEREAS, Pledgor, the Lenders and the Agent are entering into an Amended
and Restated Revolving Credit, Term Loan and Reimbursement Agreement of even
date herewith (as the same may be amended, modified or restated from time to
time, the "Credit Agreement") amending the Prior Credit Agreement to, inter
alia, increase the credit facility made available to Pledgor thereunder and to
extend to Pledgor a term loan facility; and
WHEREAS, as a condition precedent to the Lenders' obligations to make the
Loans or to issue Letters of Credit under the Credit Agreement, Pledgor is
required to amend and restate the Prior LC Account Agreement by executing and
delivering to the Agent a copy of this Agreement on or before the Effective Time
(as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the agreements,
provisions and covenants contained herein, Pledgor and the Agent hereby agree as
follows:
Section 1. Capitalized terms used in this Agreement shall have the
following meanings:
"Collateral" means (a) all funds from time to time on deposit in the LC
Account; (b) all Investments and all certificates and instruments from time to
time representing or evidencing such Investments; (c) all notes, certificates of
deposit, checks and other instruments from time to time hereafter delivered to
or otherwise possessed by the Agent for or on behalf of Pledgor in substitution
for or in addition to any or all of the Collateral described in clause (a) or
(b) above; (d) all interest, dividends,
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cash, instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
Collateral described in clause (a), (b) or (c) above; and (e) to the extent not
covered by clauses (a) through (d) above, all proceeds of any or all of the
foregoing Collateral.
"Effective Time" means the Closing Date as defined in the Credit
Agreement.
"Investments" means those investments, if any, made by the Agent pursuant
to Section 5 hereof.
"LC Account" means the cash collateral account established and maintained
pursuant to Section 2 hereof.
"Secured Obligations" means (i) all obligations of Pledgor now existing or
hereafter arising under or in respect of the Credit Agreement or the Notes
(including, without limitation, Pledgor's obligations to pay principal and
interest and all other charges, fees, expenses, reimbursements, indemnities and
other payments related to or in respect of the obligations contained in the
Credit Agreement or the Notes) or any of the other Loan Documents; and (ii)
without duplication, all obligations of Pledgor now or hereafter existing under
or in respect of this Agreement, including, without limitation, with respect to
all charges, fees, expenses, reimbursements, indemnities and other payments
related to or in respect of the obligations contained in this Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Credit Agreement.
Section 2. LC Account; Cash Collateralization of Letters of Credit.
(i) Upon the earlier to occur of (i) the occurrence of an Event of
Default which shall not have been waived or (ii) the existence on the
Revolving Credit Termination Date of a Letter of Credit having an expiry
date later than the Revolving Credit Termination Date, the Agent shall
establish and maintain at the offices of NationsBank of North Carolina,
National Association at 100 North Tryon Street, Charlotte, North Carolina,
in the name of the Agent and under the sole dominion and control of the
Agent, a cash collateral account designated as NationsBank/Vitas
Healthcare Cash LC Account, (the "LC Account"). Pledgor is delivering to
the Agent, substantially simultaneously with the delivery of this
Agreement, a duly authorized and executed signature card, with account
number left blank, authorizing the opening of the LC Account. Without
limiting the provisions of Section 9 hereof, Pledgor hereby constitutes
and appoints the Agent as its true and lawful attorney-in-fact to complete
such signature card, and to deliver and utilize the same to open and
administer the LC Account as herein provided. The appointment in the next
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preceding sentence is coupled with an interest and shall be irrevocable as
long as any Letter of Credit or any Secured Obligations shall remain
outstanding or NationsBank remains obligated to issue Letters of Credit.
(ii) In the event that an Event of Default has occurred and is
continuing and Pledgor is required to pay, to Agent, without further
demand, an amount equal to the maximum amount remaining undrawn or unpaid
under the Letters of Credit in accordance with Article X of the Credit
Agreement, the Agent may (and if required by the Credit Agreement, the
Agent shall), upon receipt of any such amounts, exercise the remedies set
forth in Section 12 hereof and shall apply the proceeds as provided in the
Credit Agreement. In addition, in the event that on the Revolving Credit
Termination Date any Letter of Credit shall be outstanding having an
expiry date later than the Revolving Credit Termination Date, Pledgor
shall without further demand pay to the Agent, on or before the Revolving
Credit Termination Date, an amount equal to the maximum amount available
to be drawn under each such Letter of Credit. Any such amounts received by
the Agent shall be deposited in the LC Account. Upon a drawing under the
Letters of Credit in respect of which any amounts described above have
been deposited in the LC Account, the Agent shall apply such amounts to
reimburse NationsBank for the amount of such drawing. In the event the
Letters of Credit are cancelled or expire or in the event of any reduction
in the maximum amount available at any time for drawing under such Letters
of Credit (the "Maximum Available Amount"), the Agent shall apply the
amount then in the LC Account designated to reimburse NationsBank for any
drawings under the Letters of Credit less the Maximum Available Amount
immediately after such cancellation, expiration or reduction, if any,
first, to the cash collateralization of the Letters of Credit if Pledgor
has failed to pay all or a portion of the maximum amounts described above
and, second, to the payment in full of the outstanding Secured obligations
in the manner provided in the Credit Agreement.
(iii) Interest and other income received in respect of Investments
of any amounts deposited in the LC Account pursuant to clause (ii) of this
Section 2 shall be delivered by Agent to Pledgor on the last Business Day
of each calendar month or, if earlier, upon cancellation or expiration of
or full drawing and full reimbursement to NationsBank by the Pledgor of
the Maximum Available Amount for drawing under the Letters of Credit, as
the case may be, in respect of which such amounts were so deposited;
provided, however, that the Agent shall not deliver to Pledgor any such
interest or other income received in respect of Investments of any amounts
deposited in the LC Account pursuant to this Section 2 if an Event of
Default has occurred and is continuing or there
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remain outstanding any Secured Obligations which have not been
indefeasibly paid in full in cash.
(iv) In the event that an Event of Default shall have occurred, at
such time as there shall be Collateral on deposit with the Agent credited
to the LC Account, all Events of Default shall have been fully and
effectively waived, cured or rescinded pursuant to the terms of the Credit
Agreement and no Letters of Credit having an expiry date later than the
Revolving Credit Termination Date shall be outstanding, then such
Collateral credited to the LC Account shall be returned to the Pledgor,
except as otherwise required by applicable law.
Section 3. Pledge; Security for Secured Obligations. Pledgor hereby
pledges to the Agent (for itself and on behalf of the Lenders) a first priority
lien and security interest in the Collateral, as collateral security for the
prompt payment in full when due, whether at stated maturity, by acceleration or
otherwise (including, without limitation, the payment of interest and other
amounts which would accrue and become due but for the filing of a petition in
bankruptcy or the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code), of all Secured Obligations.
Section 4. Delivery of Collateral. All certificates or instruments, if
any, representing or evidencing the Collateral shall be delivered to and held by
the Agent pursuant hereto and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance reasonably satisfactory to the
Agent. In the event any Collateral is not evidenced by a certificate, a
notation, reflecting title in the name of the Agent or the security interest of
the Agent, shall be made in the records of the issuer of such Collateral or in
such other appropriate records as the Agent may require, all in form and
substance reasonably satisfactory to the Agent. The Agent shall have the right,
at any time and without notice to the Pledgor, to transfer to or to register in
the name of the Agent or any of its nominees any or all of the Collateral. In
addition, the Agent shall have the right at any time to exchange certificates or
instruments representing or evidencing Collateral for certificates or
instruments of smaller or larger denominations to the extent permitted by the
agreements governing such certificates or instruments.
Section 5. Investing of Amounts in the LC Account; Amounts held by the
Agent. Cash held by the Agent in the LC Account shall not be invested or
reinvested except as provided in this Section 5.
(i) Except as otherwise provided in Section 12 hereof, any funds on
deposit in the LC Account may, at the request of Pledgor, be invested by
the Agent so long as no Event of Default shall have occurred and be
continuing, in readily
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marketable cash equivalents (including without limitation certificates of
deposit of NationsBank); provided that no such investment shall be
permitted unless the first priority security interest of the Agent
hereunder shall be maintained at all times on terms acceptable to
NationsBank.
(ii) The Agent is hereby authorized to sell, and shall sell, all or
any designated part of the Collateral (A) so long as no Default or Event
of Default shall have occurred and be continuing, upon the receipt of
appropriate written instructions from an Authorized Representative or (B)
in any event if such sale is necessary to permit the Agent to perform its
duties hereunder or under the Credit Agreement. The Agent shall have no
responsibility for any loss in the value of the Collateral resulting from
Investments made pursuant hereto, including without limitation from
fluctuations in interest rates. Any interest on securities constituting
part of the Collateral and the net proceeds of the sale or payment of any
such securities shall be held in the LC Account by the Agent.
Section 6. Representations and Warranties. In addition to its
representations and warranties made pursuant to the Credit Agreement, Pledgor
represents and warrants to the Agent (for itself and as agent on behalf of the
Lenders) that Pledgor will be the legal and beneficial owner of the Collateral
free and clear of any Lien except for the lien and security interest created by
this Agreement.
Section 7. Further Assurances. Pledgor agrees that at any time and from
time to time, at its expense, it will promptly execute and deliver to the Agent
any further instruments and documents, and take any further actions, that may be
necessary or that the Agent may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable the Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.
Section 8. Transfers and Other Liens. Pledgor agrees that it will not (a)
sell or otherwise dispose of any of the Collateral or any interest therein, or
(b) create or permit to exist any Lien upon or with respect to any of the
Collateral, except for the lien and security interest created by this Agreement.
Section 9. The Agent Appointed Attorney-in Fact. Pledgor hereby appoints
the Agent as its attorney-in-fact, with full authority in the place and stead of
Pledgor and in the name of Pledgor or otherwise, from time to time in the
Agent's reasonable discretion to take any action and to execute any instrument
which the Agent may reasonably deem necessary or advisable to accomplish the
purposes of the Agreement, including, without limitation, to receive, endorse
and collect all instruments made payable to Pledgor representing any payment,
dividend, or other distribution in respect of the Collateral or any part thereof
and to give full
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discharge for the same. In performing its functions and duties under this
Agreement, the Agent shall act solely for itself and as the agent of the Lenders
and the Agent has not assumed nor shall be deemed to have assumed any obligation
towards or relationship of agency or trust with or for Pledgor.
Section 10. The Agent May Perform. If Pledgor fails to perform within the
prescribed time period any agreement of Pledgor contained herein, or if no time
period is prescribed, within three days of request therefor, then after notice
to Pledgor, the Agent may itself perform, or cause performance of, such
agreement, and the reasonable expenses of the Agent incurred in connection
therewith shall be payable by Pledgor under Section 13 hereof.
Section 11. Standard of Care; No Responsibility For Certain Matters. In
dealing with the Collateral in its possession, the Agent shall exercise the same
care which it would exercise in dealing with its own property of a similar
nature, but it shall not be responsible for (a) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not the Agent has or is deemed to
have knowledge of such matters, (b) taking any steps to preserve rights against
any parties with respect to any Collateral (other than steps taken in accordance
with the standard of care set forth above to maintain possession of the
Collateral), (c) the collection of any proceeds, (d) any loss resulting from
Investments made pursuant to Section 5 hereof, or (e) determining (x) the
correctness of any statement or calculation made by Pledgor in any written or
telex (tested or otherwise) instructions, or (y) whether any deposit in the LC
Account is proper.
Section 12. Remedies upon Event of Default; Application of Proceeds. If
any Event of Default shall have occurred and be continuing:
(i) The Agent may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the
Uniform Commercial Code (the "Code") as in effect in the State of Florida
at that time, and the Agent may, without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any exchange or broker's board or at any of the
Agent's offices or elsewhere, for cash, on credit or for future delivery,
and at such price or prices, and upon such other terms as the Agent may
deem commercially reasonable. Pledgor agrees that, to the extent notice of
sale shall be required by law, at least ten (10) days' notice to Pledgor
of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. 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
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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.
(ii) Subject to the provisions of Section 2(ii) hereof, any cash
held by the Agent as Collateral and all cash proceeds received by the
Agent in respect of any sale of, collection from, or other realization
upon all or part of the Collateral shall be applied (after payment of any
amounts payable to the Agent pursuant to Section 13 hereof) by the Agent
to pay the Secured Obligations. Any surplus of such cash or cash proceeds
held by the Agent and remaining after payment in full of all Secured
Obligations shall be paid over to Pledgor or to whomsoever may be lawfully
entitled to receive such surplus.
Section 13. Expenses. In addition to any payments of expenses of Agent
pursuant to the Credit Agreement or the other Loan Documents, Pledgor agrees to
pay promptly to the Agent all the reasonable costs and reasonable expenses,
including reasonable attorneys fees and expenses, which the Agent may incur in
connection with (a) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (b) the exercise or
enforcement of any of the rights of the Agent hereunder, or (c) the failure by
Pledgor to perform or observe any of the provisions hereof.
Section 14. No Delay's Waiver, etc. No delay or failure on the part of the
Agent in exercising, and no course of dealing with respect to, any power or
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise by the Agent of any power or right hereunder preclude other or
further exercise thereof or the exercise of any other power or right. The
remedies herein provided are to the fullest extent permitted by law cumulative
and are not exclusive of any remedies provided by law.
Section 15. Amendments, Etc. No amendment, modification, termination or
waiver of any provision of this Agreement, or consent to any departure by
Pledgor therefrom, shall in any event be effective without the written
concurrence of the Agent.
Section 16. Notices. Except as otherwise specifically provided herein, all
notices which are to be sent to Pledgor or Agent shall be given in accordance
with the Credit Agreement.
Section 17. Continuing Security Interest; Termination. This Agreement
shall create a continuing security interest in the Collateral (subject to the
provisions of Section 2(iv)) and shall (a) remain in full force and effect until
all Secured Obligations (other than Secured Obligations in the nature of
continuing indemnities or expense reimbursement obligations not yet due and
payable) shall have been indefeasibly paid in full in cash, the commitments or
other obligations of the Agent or any Lender to make
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any Loan under the Credit Agreement shall have expired and the Letters of Credit
shall have expired, (b) be binding upon Pledgor, its successors and assigns, and
(c) inure to the benefit of the Agent, the Lenders and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c) and subject to the provisions of the Credit Agreement, any
Lender may assign or otherwise transfer any Note held by it to any other person
or entity, and such other person or entity shall thereupon become vested with
all the benefits in respect thereof granted to such Lender herein or otherwise.
Upon the indefeasible payment in full in cash of the Secured Obligations (other
than Secured Obligations in the nature of continuing indemnities or expense
reimbursement obligations not yet due and payable) and the cancellation or
expiration of the Letters of Credit and termination or expiration of all
commitments and other obligations of the Agent and any Lender to make any Loan,
Pledgor shall be entitled, subject to the provisions of Section 12 hereof, to
the return, upon its request and at its expense, of such of the Collateral as
shall not have been sold or otherwise applied pursuant to the terms hereof.
Section 18. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF FLORIDA WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF
CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
FLORIDA. UNLESS OTHERWISE DEFINED HEREIN OR IN THE CREDIT AGREEMENT, TERMS
DEFINED IN ARTICLE 9 OF THE CODE ARE USED HEREIN AS THEREIN DEFINED.
Section 19. CONSENT TO JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT
AGAINST PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF FLORIDA AND BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT SUBJECT TO RIGHT OF
APPEAL. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO
BRING PROCEEDINGS AGAINST THE PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION.
Section 20. Successors and Assigns. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party and all covenants, promises, and agreements
by or on behalf of Pledgor or by and on behalf of the Agent shall bind and inure
to the benefit of the successors and assigns of Pledgor, the Agent and the
Lenders.
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Section 21. Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by the different parties on separate counterparts
and each such counterpart shall for all purposes be deemed an original, but all
such counterparts shall together constitute but one and the same Agreement.
Pledgor and the Agent hereby acknowledge receipt of a true, correct, and
complete counterpart of this Agreement.
Section 22. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 23. Headings. The section headings in this Agreement are inserted
for convenience of reference and shall not be considered a part of this
Agreement or used in its interpretation.
Section 24. Agency. Notwithstanding the foregoing references to the Agent,
Pledgor acknowledges and agrees that so long as NationsBank shall be the sole
Lender under the Credit Agreement, the term "Agent" shall mean NationsBank as
Lender. When and if there shall be more than one Lender party to the Credit
Agreement, then the term "Agent" shall refer to the Agent under the Credit
Agreement pursuant to the provisions of Article XI of the Credit Agreement, to
which reference is hereby made.
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IN WITNESS WHEREOF, Pledgor and the Agent have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
WITNESS: VITAS HEALTHCARE CORPORATION
/s/ [Signature Illegible] By: /s/ Mark W. Ohlendorf
- ------------------- -----------------------------
Mark W. Ohlendorf
/s/ [Signature Illegible] Vice President
- -------------------
NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION, as Agent
By: /s/ Allison S. Freeland
------------------------------
Allison S. Freeland
Vice President
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EXHIBIT 10.42
AMENDMENT NO. 1 TO
AMENDED AND RESTATED
REVOLVING CREDIT AND REIMBURSEMENT AGREEMENT
THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED REVOLVING CREDIT AND
REIMBURSEMENT AGREEMENT (the "Amendment") dated as of June 30, 1995, is
made by and among VITAS HEALTHCARE CORPORATION, a Delaware corporation (the
"Borrower"), and NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION, a national
banking association, (the "Lender") and NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION, as Agent for the Lender;
W I T N E S S E T H:
WHEREAS, the Lender by an Amended and Restated Revolving Credit, Term Loan
and Reimbursement Agreement dated as of February 17, 1995 (the "Agreement"), has
agreed to make available and has made available to Borrower a Revolving Credit
Facility (as defined in the Agreement) of up to $20,000,000; and
WHEREAS, the Lender and the Borrower have agreed to amend the Agreement in
the manner set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions herein set forth, it is hereby agreed as follows:
1. The term "Agreement" as used herein and in the Agreement, the
Guaranties, the Notes and the other Loan Documents (as defined in the
"Agreement") shall mean the Agreement as hereby amended and modified. Unless the
context otherwise requires, all capitalized terms used herein and in the other
Loan Documents without definition shall have the respective meanings provided
therefor in the Agreement, as hereby amended.
2. Subject to the conditions set forth in paragraph 5 hereof, the
Agreement shall be and hereby is amended, effective as of June 30, 1995, as
follows:
(a) Section 1.01 is hereby amended by adding a new definition
"Consolidated EBITDA" immediately following the definition of
"Consolidated Current Liabilities" which definition shall read as follow:
"'Consolidated EBITDA' means, with respect to the Borrower and
its Subsidiaries for any period of computation thereof, the sum of,
without duplication, (i) Consolidated Net Income, plus (ii)
Consolidated Interest Expense accrued during such period, plus (iii)
amortization accrued during such period, plus (iv) any depreciation
during such period, plus (v) all contributions to the ESOP made or
accrued by the Borrower during such period, plus (vi) all taxes on
income, all determined on a consolidated basis in accordance with
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Generally Accepted Accounting Principles applied on a Consistent
Basis;"
(b) The definition of "Consolidated Leverage Ratio" in Section 1.01
is amended in its entirety to read as follows:
"'Consolidated Leverage Ratio' means the ratio of Consolidated
Funded Indebtedness to Consolidated EBITDA;"
(c) The definition of "Consolidated Net Income" in Section 1.01 is
amended in its entirety to read as follows:
"'Consolidated Net Income' means, for any period of
computation thereof, the gross revenues from operations of the
Borrower and its Subsidiaries (including payments received by the
Borrower and its Subsidiaries of (i) interest income, and (ii)
dividends and distributions made in the ordinary course of their
businesses by Persons in which investment is permitted pursuant to
Section 9.09 and not related to an extraordinary event) less all
operating and non-operating expenses of the Borrower and its
Subsidiaries including taxes on income (excluding, however, (a) the
$6,700,000 of restructuring charges incurred in Fiscal Year 1993,
(b) up to $800,000 of expenses incurred in connection with
preparation of a proposed public offering of the Borrower's capital
stock that was not pursued due to market conditions and (c) up to
$6,312,000 of restructuring charges incurred in the fiscal quarter
ended June 30, 1995) all determined on a consolidated basis in
accordance with Generally Accepted Accounting Principles applied on
a Consistent Basis; but excluding as income: (i) net gains on the
sale, conversion or other disposition of capital assets, (ii) net
gains on the acquisition, retirement, sale or other disposition of
capital stock and other securities of the Borrower or its
Subsidiaries, (iii) net gains on the collection of proceeds of life
insurance policies, (iv) any write-up of any asset, and (v) any
other net gain or credit of an extraordinary nature as determined in
accordance with Generally Accepted Accounting Principles applied on
a Consistent Basis;"
(d) The definition of "Revolving Credit Termination Date" in Section
1.01 is amended by deleting the date "September 30, 1996" appearing
therein and inserting in lieu thereof the date "October 1, 1996;"
(e) Clause (i) of Section 9.01 is amended to read as follows:
"(i) $21,000,000 at June 30, 1995, and"
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(f) Section 9.04 is hereby amended in its entirety so that as
amended it shall read as follows:
"9.04 Consolidated Leverage Ratio. Permit at any time during
the periods set forth below the Consolidated Leverage Ratio to be
more than the respective amount set forth opposite each such period:
Period Ratio
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From the Closing Date through 5.00 to 1.00
September 30, 1995
From and including October 1, 4.50 to 1.00
1995 through December 31, 1995
From and including January 1,
1996 through March 31, 1996 4.00 to 1.00
From and including April 1, 1996 3.00 to 1.00
through June 30, 1996
From and including July 1, 1996 2.50 to 1.00
and thereafter
3. Each of the Subsidiaries of the Borrower who has previously delivered a
Guaranty to the Agent has joined in the execution of this Amendment Agreement
for the purpose of consenting to this Amendment Agreement and affirming its
respective guaranty of the Obligations of Borrower arising under the Agreement
as amended by this Amendment Agreement.
4. The Borrower hereby represents and warrants to the Agent and the Lender
that as of the date hereof the Agreement has been re-examined by the Borrower
and:
(i) The representations and warranties made by the Borrower therein
and in the other Loan Documents (including the Schedules to the Agreement
and the other Loan Documents) are true, complete and correct in all
material respects on and as of the date hereof, are hereby reaffirmed, and
shall survive the execution and delivery of the Amendment Agreement;
(ii) The execution, delivery and performance of this Amendment
Agreement will not conflict with or result in the breach of any of the
provisions of, or cause a default under, the Articles of Incorporation or
Bylaws of the Borrower, or any applicable law, rule or regulation, or any
judgment, order, writ, injunction or decree of any court, administrative
agency or other government instrumentality to which the Borrower or any
Subsidiary is subject or any agreement or instrument to which the Borrower
or any Subsidiary is a party, the effect of which would have any material
adverse effect on
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the ability of the Borrower or any Guarantor to observe the covenants and
agreements contained in the agreement, as amended hereby, or in any other
Loan Document or any of the CHC Transaction Documents or to pay the
Obligations, and will not result in the creation or imposition of any
security interest, lien, charge or encumbrance on any of the assets of the
Borrower or any Subsidiary.
5. As conditions to the effectiveness of this Amendment Agreement there
shall not have occurred either (i) any Default or Event of Default which shall
not have been waived or (ii) any material adverse change in the business,
financial condition or operations of the Borrower or any Subsidiary since June
30, 1995.
6. This Amendment Agreement sets forth the entire understanding and
agreement of the parties hereto in relation to the subject matter hereof and
supersedes any prior negotiations and agreements among the parties relative to
such subject matter. No promise, condition, representation or warranty, express
or implied, not herein set forth shall bind any party hereto, and none of them
has relied on any such promise, condition, representation or warranty. Each of
the parties hereto acknowledges that, except as in this Amendment Agreement
otherwise expressly stated, no representations, warranties or commitments,
express or implied, have been made by any party to the other.
7. Except as specifically amended, modified or supplemented by this
Amendment Agreement, all of the other documents delivered in connection with the
Loans, as heretofore amended, are hereby confirmed and ratified in all respects
and shall remain in full force and effect according to their respective terms.
8. Should any stamp or excise tax become payable under the laws of the
United States or of any state or any subdivision thereof or municipality therein
in respect of the Amendment Agreement, the Borrower shall pay the same
(including interest penalties, if any) and shall hold the Bank and the Agent
harmless with respect thereto.
9. This Amendment Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original as against any party whose
signature appears thereon, and all of which shall together constitute one and
the same instrument.
[remainder of page intentionally left blank]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Agreement to be duly executed by their duly authorized officers, all as of the
day and year first above written.
VITAS HEALTHCARE CORPORATION
WITNESS:
/s/ [Signature Illegible] By: /s/ Mark W. Ohlendorf
- ------------------------ ---------------------------------
Name: Mark W. Ohlendorf
/s/ [Signature Illegible] Title: Vice President
- ------------------------
5
<PAGE>
NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION, as Agent
By: /s/ Allison Freeland
-------------------------------
Name: Allison Freeland
-----------------------------
Title: Vice President
NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION, as Lender
By: /s/ Allison Freeland
-------------------------------
Name: Allison Freeland
-----------------------------
Title: Vice President
6
<PAGE>
GUARANTORS:
VITAS HEALTHCARE CORPORATION OF
FLORIDA
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: Vice President
VITAS HEALTHCARE CORPORATION OF OHIO
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: Vice President
VITAS HEALTHCARE CORPORATION OF
PENNSYLVANIA
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: Vice President
VITAS HEALTHCARE CORPORATION OF
CALIFORNIA
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: Vice President
7
<PAGE>
EXHIBIT 10.43
AMENDMENT NO. 2 TO
AMENDED AND RESTATED
REVOLVING CREDIT, TERM LOAN AND REIMBURSEMENT AGREEMENT
THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN
AND REIMBURSEMENT AGREEMENT (the "Amendment Agreement") dated March 28, 1996, is
made by and among VITAS HEALTHCARE CORPORATION, a Delaware corporation (the
"Borrower") , and NATIONSBANK, NATIONAL ASSOCIATION (SOUTH) (successor by merger
of NationsBank of Florida, National Association), a national banking
association, (the "Lender") and NATIONSBANK, NATIONAL ASSOCIATION (SOUTH), as
Agent for the Lender;
W I T N E S S E T H:
WHEREAS, the Lender by an Amended and Restated Revolving Credit, Term Loan
and Reimbursement Agreement dated as of February 17, 1995, as amended by
Amendment No. 1 dated July 21, 1995 as so amended (the "Agreement"), has agreed
to make available and has made available to Borrower a Revolving Credit Facility
(as defined in the Agreement) of up to $20,000,000 and a Term Loan (as defined
in the Agreement) of $25,000,000; and
WHEREAS, the Lender and the Borrower have agreed to amend the Agreement in
the manner set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions herein set forth, it is hereby agreed as follows:
1. The term "Agreement" as used herein and in the Agreement, the
Guaranties, the Notes and the other Loan Documents (as defined in the
"Agreement") shall mean the Agreement as hereby amended and modified. Unless the
context otherwise requires, all capitalized terms used herein and in the other
Loan Documents without definition shall have the respective meanings provided
therefor in the Agreement, as hereby amended.
2. Subject to the conditions set forth in paragraph 5 hereof, the
Agreement shall be and hereby is amended, effective as of December 31, 1995, as
follows:
(a) The definition of "Consolidated Fixed Charge Ratio" appearing in
Section 1.01 is amended in its entirety to read as follows:
"'Consolidated Fixed Charge Ratio' means, with respect to the
Borrower and its Subsidiaries, the ratio of (i) Consolidated EBITDAR
minus Capital Expenditures (other than (a) Capital Expenditures of
up to $2,300,000 in the aggregate incurred in connection with the
operation of the business acquired in the CHC Transaction and (b)
Capital Expenditures incurred under Capital Leases) to (ii)
Consolidated Fixed Charges; which ratio
<PAGE>
shall be calculated (x) for each fiscal quarter ending on December
31, 1995, March 31, 1996 and June 30, 1996 based on the annualized
operations of the Borrower and its Subsidiaries for the period
beginning October 1, 1995 and ending as of the end of each such
quarter period, as the case may be, and (y) after June 30, 1996 for
the Four-Quarter Period ending on the date of computation."
(b) The definition of "Consolidated Interest Coverage Ratio"
appearing in Section 1.01 is amended in its entirety to read as follows:
"'Consolidated Interest Coverage Ratio' means, with respect to
the Borrower and its Subsidiaries, the ratio of (a) Consolidated Net
Income plus to the extent deducted in determining Consolidated Net
Income (i) taxes based on income accrued during such period, (ii)
Consolidated Interest Expense, and (iii) all contributions to the
ESOP made or accrued by the Borrower during such period related to
the ESOP Debt to (b) Consolidated Interest Expense; which ratio
shall be calculated (x) for each fiscal quarter ending on December
31, 1995, March 31, 1996 and June 30, 1996 based on the annualized
operations of the Borrower and its Subsidiaries for the period
beginning October 1, 1995 and ending as of the end of each such
quarter period, as the case may be, and (y) after June 30, 1996 for
the Four-Quarter Period ending on the date of computation."
(c) The definition of "Consolidated Leverage Ratio" appearing in
Section 1.01 is amended in its entirety to read as follows:
"'Consolidated Leverage Ratio' means the ratio of Consolidated
Funded Indebtedness to Consolidated EBITDA (i) for each fiscal
quarter ending on December 31, 1995, March 31, 1996 and June 30,
1996 based on the annualized operations of the Borrower and its
Subsidiaries for the period beginning October 1, 1995 and ending as
of the end of each such quarter period, as the case may be, and (ii)
after June 30, 1996 for the Four-Quarter Period ending on the date
of computation."
(d) Clause (i) of Section 9.01 is amended in its entirety to read as
follows:
"***(i) $20,000,000 at December 31, 1995 and ****"
(e) Section 9.03 through Section 9.05 are hereby amended in their
entirety to read as follows:
"9.03 Consolidated Interest Coverage Ratio. Permit at any time
during the periods set forth below the
2
<PAGE>
Consolidated Interest Coverage Ratio to be less than the respective
amount set forth opposite each such period:
Period Ratio
------ -----
October 1, 1995 through 1.50 to 1.00
December 31, 1995
January 1, 1996 through 1.75 to 1.00
March 31, 1996
April 1, 1996 through 1.75 to 1.00
June 30, 1996
July 1, 1996 and thereafter 2.00 to 1.00
9.04 Consolidated Leverage Ratio. Permit at any time during
the periods set forth below the Consolidated Leverage Ratio to be
more than the respective amount set forth opposite each such period:
Period Ratio
------ -----
October 1, 1995 through 3.75 to 1.00
December 31, 1995
January 1, 1996 through 3.75 to 1.00
March 31, 1996
April 1, 1996 through 3.50 to 1.00
June 30, 1996
July 1, 1996 and thereafter 3.00 to 1.00
9.05 Consolidated Fixed Charge Ratio. Permit at any time
during the respective periods set forth below the Consolidated Fixed
Charge Ratio to be less than the respective amount set forth
opposite such period:
Period Ratio
------ -----
October 1, 1995 through 1.00 to 1.00
December 31, 1995
January 1, 1996 through 1.00 to 1.00
March 31, 1996
April 1, 1996 through 1.10 to 1.00
June 30, 1996
July 1, 1996 and thereafter 1.10 to 1.00
3. Each of the Subsidiaries of the Borrower who has previously delivered a
Guaranty to the Agent has joined in the execution of this Amendment Agreement
for the purpose of consenting to this Amendment Agreement and affirming its
respective guaranty of the Obligations of Borrower arising under the Agreement
as amended by this Amendment Agreement.
4. The Borrower hereby represents and warrants to the Agent and the Lender
that as of the date hereof the Agreement has been re-examined by the Borrower
and:
3
<PAGE>
(i) The representations and warranties made by the Borrower therein
and in the other Loan Documents (including the Schedules to the Agreement
and the other Loan Documents) are true, complete and correct in all
material respects on and as of the date hereof, are hereby reaffirmed, and
shall survive the execution and delivery of this Amendment Agreement;
(ii) The execution, delivery and performance of this Amendment
Agreement will not conflict with or result in the breach of any of the
provisions of, or cause a default under, the Articles of Incorporation or
Bylaws of the Borrower, or any applicable law, rule or regulation, or any
judgment, order, writ, injunction or decree of any court, administrative
agency or other government instrumentality to which the Borrower or any
Subsidiary is subject or any agreement or instrument to which the Borrower
or any Subsidiary is a party, the effect of which would have any material
adverse effect on the ability of the Borrower or any Guarantor to observe
the covenants and agreements contained in the Agreement, as amended
hereby, or in any other Loan Document or any of the CHC Transaction
Documents or to pay the Obligations, and will not result in the creation
or imposition of any security interest, lien, charge or encumbrance on any
of the assets of the Borrower or any Subsidiary.
5. As conditions to the effectiveness of this Amendment Agreement there
shall not have occurred either (i) any Default or Event of Default which shall
not have been waived or (ii) any material adverse change in the business,
financial condition or operations of the Borrower or any Subsidiary since
September 30, 1996.
6. This Amendment Agreement sets forth the entire understanding and
agreement of the parties hereto in relation to the subject matter hereof and
supersedes any prior negotiations and agreements among the parties relative to
such subject matter. No promise, condition, representation or warranty, express
or implied, not herein set forth shall bind any party hereto, and none of them
has relied on any such promise, condition, representation or warranty. Each of
the parties hereto acknowledges that, except as in this Amendment Agreement
otherwise expressly stated, no representations, warranties or commitments,
express or implied, have been made by any party to the other.
7. Except as specifically amended, modified or supplemented by this
Amendment Agreement, all of the other documents delivered in connection with the
Loans, as heretofore amended, are hereby confirmed and ratified in all respects
and shall remain in full force and effect according to their respective terms.
8. Should any stamp or excise tax become payable under the laws of the
United States or of any state or any subdivision
4
<PAGE>
thereof or municipality therein in respect of this Amendment Agreement, the
Borrower shall pay the same (including interest penalties, if any) and shall
hold the Bank and the Agent harmless with respect thereto.
9. This Amendment Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original as against any party whose
signature appears thereon, and all of which shall together constitute one and
the same instrument.
[remainder of page intentionally left blank]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Agreement to be duly executed by their duly authorized officers, all as of the
day and year first above written.
VITAS HEALTHCARE CORPORATION
WITNESS:
/s/ [Signature Illegible] By: /s/ Mark W. Ohlendorf
- ------------------------ ---------------------------------
Name: Mark W. Ohlendorf
/s/ [Signature Illegible] Title: Vice President
- ------------------------
6
<PAGE>
NATIONSBANK, NATIONAL ASSOCIATION
(SOUTH), as Agent
By: /s/ Sugeet Manchanda
-------------------------------
Name: Sugeet Manchanda
-----------------------------
Title: Vice President
NATIONSBANK, NATIONAL ASSOCIATION
(SOUTH), as Lender
By: /s/ Sugeet Manchanda
-------------------------------
Name: Sugeet Manchanda
-----------------------------
Title: Vice President
7
<PAGE>
GUARANTORS:
VITAS HEALTHCARE CORPORATION OF
FLORIDA
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: Vice President
VITAS HEALTHCARE CORPORATION OF OHIO
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: Vice President
VITAS HEALTHCARE CORPORATION OF
PENNSYLVANIA
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: Vice President
VITAS HEALTHCARE CORPORATION OF
CALIFORNIA
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: Vice President
8
<PAGE>
EXHIBIT 10.44
AMENDMENT NO. 3 TO
AMENDED AND RESTATED
REVOLVING CREDIT, TERM LOAN AND REIMBURSEMENT AGREEMENT
THIS AMENDMENT NO. 3 TO AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN
AND REIMBURSEMENT AGREEMENT (the "Amendment") dated September 30, 1996, is made
by and among VITAS HEALTHCARE CORPORATION, a Delaware corporation (the
"Borrower") , and NATIONSBANK, NATIONAL ASSOCIATION (SOUTH) (successor by merger
of NationsBank of Florida, National Association) , a national banking
association (the "Lender") and NATIONSBANK, NATIONAL ASSOCIATION (SOUTH) , as
Agent for the Lender;
W I T N E S S E T H:
WHEREAS, the Lender, by an Amended and Restated Revolving Credit, Term
Loan and Reimbursement Agreement dated as of February 17, 1995, as amended by
Amendment No. 1 dated as of June 30, 1995, by Amendment No. 2 dated March 28,
1996, and by a letter agreement dated August 5, 1996 (the "Agreement") , has
agreed to make available and has made available to Borrower a Revolving Credit
Facility (as defined in the Agreement) of up to $20,000,000 and a Term Loan (as
defined in the Agreement) of $25,000,000; and
WHEREAS, the Borrower has requested that the Revolving Credit Termination
Date and the Term Loan Maturity Date (each as defined in the Agreement) provided
for in the Agreement be extended as herein specified; and
WHEREAS, the Lender and the Borrower have agreed to amend the Agreement in
the manner set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions herein set forth, it is hereby agreed as follows:
1. The term "Agreement" as used herein and in the Agreement, the
Guaranties, the Notes and the other Loan Documents (each as defined in the
Agreement) shall mean the Agreement as hereby amended and modified. Unless the
context otherwise requires, all capitalized terms used herein and in the other
Loan Documents without definition shall have the respective meanings provided
therefor in the Agreement.
2. Subject to and upon satisfaction of the conditions set forth in
paragraph 6 hereof, the Agreement shall be and hereby is amended as follows:
(a) Two new definitions are added to Section 1.01 which shall read
as follows:
<PAGE>
"'Apria Acquisition Agreement' means that certain Agreement
and Plan of Merger among Apria Healthcare Group Inc., Apria Number
Two, Inc. and the Borrower dated as of June 28, 1996, as amended, a
copy of which Apria Acquisition Agreement has been delivered to the
Agent and the Lender;"
"'Apria Transaction' means the acquisition of the Borrower as
provided for in the Apria Acquisition Agreement;"
(b) The definitions of each of "Revolving Credit Termination Date"
and "Term Loan Maturity Date" are amended by deleting clause (i) and
substituting in lieu thereof the following clause (i): "(i) November 15,
1996 or such earlier date upon which the Apria Transaction shall be
consummated, or cancelled or otherwise terminated,";
(c) Sections 9.02, 9.03, 9.04 and 9.05 are amended by deleting the
phrase "Permit at any time" in each of such Sections and substituting in
lieu thereof the phrase "Permit as at the end of any fiscal quarter of the
Borrower"; and
(d) Section 8.l2 is hereby amended by inserting the following
proviso at the end thereof:
"; provided, however, that with respect to any Default or
Event of Default under Sections 9.02 through 9.05, in no event shall
any such notification be required to be made prior to the earlier to
occur of (i) delivery of any financial report pursuant to Section
8.01(b) hereof or (ii) the day upon which the Apria Transaction
shall be terminated or cancelled."
3. Each of the Subsidiaries of the Borrower who has previously delivered a
Guaranty to the Agent has joined in the execution of this Amendment for the
purposes of consenting to this amendment and affirming its guaranty of the
Obligations of Borrower arising under the Agreement and the other Loan Documents
as amended by this Amendment.
4. The Borrower hereby represents and warrants to the Agent and the Lender
that as of the date hereof the Agreement has been re-examined by the Borrower
and:
(i) The representations and warranties made by the Borrower therein
and in the other Loan Documents (including the Schedules to the Agreement
and the other Loan Documents) as modified to give effect to the
information contained in the disclosure schedules delivered by the
Borrower (the "Vitas Disclosure Schedules") in connection with its
execution and delivery of the Apria Acquisition Agreement, are true,
complete and correct in all material respects on and as of the
2
<PAGE>
date hereof, and shall survive the execution and delivery of this
Amendment;
(ii) The execution, delivery and performance of this Amendment will
not conflict with or result in the breach of any of the provisions of, or
cause a default under, the Articles of Incorporation or Bylaws of the
Borrower, or any applicable law, rule or regulation, or any judgment,
order, writ, injunction or decree of any court, administrative agency or
other government instrumentality to which the Borrower or any Subsidiary
is subject or any agreement or instrument to which the Borrower or any
Subsidiary is a party, the effect of which would have any material adverse
effect on the ability of the Borrower or any Guarantor to observe the
covenants and agreements contained in the Agreement or in any other Loan
Document or any of the CHC Transaction Documents or to pay the
Obligations, and will not result in the creation or imposition of any
security interest, lien, charge or encumbrance on any of the assets of the
Borrower or any Subsidiary.
5. The Borrower acknowledges that consummation of the Apria Transaction
would constitute a violation of Section 9.12 of the Agreement and Section 5.12
of the ESOP Guaranty, and the Borrower agrees that it shall cause the ESOP Debt
and all interest accrued thereon and other liabilities owing to the Lenders (as
defined in the ESOP Guaranty) and the Agent (as defined in the ESOP Guaranty)
arising under or in connection with the ESOP Loan Documents to be paid and
satisfied in full substantially simultaneously with the consummation of the
Apria Transaction.
6. As conditions to the effectiveness of this Amendment Agreement:
A. the Borrower shall have delivered to the Agent:
(a) duly executed counterparts of this Amendment; and
(b) the Vitas Disclosure Schedules and such other documents,
certifications and opinions as the Agent may reasonably request; and
B. there shall not have occurred either (i) any Default or Event of
Default which shall not have been waived or (ii) any material adverse
change in the business, financial condition or operations of the Borrower
or any Subsidiary since June 30, 1900, except as disclosed in the Vitas
Disclosure Schedules.
7. This Amendment sets forth the entire understanding and agreement of the
parties hereto in relation to the subject matter hereof and supersedes any prior
negotiations and agreements among the parties relative to such subject matter.
No promise, condi-
3
<PAGE>
tion, representation or warranty, express or implied, not herein set forth shall
bind any party hereto, and none of them has relied on any such promise,
condition, representation or warranty. Each of the parties hereto acknowledges
that, except as in this Amendment otherwise expressly stated, no
representations, warranties or commitments, express or implied, have been made
by any party to the other.
8. Except as specifically amended, modified or supplemented by this
Amendment, all of the other documents delivered in connection with the Loans, as
heretofore amended, shall remain in full force and effect according to their
respective terms.
9. Should any stamp or excise tax become payable under the laws of the
United States or of any state or any subdivision thereof or municipality therein
in respect of this Amendment, the Borrower shall pay the same (including
interest penalties, if any) and shall hold the Lender and the Agent harmless
with respect thereto.
10. This Amendment may be executed in any number of counterparts, each of
which shall be deemed to be an original as against any party whose signature
appears thereon, and all of which shall together constitute one and the same
instrument.
[remainder of page intentionally left blank]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their duly authorized officers, all as of the day and year
first above written.
VITAS HEALTHCARE CORPORATION
WITNESS:
/s/ [Signature Illegible] By: /s/ Hugh A. Westbrook
- ------------------------ ---------------------------------
Name: Hugh A. Westbrook
/s/ [Signature Illegible] Title: Chairman and Chief Executive Officer
- ------------------------
5
<PAGE>
NATIONSBANK, NATIONAL ASSOCIATION
(SOUTH), as Agent
By: /s/ Allison S. Freeland
---------------------------------
Name: Allison S. Freeland
Title: Vice President
NATIONSBANK, NATIONAL ASSOCIATION
(SOUTH), as Lender
By: /s/ Allison S. Freeland
---------------------------------
Name: Allison S. Freeland
Title: Vice President
6
<PAGE>
GUARANTORS:
VITAS HEALTHCARE CORPORATION OF
FLORIDA
By: /s/ Hugh A. Westbrook
----------------------------
Name: Hugh A. Westbrook
Title: Chairman, President and
Chief Executive Officer
VITAS HEALTHCARE CORPORATION OF OHIO
By: /s/ Hugh A. Westbrook
----------------------------
Name: Hugh A. Westbrook
Title: Chairman, President and
Chief Executive Officer
VITAS HEALTHCARE CORPORATION OF
PENNSYLVANIA
By: /s/ Hugh A. Westbrook
----------------------------
Name: Hugh A. Westbrook
Title: Chairman, President and
Chief Executive Officer
VITAS HEALTHCARE CORPORATION OF
CALIFORNIA
By: /s/ Hugh A. Westbrook
----------------------------
Name: Hugh A. Westbrook
Title: Chairman, President and
Chief Executive Officer
VITAS HEALTHCARE CORPORATION OF
CENTRAL FLORIDA
By: /s/ Hugh A. Westbrook
----------------------------
Name: Hugh A. Westbrook
Title: Chairman, President and
Chief Executive Officer
7
<PAGE>
EXHIBIT 10.45
AMENDMENT NO. 4 TO
AMENDED AND RESTATED
REVOLVING CREDIT, TERM LOAN AND REIMBURSEMENT AGREEMENT
AND RELATED DOCUMENTS
THIS AMENDMENT NO. 4 TO AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN
AND REIMBURSEMENT AGREEMENT AND RELATED DOCUMENTS (the "Amendment") dated as of
November 1, 1996, is made by and among VITAS HEALTHCARE CORPORATION, a Delaware
corporation (the "Borrower"), and NATIONSBANK, NATIONAL ASSOCIATION (SOUTH)
(successor by merger of NationsBank of Florida, National Association), a
national banking association (the "Lender"), and NATIONSBANK, NATIONAL
ASSOCIATION (SOUTH), as Agent for the Lender;
W I T N E S S E T H:
WHEREAS, the Lender, by an Amended and Restated Revolving Credit, Term
Loan and Reimbursement Agreement dated as of February 17, 1995, as amended by
Amendment No. 1 dated as of June 30, 1995, by Amendment No. 2 dated March 28,
1996, by a letter agreement dated August 5, 1996, and by Amendment No. 3 dated
September 30, 1996 (the "Agreement"), has agreed to make available and has made
available to Borrower a Revolving Credit Facility (as defined in the Agreement)
of up to $20,000,000 and a Term Loan (as defined in the Agreement) of
$25,000,000; and
WHEREAS, in connection with the loan by the Lender to the ESOP (as defined
in the Agreement), the Borrower executed and delivered to the Lender the ESOP
Guaranty (as defined in the Agreement); and
WHEREAS, each of the Revolving Credit Termination Date and the Term Loan
Maturity Date (each as defined in the Agreement) has occurred and the Apria
Transaction has been terminated, and the Borrower has requested that the
Revolving Credit Termination Date and the Term Loan Maturity Date provided for
in the Agreement be extended as herein specified; and
WHEREAS, the Lender and the Borrower have agreed to amend the Agreement in
the manner set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions herein set forth, it is hereby agreed as follows:
1. The term "Agreement" as used herein and in the Agreement, the
Guaranties, the Notes and the other Loan Documents (each as defined in the
Agreement), and the term "Revolving Credit Agreement" as used in the ESOP
Guaranty and the other ESOP Loan Documents (as defined in the Agreement) shall
mean the Agreement as heretofore and hereby amended and modified. Unless the
<PAGE>
context otherwise requires, all capitalized terms used herein and in the other
Loan Documents without definition shall have the respective meanings provided
therefor in the Agreement.
2. Subject to and upon satisfaction of the conditions set forth in
paragraph 6 hereof, the Agreement shall be and hereby is amended as follows:
(a) The definitions of each of "Revolving Credit Termination Date"
and "Term Loan Maturity Date" are amended by deleting clause (i) and
substituting in lieu thereof the following clause (i): "(i) February 15,
1997,";
(b) The definition of "Total Revolving Credit Commitment" is amended
by deleting the amount "$20,000,000" and substituting in lieu thereof the
amount "$11,600,000";
(c) Section 8.01(b) is amended by (x) deleting from lines 2 and 3
thereof the phrase "other than the last month of each Fiscal Year", (y)
deleting the parenthetical from clause (iii) thereof; and (z) substituting
the word "month" for the word "quarter" in the next to last line thereof;
(d) Section 9.01 is amended to read as follows:
"9.01 Consolidated Shareholders' Equity. Permit Consolidated
Shareholders' Equity to be less than $10,000,000 as at the last day
of each calendar month.";
(e) The provisions of Sections 9.02, 9.03, 9.04 and 9.05 (together
with the related requirements in Sections 8.01(a)(ii) and 8.0l(b)(iii) to
furnish compliance calculations and certifications with respect to such
Sections) are suspended to and including the Revolving Credit Termination
Date;
(f) The text of clause (iv) of Section 9.06 is deleted in its
entirety and the reference "[reserved]" is substituted in lieu thereof;
(g) The text of each of clauses (iv), (v) and (vi) of Section 9.09
is deleted in its entirety and the reference "[reserved]" is substituted
in lieu thereof; and
(h) Section 9.10 is amended by (w) inserting in the text of clause
(i) after the phrase "Preferred Stock", the phrase "after February 15,
1997"; (x) inserting in the text of clause (ii) after the phrase
"Preferred Stock Redemptions" the phrase "after February 15, 1997"; (y)
inserting in the text of clause (iii) after the phrase "Qualified Equity
Securities", the phrase "after February 15, 1997"; and (z) inserting a "."
after the word "hereunder" in the proviso of such section and deleting all
text after the word "hereunder" in such proviso.
3. Subject to and upon satisfaction of the conditions set forth in
paragraph 6 hereof; the ESOP Guaranty shall be and hereby is amended as follows:
2
<PAGE>
(a) Section 4.01(b) is amended by (x) deleting from lines 2 and 3
thereof the phrase "other than the last month of each fiscal year", (y)
deleting the first parenthetical from clause (ii) thereof; and (z)
substituting the word "month" for the word "quarter" in clause (iii)
thereof;
(b) Section 5.01 is amended to read as follows:
"5.01 Consolidated Shareholders' Equity. Permit Consolidated
Shareholders' Equity to be less than $10,000,000 at any time."
(c) The provisions of Sections 5.02, 5.03, 5.04 and 5.05 (together
with the related requirements in Sections 4.01(a)(ii) and 4.01(b)(ii) to
furnish compliance calculations and certifications with respect to such
Sections) are suspended to and including the Revolving Credit Termination
Date (as defined in the Revolving Credit Agreement);
(d) The text of clause (iv) of Section 5.06 is deleted in its
entirety and the reference "[reserved]" is substituted in lieu thereof;
(e) The text of each of clauses (iv), (v) and (vi) of Section 5.09
is deleted in its entirety and the reference "[reserved]" is substituted
in lieu thereof; and
(f) Section 5.10 is amended by (w) inserting in the text of clause
(i) after the phrase "Preferred Stock", the phrase "after February 15,
1997"; (x) inserting in the text of clause (ii) after the phrase
"Preferred Stock Redemptions" the phrase "after February 15, 1997"; (y)
inserting in the text of clause (iii) after the phrase "Qualified Equity
Securities", the phrase "after February 15, 1997"; and (z) inserting a"."
after the word "hereunder" in the proviso of such section and deleting all
text after the word "hereunder" in such proviso.
4. Each of the Subsidiaries of the Borrower who has previously delivered a
Guaranty to the Agent has joined in the execution of this Amendment for the
purposes of consenting to this Amendment and affirming its guaranty and of the
Obligations of Borrower arising under the Agreement and the other Loan Documents
as amended by this Amendment, and of its other undertakings and obligations
under each of the other Loan Documents and ESOP Loan Documents to which it is a
signatory.
5. The Borrower hereby represents and warrants to the Agent and the Lender
that as of the date hereof the Agreement has been re-examined by the Borrower
and:
(i) The representations and warranties made by the Borrower therein
and in the other Loan Documents (including the Schedules to the Agreement
and the other Loan Documents) as modified to give effect to the
information contained in the disclosure schedules delivered by the
Borrower (the "Vitas Disclosure Schedules") in connection with its
execution and delivery of the Apria Acquisition Agreement and the
financial and other information previously provided to the Agent and the
Lender by the Borrower in writing (the "Vitas
3
<PAGE>
Information"), are true, complete and correct in all material respects on
and as of the date hereof, and shall survive the execution and delivery of
this Amendment;
(ii) The execution, delivery and performance of this Amendment will
not conflict with or result in the breach of any of the provisions of; or
cause a default under, the Articles of Incorporation or Bylaws of the
Borrower, or any applicable law, rule or regulation, or any judgment,
order, writ, injunction or decree of any court, administrative agency or
other government instrumentality to which the Borrower or any Subsidiary
is subject or any agreement or instrument to which the Borrower or any
Subsidiary is a party, the effect of which would have any material adverse
effect on the ability of the Borrower or any Guarantor to observe the
covenants and agreements contained in the Agreement or in any other Loan
Document or any of the CHC Transaction Documents or to pay the
Obligations, and will not result in the creation or imposition of any
security interest, lien, charge or encumbrance on any of the assets of the
Borrower or any Subsidiary.
6. As conditions to the effectiveness of this Amendment Agreement:
A. the Borrower shall have delivered to the Agent:
(a) counterparts of this Amendment duly executed by the
Borrower and each of the Guarantors;
(b) a copy of a Certificate of Amendment to the Amended and
Restated Certificate of Incorporation of Vitas Healthcare
Corporation providing for a new redemption schedule for the 9%
Cumulative Non-Convertible Preferred Stock of Borrower;
(c) such other documents and certifications as the Agent or
the Lender may reasonably request;
(d) $4,000,000 (which may include funds received in connection
with the termination of the Apria Transaction) to be applied to the
reduction of the outstanding principal amount of the Revolving
Credit Loans; and
(e) all accrued and unpaid interest previously billed by the
Agent and not heretofore paid.
B. there shall not have occurred either (i) any Default or Event of
Default which shall not have been waived or (ii) any material adverse
change in the business, financial condition or operations of the Borrower
or any Subsidiary since September 30, 1996, except as disclosed in the
Vitas Disclosure Schedules, the Vitas Information and other than the
termination of the Apria Transaction.
7. This Amendment sets forth the entire understanding and agreement of the
parties hereto in relation to the subject matter hereof and supersedes any prior
negotiations and agreements
4
<PAGE>
among the parties relative to such subject matter. No promise, condition,
representation or warranty, express or implied, not herein set forth shall bind
any party hereto, and none of them has relied on any such promise, condition,
representation or warranty. Each of the parties hereto acknowledges that, except
as in this Amendment otherwise expressly stated, no representations, warranties
or commitments, express or implied, have been made by any party to the other.
8. Except as specifically amended, modified or supplemented by this
Amendment, all of the other documents delivered in connection with the Loans, as
heretofore amended, shall remain in full force and effect according to their
respective terms.
9. Should any stamp or excise tax become payable under the laws of the
United States or of any state or any subdivision thereof or municipality therein
in respect of this Amendment, the Borrower shall pay the same (including
interest penalties, if any) and shall hold the Lender and the Agent harmless
with respect thereto.
10. This Amendment may be executed in any number of counterparts, each of
which shall be deemed to be an original as against any party whose signature
appears thereon, and all of which shall together constitute one and the same
instrument.
[remainder of page intentionally left blank]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their duly authorized officers, all as of the day and
year first above written.
VITAS HEALTHCARE CORPORATION
WITNESS:
/s/ [Signature Illegible] By: /s/ Mark W. Ohlendorf
- ------------------------ ---------------------------------
Name: Mark W. Ohlendorf
/s/ [Signature Illegible] Title: Vice President, Chief Financial
- ------------------------ Officer and Treasurer
6
<PAGE>
NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION
(SOUTH), as Agent
By: /s/ Michael Sylvester
-------------------------------
Name: Michael B. Sylvester
-----------------------------
Title: Officer
-----------------------------
NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION
(SOUTH), as Lender
By: /s/ Michael Sylvester
-------------------------------
Name: Michael B. Sylvester
-----------------------------
Title: Officer
-----------------------------
7
<PAGE>
GUARANTORS:
VITAS HEALTHCARE CORPORATION OF
FLORIDA
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: VP
VITAS HEALTHCARE CORPORATION OF OHIO
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: VP
VITAS HEALTHCARE CORPORATION OF
PENNSYLVANIA
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: VP
VITAS HEALTHCARE CORPORATION OF
CALIFORNIA
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: VP
VITAS HEALTHCARE CORPORATION OF
CENTRAL FLORIDA
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: VP
8
<PAGE>
EXHIBIT 10.46
AMENDMENT NO. 5 TO
AMENDED AND RESTATED
REVOLVING CREDIT, TERM LOAN AND REIMBURSEMENT AGREEMENT
AND RELATED DOCUMENTS
THIS AMENDMENT NO. 5 TO AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN
AND REIMBURSEMENT AGREEMENT AND RELATED DOCUMENTS (the "Amendment") dated as of
February 15, 1997, is made by and among VITAS HEALTHCARE CORPORATION, a Delaware
Corporation (the "Borrower"), and NATIONSBANK, NATIONAL ASSOCIATION (SOUTH)
(successor by merger of NationsBank of Florida, National Association), a
national banking association (the "Lender"), and NATIONSBANK, NATIONAL
ASSOCIATION (SOUTH), as Agent for the Lender;
W I T N E S S E T H:
WHEREAS, the Lender, by an Amended and Restated Revolving Credit, Term
Loan and Reimbursement Agreement dated as of February, 17, 1995, as amended by
Amendment No. 1 dated as of June 30, 1995, by Amendment No. 2 dated March 28,
1996, by a letter agreement dated August 5, 1996, by Amendment No. 3 dated
September 30, 1996 and by Amendment No. 4 dated as of November 1, 1996 (the
"Agreement"), has agreed to make available and has made available to Borrower a
Revolving Credit Facility (as defined in the Agreement) of up to $11,600,000 and
a Term Loan (as defined in the Agreement) of $25,000,000; and
WHEREAS, in connection with the loan by the Lender to the ESOP (as defined
in the Agreement), the Borrower executed and delivered to the Lender the ESOP
Guaranty (as defined in the Agreement); and
WHEREAS, the Borrower has requested that the Revolving Credit Termination
Date and the Term Loan Maturity Date provided for in the Agreement be extended
as herein specified; and
WHEREAS, the Lender is willing to extend the maturity dates on a
short-term basis so long as certain payments to holders of preferred stock are
deferred and certain other provisions of the Agreement are further amended; and
WHEREAS, the Lender and the Borrower have agreed to amend the Agreement in
the manner set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions herein set forth, it is hereby agreed as follows:
<PAGE>
1. The term "Agreement" as used herein and in the Agreement, the
Guaranties, the Notes and the other Loan Documents (each as defined in the
Agreement), and the term "Revolving Credit Agreement" as used in the ESOP
Guaranty and the other ESOP Loan Documents (as defined in the Agreement) shall
mean the Agreement as heretofore and hereby amended and modified. Unless the
context otherwise requires, all capitalized terms used herein and in the other
Loan Documents without definition shall have the respective meanings provided
therefor in the Agreement.
2. Subject to and upon satisfaction of the conditions set forth in
paragraph 6 hereof, the Agreement shall be and hereby is amended as follows:
(a) The definitions of each of "Revolving Credit Termination Date"
and "Term Loan Maturity Date" are amended by deleting clause (i) and
substituting in lieu thereof the following clause (i): "(i) March 24,
1997,";
(b) The definition of "Total Revolving Credit Commitment" is amended
by deleting the amount "$11,600,000" and substituting in lieu thereof the
amount "$8,850,000; and
(c) Section 9.10 is amended by (w) inserting in the text of clause
(i) after the phrase "Preferred Stock", the phrase "after March 31, 1997";
(x) inserting in the text of clause (ii) after the phrase "Preferred Stock
Redemptions" the phrase "after March 31, 1997"; and (y) inserting in the
text of clause (iii) after the phrase "Qualified Equity Securities", the
phrase "after March 31, 1997".
3. Subject to and upon satisfaction of the conditions set forth in
paragraph 6 hereof, Section 5.10 of the ESOP Guaranty shall be and hereby is
amended by (w) inserting in the text of clause (i) after the phrase "Preferred
Stock", the phrase "after March 31, 1997"; (x) inserting in the text of clause
(ii) after the phrase "Preferred Stock Redemptions" the phrase "after March
31,1997"; and (y) inserting in the text of clause (iii) after the phrase
"Qualified Equity Securities", the phrase "after March 31, 1997".
4. Each of the Subsidiaries of the Borrower who has previously delivered a
Guaranty to the Agent has joined in the execution of this Amendment for the
purposes of consenting to this Amendment and affirming its guaranty and of the
Obligations of Borrower arising under the Agreement and the other Loan Documents
as amended by this Amendment, and of its other undertakings and obligations
under each of the other Loan Documents and ESOP Loan Documents to which it is a
signatory.
5. The Borrower hereby represents and warrants to the Agent and the Lender
that as of the date hereof the Agreement has been re-examined by the Borrower
and:
(i) The representations and warranties made by the Borrower therein
and in the other Loan Documents (including the Schedules to the Agreement
and the other Loan Documents) as modified to give effect to the
information contained in the disclosure schedules delivered by the
Borrower (the "Vitas Disclosure Schedules") in connection with its
execution and delivery of the Apria Acquisition Agreement and the
financial and other information
2
<PAGE>
previously provided to the Agent and the Lender by the Borrower in writing
(the "Vitas Information"), are true, complete and correct in all material
respects on and as of the date hereof, and shall survive the execution and
delivery of this Amendment;
(ii) The execution, delivery and performance of this Amendment will
not conflict with or result in the breach of any of the provisions of, or
cause a default under, the Articles of Incorporation or Bylaws of the
Borrower, or any applicable law, rule or regulation, or any judgment,
order, writ, injunction or decree of any court, administrative agency or
other government instrumentality, to which the Borrower or any Subsidiary
is subject or any agreement or instrument to which the Borrower or any
Subsidiary is a party, the effect of which would have any material adverse
effect on the ability of the Borrower or any Guarantor to observe the
covenants and agreements contained in the Agreement or in any other Loan
Document or any of the CHC Transaction Documents or to pay the
Obligations, and will not result in the creation or imposition of any
security interest, lien, charge or encumbrance on any of the assets of the
Borrower or any Subsidiary.
6. As conditions to the effectiveness of this Amendment Agreement:
A. the Borrower shall have delivered to the Agent:
(a) counterparts of this Amendment duly executed by the
Borrower and each of the Guarantors,
(b) a copy of a Certificate of Amendment to the Amended and
Restated Certificate of Incorporation of Vitas Healthcare
Corporation providing for a new redemption schedule for the 9%
Cumulative Non-Convertible Preferred Stock of Borrower;
(c) such other documents and certifications as the Agent or
the Lender may reasonably request; and
(d) all accrued and unpaid interest previously billed by the
Agent and not heretofore paid.
B. there shall not have occurred either (i) any Default or Event of
Default which shall not have been waived or (ii) any material adverse
change in the business, financial condition or operations of the Borrower
or any Subsidiary since September 30, 1996, except as disclosed in the
Vitas Disclosure Schedules, the Vitas Information and other than the
termination of the Apria Transaction.
7. This Amendment sets forth the entire understanding and agreement of the
parties hereto in relation to the subject matter hereof and supersedes any prior
negotiations and agreements among the parties relative to such subject matter.
No promise, condition, representation or warranty, express or implied, not
herein set forth shall bind any party hereto, and none of them has relied on any
such promise, condition, representation or warranty. Each of the parties hereto
acknowledges that,
3
<PAGE>
except as in this Amendment otherwise expressly stated, no representations,
warranties or commitments, express or implied, have been made by any party to
the other.
8. Except as specifically amended, modified or supplemented by this
Amendment, all of the other documents delivered in connection with the Loans, as
heretofore amended, shall remain in full force and effect according to their
respective terms.
9. Should any stamp or excise tax become payable under the laws of the
United States or of any state or any subdivision thereof or municipality therein
in respect of this Amendment, the Borrower shall pay the same (including
interest penalties, if any) and shall hold the Lender and the Agent harmless
with respect thereto.
10. This Amendment may be executed in any number of counterparts, each of
which shall be deemed to be an original as against any party whose signature
appears thereon, and all of which shall together constitute one and the same
instrument.
[remainder of page intentionally left blank]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their duly authorized officers, all as of the day and year
first above written.
VITAS HEALTHCARE CORPORATION
WITNESS:
/s/ [Signature Illegible] By: /s/ Mark W. Ohlendorf
- ------------------------ ---------------------------------
Name: Mark W. Ohlendorf
/s/ Melissa Smith Title: Vice President, Chief Financial
- ------------------------ Officer and Treasurer
5
<PAGE>
NATIONSBANK NATIONAL ASSOCIATION
(SOUTH), as Agent
By: /s/ S. Manchanda
-------------------------------
Name: S. Manchanda
-----------------------------
Title: Vice President
NATIONSBANK NATIONAL ASSOCIATION
(SOUTH), as Lender
By: /s/ S. Manchanda
-------------------------------
Name: S. Manchanda
-----------------------------
Title: Vice President
6
<PAGE>
GUARANTORS:
VITAS HEALTHCARE CORPORATION OF
FLORIDA
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: Vice President
VITAS HEALTHCARE CORPORATION OF OHIO
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: Vice President
VITAS HEALTHCARE CORPORATION OF
PENNSYLVANIA
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: Vice President
VITAS HEALTHCARE CORPORATION OF
CALIFORNIA
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: Vice President
VITAS HEALTHCARE CORPORATION OF
CENTRAL FLORIDA
By: /s/ Mark W. Ohlendorf
----------------------------
Name: Mark W. Ohlendorf
Title: Vice President
7
<PAGE>
EXHIBIT 10.47
AMENDMENT NO. 6 TO
AMENDED AND RESTATED
REVOLVING CREDIT, TERM LOAN AND REIMBURSEMENT AGREEMENT
AND RELATED DOCUMENTS
THIS AMENDMENT NO. 6 TO AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN
AND REIMBURSEMENT AGREEMENT AND RELATED DOCUMENTS (the "Amendment") dated as of
March 24, 1997, is made by and among VITAS HEALTHCARE CORPORATION, a Delaware
corporation (the "Borrower"), and NATIONSBANK, NATIONAL ASSOCIATION (SOUTH)
(successor by merger of NationsBank of Florida, National Association), a
national banking association (the "Lender"), and NATIONSBANK, NATIONAL
ASSOCIATION (SOUTH), as Agent for the Lender;
W I T N E S S E T H:
WHEREAS, the Lender, by an Amended and Restated Revolving Credit, Term
Loan and Reimbursement Agreement dated as of February 17, 1995, as amended by
Amendment No. 1 dated as of June 30, 1995, by Amendment No. 2 dated March 28,
1996, by a letter agreement dated August 5, 1996, by Amendment No. 3 dated
September 30, 1996, by Amendment No. 4 dated as of November 1, 1996 and by
Amendment No. 5 dated as of February 15, 1997 (the "Agreement"), has agreed to
make available and has made available to Borrower a Revolving Credit Facility
(as defined in the Agreement) of up to $8,850,000 and a Term Loan (as defined in
the Agreement) of $25,000,000; and
WHEREAS, in connection with the loan by the Lender to the ESOP (as defined
in the Agreement), the Borrower executed and delivered to the Lender the ESOP
Guaranty (as defined in the Agreement); and
WHEREAS, the Borrower has requested that the Revolving Credit Termination
Date and the Term Loan Maturity Date provided for in the Agreement be extended
as herein specified and that certain other terms and conditions of the Agreement
be further amended as herein provided; and
WHEREAS, the Lender is willing to extend the maturity dates on a
short-term basis so long as certain provisions of the Agreement are further
amended; and
WHEREAS, the Lender and the Borrower have agreed to amend the Agreement in
the manner set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions herein set forth, it is hereby agreed as follows:
<PAGE>
1. The term "Agreement" as used herein and in the Agreement, the
Guaranties, the Notes and the other Loan Documents (each as defined in the
Agreement), and the term "Revolving Credit Agreement" as used in the ESOP
Guaranty and the other ESOP Loan Documents (as defined in the Agreement) shall
mean the Agreement as heretofore and hereby amended and modified. Unless the
context otherwise requires, all capitalized terms used herein and in the other
Loan Documents without definition shall have the respective meanings provided
therefor in the Agreement.
2. Subject to and upon satisfaction of the conditions set forth in
paragraph 6 hereof, the Agreement shall be and hereby is amended as follows:
(a) The definition of "Applicable Interest Addition" in Section 1.01
is amended in its entirety so that as amended it shall read as follows:
"'Applicable Interest Addition' means, for each Revolving
Credit Loan that bears interest at a LIBOR Rate that percent per
annum, which shall be based upon the Consolidated EBITDA for the
one, two and three quarter periods ending on the dates specified
below:
Quarter Two Quarters Three Quarters
Ending Ending Ending Interest
6/30/97 9/30/97 12/31/97 Addition
-----------------------------------------------------------------
Consolidated a) Less than a) Less than a) Less than 2 1/2%
EBITDA $4,000,000 $6,500,000 $10,000,000
is
b) Equal to or b) Equal to or b) Equal to or 2 1/4%
Greater than Greater than Greater than
$4,000,000 $6,500,000 $10,000,000
but Less than but Less than
$8,000,000 $12,000,000
c) N/A c) Equal to or c) Equal to or 2%
Greater than Greater than
$8,000,000 $12,000,000
The Applicable Interest Addition shall be established at the end of
each of the above periods (the "Determination Date") beginning June
30, 1997. Any change in the Applicable Interest Addition shall be
determined based upon the computations set forth in the certificate
furnished to the Agent pursuant to Section 8.01, subject to review
and approval of such computations by the Agent, and shall be
effective commencing on the day following the date such certificate
is received, until the day following the date on which a new
certificate is delivered or is required to be delivered, whichever
shall first occur. If the Borrower shall fail to deliver any such
certificate within the time period required by Section 8.01, then
the Applicable
2
<PAGE>
Interest Addition shall be 2 1/2% until the appropriate certificate
is delivered. From the date of Amendment No. 6 to this Agreement
until the receipt of the certificate for the period ending June 30,
1997, the Applicable Interest Addition shall 2 1/2%."
(b) The definitions of each of "Revolving Credit Termination Date"
and "Term Loan Maturity Date" in Section 1.01 are amended by deleting
clause (i) and substituting in lieu thereof the following clause (i): "(i)
February 28, 1998";
(c) The definition of "Total Revolving Credit Commitment" in Section
1.01 is amended by deleting the amount "$8,850,000" and substituting in
lieu thereof the amount "$18,000,000";
(d) The definition of "Total Term Loan Commitment" in Section 1.01
is amended by deleting the amount "$25,000,000" and substituting in lieu
thereof the amount "$14,000,000";
(e) A new definition, "Consolidated EBITDA", is added to Section
1.01 immediately following the definition of "Consolidated Current
Liabilities" which definition shall read as follows:
"'Consolidated EBITDA' means, with respect to the Borrower and
its Subsidiaries, for any period of computation thereof Consolidated
EBITDAR less Consolidated Rentals;"
(f) Section 2.02 is hereby amended in its entirety so that as
amended it shall read as follows:
"2.02 Term Loan.
(a) Amount. Subject to the terms and conditions of this
Agreement, the Borrower and Lender agree that effective March 24,
1997 a $11,000,000 portion of the outstanding Term Loan shall be
converted to a Revolving Credit Loan to bear interest in accordance
with Section 2.01, so long as after giving effect to such transfer
and the borrowing of such amount pursuant to Section 2.01, the
amount of outstanding Revolving Credit Loans plus the amount of all
Outstanding Letters of Credit shall not exceed the Borrowing Base.
On March 24, 1997, the Term Loan amount shall be $14,000,000.
(b) Interest. The principal amount of the Term Loan shall bear
interest from March 24, 1997 through August 30, 1997 at a rate of
11% per annum, from August 31, 1997 through November 29, 1997 at a
rate of 11 1/2% and from and after November 30, 1997 at a rate of
12% per annum. Interest shall be paid to the Agent for the account
of each Lender on the outstanding and unpaid principal amount of the
Term Loan on the last Business Day of March, June, September and
December, commencing March 31, 1997."
3
<PAGE>
(g) Section 2.03 and Section 2.04 are hereby amended by (i)
inserting the words "Revolving Credit" before the word "Loan" in the first
line of Section 2.03, (ii) inserting the words "Revolving Credit" before
the word "Loan" in the third, fourth and fifth lines of Section 2.04, and
(iii) by adding a new sentence to the end of Section 2.04 which sentence
shall read as follows:
"If any amount of the Term Loan shall not be paid when due (at
maturity, by acceleration or otherwise) all outstanding amounts of
the Term Loan shall bear interest at the lesser of rate set forth in
Section 2.02(b) plus two percent (2%) or the maximum rate permitted
by applicable law."
(h) Section 9.01 is hereby amended in its entirety so that as
amended it shall read as follows:
"9.01 Consolidated Shareholders' Equity. Permit Consolidated
Shareholders' Equity to be less than (i) $10,000,000 at March 24,
1997 and (ii) as at the last day of each fiscal quarter of the
Borrower and until (but excluding) the last day of the next
following fiscal quarter of the Borrower, the sum of (A) the amount
of Consolidated Shareholders' Equity required to be maintained
pursuant to this Section 9.01 as at the end of the immediately
preceding fiscal quarter, plus (B) 50% of positive Consolidated Net
Income during the immediately preceding fiscal quarter of the
Borrower ending on such day (including in Consolidated Net Income
for purposes of this Section 9.01 only any net gain or credit of an
extraordinary nature)."
(i) Section 9.02 is hereby reinstated and is amended in its
entirety, so that as amended it shall read as follows:
"9.02 Consolidated EBITDA. Permit for each of the fiscal
quarters set forth below Consolidated EBITDA to be less than that
amount set forth opposite such quarter:
Consolidated
Fiscal Quarter Ending EBITDA
--------------------- ------------
June 30, 1997 $3,200,000
September 30, 1997 $3,400,000
December 31, 1997 $3,800,000"
(j) Section 9.10 is hereby amended in its entirety, so that as
amended it shall read as follows:
"9.10 Dividends or Distributions. Declare or pay any dividends
(other than those payable solely in capital stock) or distribution
in reduction of capital or otherwise in respect of any equity
interest, or purchase, redeem or otherwise retire any common stock
except (i) dividends paid with respect to Preferred Stock so long
4
<PAGE>
as such dividends have accrued and after giving effects to such
payment and the required increase in Consolidated Shareholders'
Equity pursuant to Section 9.01, Consolidated Net Income for the
most recently completed fiscal quarter is a positive number,
provided that after giving effect to payment of such dividend no
Default or Event of Default exists hereunder, (ii) payments to
purchase stock of the Borrower pursuant to the exercise by
beneficiaries of the Plan (as defined in the ESOP Loan Documents) of
put rights under Section 16(b) of the Plan, and (iii) pursuant to
the exercise of rights of first refusal or similar rights relating
to stock options or securities issued upon the exercise of stock
options in an aggregate amount in any Fiscal Year not exceeding
$300,000 (on a non-cumulative basis, with the effect that amounts
not expended in any Fiscal Year may not be expended in a subsequent
Fiscal Year."
(k) Section 10.01 hereby is amended in order to add the following
new clauses (o) and (p) hereto:
"(o) if the Borrower shall have redeemed, repurchased or
retired any shares of Preferred Stock of Borrower, prior to
February 28, 1998, provided, however, that any such failure by
Borrower, or consequence of Borrower's failure, to redeem
repurchase, or retire any such shares of preferred stock of
Borrower, shall not constitute an Event of Default so long as
any holder of such Preferred Stock shall not take any action
to enforce any right arising by reason of failure to redeem,
repurchase or retire any such shares.
(p) if the Borrower shall not have executed and delivered to
the Agent by July 3, 1997 a Warrant Certificate and a Warrant
Agreement evidencing the Agent's right to purchase up to
486,532 shares of the Borrower's common stock, par value $.001
per share ("Common Stock"), subject to the terms and
conditions thereof"
3. Subject to and upon satisfaction of the conditions set forth in
paragraph 6 hereof, Section 5.10 of the ESOP Guaranty shall be and hereby is
amended as follows:
(a) Section 5.01 is hereby amended in its entirety so that as
amended it shall read as follows:
"5.01 Consolidated Shareholders' Equity. Permit Consolidated
Shareholders' Equity to be less than (i) $10,000,000 at March 24,
1997 and (ii) as at the last day of each fiscal quarter of the
Borrower and until (but excluding) the last day of the next
following fiscal quarter of the Borrower, the sum of (A) the amount
of Consolidated Shareholders' Equity required to be maintained
pursuant to this Section 5.01 as at the end of the immediately
preceding fiscal quarter, plus (B) 50% of positive Consolidated Net
Income during the immediately preceding fiscal quarter of the
Borrower ending on such day (including in Consolidated Net Income
for purposes of this Section 5.0l only any net gain or credit of an
extraordinary nature)."
5
<PAGE>
(b) Section 5.02 is hereby reinstated and is amended and restated in
its entirety, so that as amended it shall read as follows:
"5.02 Consolidated EBITDA. Permit for each of the fiscal
quarters set forth below Consolidated EBITDA to be less than that
amount set forth opposite such quarter:
Consolidated
Fiscal Quarter Ending EBITDA
--------------------- ------------
June 30, 1997 $3,200,000
September 30, 1997 $3,400,000
December 31, 1997 $3,800,000"
(c) Section 5.10 is hereby amended in its entirety, so that as
amended it shall read as follows:
"5.10 Dividends or Distributions. Declare or pay any dividends
(other than those payable solely in capital stock) or distribution
in reduction of capital or otherwise in respect of any equity
interest, or purchase, redeem or otherwise retire any common stock
except (i) dividends paid with respect to Preferred Stock so long as
such dividends have accrued and after giving effects to such payment
and the required increase in Consolidated Shareholders' Equity
pursuant to Section 5.01, Consolidated Net Income for the most
recently completed fiscal quarter is a positive number, provided
that after giving effect to payment of such dividend no Default or
Event of Default exists hereunder, (ii) payments to purchase stock
of the Guarantor pursuant to the exercise by Plan beneficiaries of
put rights under Section 16(b) of the Plan, and (iii) pursuant to
the exercise of rights of first refusal or similar rights relating
to stock options or securities issued upon the exercise of stock
options in an aggregate amount in any Fiscal Year not exceeding
$300,000 (on a non-cumulative basis, with the effect that amounts
not expended in any Fiscal Year may not be expended in a subsequent
Fiscal Year."
(d) Section 6.01 hereby is amended in order to add the following new
clauses (n) and (o) thereto:
"(n) if the Guarantor shall have redeemed, repurchased or
retired any shares of Preferred Stock of Guarantor, prior to
February 28, 1998, provided, however, that any such failure by
Guarantor, or consequence of Guarantor's failure, to redeem,
repurchase, or retire any such shares of preferred stock of
Guarantor, shall not constitute an Event of Default so long as
any holder of such Preferred Stock shall not take any action
to enforce any right arising by reason of failure to redeem,
repurchase or retire any such shares.
6
<PAGE>
(o) if the Guarantor shall not have executed and delivered to
the Agent by July 3, 1997 a Warrant Certificate and a Warrant
Agreement evidencing the Agent's right to purchase up to
486,532 shares of the Guarantor's common stock, par value
$.001 per share ("Common Stock"), subject to the terms and
conditions thereof"
4. Each of the Subsidiaries of the Borrower who has previously delivered a
Guaranty to the Agent has joined in the execution of this Amendment for the
purposes of consenting to this Amendment and affirming its guaranty and of the
Obligations of Borrower arising under the Agreement and the other Loan Documents
as amended by this Amendment, and of its other undertakings and obligations
under each of the other Loan Documents and ESOP Loan Documents to which it is a
signatory.
5. The Borrower hereby represents and warrants to the Agent and the Lender
that as of the date hereof the Agreement has been re-examined by the Borrower
and:
(i) The representations and warranties made by the Borrower therein
and in the other Loan Documents (including the Schedules to the Agreement
and the other Loan Documents) as modified to give effect to the
information contained in the disclosure schedules delivered by the
Borrower (the "Vitas Disclosure Schedules") in connection with its
execution and delivery of the Apria Acquisition Agreement and the
financial and other information previously provided to the Agent and the
Lender by the Borrower in writing (the "Vitas Information"), are true,
complete and correct in all material respects on and as of the date
hereof, and shall survive the execution and delivery of this Amendment;
(ii) The execution, delivery and performance of this Amendment will
not conflict with or result in the breach of any of the provisions of, or
cause a default under, the Articles of Incorporation or Bylaws of the
Borrower, or any applicable law, rule or regulation, or any judgment,
order, writ, injunction or decree of any court, administrative agency or
other government instrumentality to which the Borrower or any Subsidiary
is subject or any agreement or instrument to which the Borrower or any
Subsidiary is a party, the effect of which would have any material adverse
effect on the ability of the Borrower or any Guarantor to observe the
covenants and agreements contained in the Agreement or in any other Loan
Document or any of the CHC Transaction Documents or to pay the
Obligations, and will not result in the creation or imposition of any
security interest, lien, charge or encumbrance on any of the assets of the
Borrower or any Subsidiary.
6. As conditions to the effectiveness of this Amendment Agreement:
A. the Borrower shall have delivered to the Agent:
(a) counterparts of this Amendment duly executed by the
Borrower and each of the Guarantors;
7
<PAGE>
(b) evidence acceptable to the Agent of the extension of the
date for payment of Subordinated Note A on terms and conditions
acceptable to the Agent;
(c) such other documents and certifications as the Agent or
the Lender may reasonably request; and
(d) all accrued and unpaid interest previously billed by the
Agent and not heretofore paid.
B. there shall not have occurred either (i) any Default or Event of
Default which shall not have been waived or (ii) any material adverse
change in the business, financial condition or operations of the Borrower
or any Subsidiary since September 30, 1996, except as disclosed in the
Vitas Disclosure Schedules, the Vitas Information and other than the
termination of the Apria Transaction.
7. This Amendment sets forth the entire understanding and agreement of the
parties hereto in relation to the subject matter hereof and supersedes any prior
negotiations and agreements among the parties relative to such subject matter.
No promise, condition, representation or warranty, express or implied, not
herein set forth shall bind any party hereto, and none of them has relied on any
such promise, condition, representation or warranty. Each of the parties hereto
acknowledges that, except as in this Amendment otherwise expressly stated, no
representations, warranties or commitments, express or implied, have been made
by any party to the other.
8. Except as specifically amended, modified or supplemented by this
Amendment, all of the other documents delivered in connection with the Loans, as
heretofore amended, shall remain in full force and effect according to their
respective terms.
9. Should any stamp or excise tax become payable under the laws of the
United States or of any state or any subdivision thereof or municipality therein
in respect of this Amendment, the Borrower shall pay the same (including
interest penalties, if any) and shall hold the Lender and the Agent harmless
with respect thereto.
10. This Amendment may be executed in any number of counterparts, each of
which shall be deemed to be an original as against any party whose signature
appears thereon, and all of which shall together constitute one and the same
instrument.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their duly authorized officers, all as of the day and year
first above written.
VITAS HEALTHCARE CORPORATION
WITNESS:
/s/ [Signature Illegible] By: /s/ Hugh A. Westbrook
- ----------------------------- -------------------------------------
Name: Hugh A. Westbrook
Title: Chairman and Chief Executive Officer
/s/ [Signature Illegible]
- -----------------------------
9
<PAGE>
NATIONSBANK, NATIONAL ASSOCIATION
(SOUTH), as Agent
By: /s/ Allison Freeland
-------------------------------------
Name: Allison Freeland
Title: Senior Vice President
NATIONSBANK, NATIONAL ASSOCIATION
(SOUTH), as Lender
By: /s/ Allison Freeland
-------------------------------------
Name: Allison Freeland
Title: Senior Vice President
10
<PAGE>
GUARANTORS
VITAS HEALTHCARE CORPORATION OF FLORIDA
By: /s/ Hugh A. Westbrook
--------------------------------------
Name: Hugh A. Westbrook
Title: Chairman, President and Chief
Executive Officer
VITAS HEALTHCARE CORPORATION OF OHIO
By: /s/ Hugh A. Westbrook
--------------------------------------
Name: Hugh A. Westbrook
Title: Chairman, President and Chief
Executive Officer
VITAS HEALTHCARE CORPORATION OF
PENNSYLVANIA
By: /s/ Hugh A. Westbrook
--------------------------------------
Name: Hugh A. Westbrook
Title: Chairman, President and Chief
Executive Officer
VITAS HEALTHCARE CORPORATION CALIFORNIA
By: /s/ Hugh A. Westbrook
--------------------------------------
Name: Hugh A. Westbrook
Title: Chairman, President and Chief
Executive Officer
VITAS HEALTHCARE CORPORATION OF CENTRAL
FLORIDA
By: /s/ Hugh A. Westbrook
--------------------------------------
Name: Hugh A. Westbrook
Title: Chairman, President and Chief
Executive Officer
11
<PAGE>
EXHIBIT 10.48
AMENDMENT NO. 7 TO
AMENDED AND RESTATED
REVOLVING CREDIT, TERM LOAN AND REIMBURSEMENT AGREEMENT
AND RELATED DOCUMENTS
THIS AMENDMENT NO. 7 TO AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN AND
REIMBURSEMENT AGREEMENT AND RELATED DOCUMENTS (the "Amendment") dated as of
September 1, 1997, is made by and among VITAS HEALTHCARE CORPORATION, a Delaware
corporation (the "Borrower"), and NATIONSBANK, NATIONAL ASSOCIATION (successor
by merger of NationsBank, National Association (South)), a national banking
association (the "Lender"), and NATIONSBANK, NATIONAL ASSOCIATION (SOUTH), as
Agent for the Lender;
W I T N E S S E T H:
WHEREAS, the Lender, by an Amended and Restated Revolving Credit, Term Loan
and Reimbursement Agreement dated as of February 17, 1995, as amended by
Amendment No. 1 dated as of June 30, 1995, by Amendment No. 2 dated March 28,
1996, by a letter agreement dated August 5, 1996, by Amendment No. 3 dated
September 30, 1996, by Amendment No. 4 dated as of November 1, 1996, by
Amendment No. 5 dated as of February 15, 1997 and by Amendment No. 6 dated as of
March 24, 1997, as amended by letter dated June 30, 1997 (the "Agreement"), has
agreed to make available and has made available to Borrower a Revolving Credit
Facility (as defined in the Agreement) of up to $18,000,000 and a Term Loan (as
defined in the Agreement) of $14,000,000; and
WHEREAS, in connection with the loan by the Lender to the ESOP (as defined
in the Agreement), the Borrower executed and delivered to the Lender the ESOP
Guaranty (as defined in the Agreement); and
WHEREAS, the Borrower has requested that the Revolving Credit Termination
Date and the Term Loan Maturity Date provided for in the Agreement be extended
as herein specified and that certain other terms and conditions of the Agreement
be further amended as herein provided; and
WHEREAS, the Lender is willing to extend the maturity dates on a short-term
basis so long as certain provisions of the Agreement are further amended; and
WHEREAS, the Lender and the Borrower have agreed to amend the Agreement in
the manner set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions herein set forth, it is hereby agreed as follows:
<PAGE>
1. The term "Agreement" as used herein and in the Agreement, the
Guaranties, the Notes and the other Loan Documents (each as defined in the
Agreement), and the term "Revolving Credit Agreement" as used in the ESOP
Guaranty and the other ESOP Loan Documents (as defined in the Agreement)
shall mean the Agreement as heretofore and hereby amended and modified.
Unless the context otherwise requires, all capitalized terms used herein and
in the other Loan Documents without definition shall have the respective
meanings provided therefor in the Agreement.
2. Subject to and upon satisfaction of the conditions set forth in
paragraph 6 hereof, the Agreement shall be and hereby is amended as follows:
(a) The definition of "Applicable Interest Addition" in Section 1.01 is
amended in its entirety so that as amended it shall read as follows:
"'Applicable Interest Addition'" means, for each Revolving Credit Loan
that bears interest at a LIBOR Rate that percent per annum, which shall be
based upon the Consolidated EBITDA for the two, three and four quarter
periods ending on the dates specified below:
<TABLE>
<CAPTION>
TWO THREE FOUR FOUR FOUR
QUARTERS QUARTERS QUARTERS QUARTERS QUARTERS
ENDING ENDING ENDING ENDING ENDING INTEREST
9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 ADDITION
---------------- ---------------- ---------------- ---------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Consolidated a) Less than a) Less than a) Less than a) Less than a) Less than 2 1/2%
EBITDA $6,500,000 $10,000,000 $14,000,000 $16,000,000 $18,000,000
is
b) Equal to or b) Equal to or b) Equal to or b) Equal to or b) Equal to or 2 1/4%
Greater than Greater than Greater than Greater than Greater than
$6,500,000 $10,000,000 $14,000,000 $16,000,000 $18,000,000
but Less than but Less than but Less than but Less than but Less than
$8,000,000 $12,000,000 $16,000,000 $18,000,000 $20,000,000
c) Equal to or c) Equal to or c) Equal to or c) Equal to or c) Equal to or 2%
Greater than Greater than Greater than Greater than Greater than
$8,000,000 $12,000,000 $16,000,000 $18,000,000 $20,000,000
</TABLE>
The Applicable Interest Addition shall be established at the end of
each of the above periods (the "Determination Date") beginning September
30, 1997. Any change in the Applicable Interest Addition shall be
determined based upon the computations set forth in the certificate
furnished to the Agent pursuant to Section 8.01, subject to review and
approval of such computations by the Agent, and shall be effective
commencing on the day following the date such certificate is received,
until the day following the date on which a new certificate is delivered
or is required to be delivered, whichever shall first occur. If the
Borrower shall fail to deliver any such certificate within the time
period required by Section 8.01, then the Applicable Interest Addition
shall be 2 1/2% until the appropriate certificate is delivered. From the
date of Amendment No. 7 to this Agreement until the receipt of the
certificate for
2
<PAGE>
the period ending September 30, 1997, the Applicable Interest Addition
shall be 2.5%."
(b) The definitions of "Revolving Credit Termination Date" in
Section 1.01 is hereby amended in its entirety so that as amended it
shall read as follows:
"'Revolving Credit Termination Date' means the earlier of
(i) October 1, 1998, (ii) the occurrence of a Significant
Recapitalization Event, (iii) termination of Lenders' obligations
pursuant to Section 10.01 upon the occurrence of an Event of Default,
or (iv) such date as the Borrower may voluntarily permanently terminate
the Revolving Credit Facility by payment in full of all Obligations
(including the discharge of all Obligations of NationsBank and the
Lenders with respect to the Letters of Credit and Participation);"
(c) The definition of "Term Loan Maturity Date" in Section 1.01 is
hereby amended in its entirety so that as amended it shall read as
follows:
"'Term Loan Maturity Date' means the earlier of (i) October 1,
1998, (ii) the occurrence of a Significant Recapitalization Event or
(iii) such date as the Term Loans shall become due and payable pursuant
to Section 10.01 upon the occurrence of an Event of Default or (iv)
such date as the Borrower shall pay in full the Term Loan;"
(d) A new definition, "Significant Recapitalization Event", is added
to Section 1.01 immediately following the definition of "Single Employer
Plan" which definition shall read as follows:
"'Significant Recapitalization Event' means, with respect to the
Borrower and its Subsidiaries, a debt or equity offering generating
minimum gross proceeds of $15,000,000;"
(e) A new definition, "Minimum Liquidity", is added to Section 1.01
immediately following the definition of "Maturity Extension Conditions"
which definition shall read as follows:
"'Minimum Liquidity' means, with respect to the Borrower and its
Subsidiaries, the sum of cash or cash equivalents and amounts available
under the Revolving Credit Facility;"
(f) Section 9.02 is hereby amended by deleting the quarterly
Consolidated EBITDA chart and substituting in lieu thereof the following:
Consolidated
"Fiscal Quarter Ending EBITDA
---------------------- -------------
September 30, 1997 $ 3,400,000
3
<PAGE>
December 31, 1997 $ 3,800,000
March 31, 1998 $ 4,000,000
June 30, 1998 $ 4,200,000
September 30, 1998 $ 4,400,000"
(g) Article IX is hereby amended by adding a new financial
covenant after Section _________ which financial covenant shall read as
follows:
"9._______ Minimum Liquidity. Permit Minimum Liquidity to be
less than $4,000,000."
(h) Section 10.01(o) is hereby amended by deleting the clause
"February 28, 1998" and substituting in lieu thereof the clause "October
1, 1998".
(i) Section 10.01(p) is hereby amended in its entirety so that as
amended it shall read as follows:
(p) if the Borrower shall not have executed and delivered
to the Agent by September 30, 1997 a second Warrant Certificate
and a second Warrant Agreement evidencing the Agent's right to
purchase up to 291,918 shares of the Borrower's common stock, par
value $.001 per share ("Common Stock"), subject to the terms and
conditions thereof."
3. (a) Notwithstanding the terms and conditions of the Warrant
Agreement and Warrant Certificate executed and delivered by Borrower to
Lender in connection with Amendment No. 6 to the Agreement (the "Amendment
No. 6 Warrants"), Lender hereby (i) irrevocably waives any adjustments to the
number of shares of Borrower's common stock issuable under the amendment No.
6 Warrants and any adjustments to the exercise price therefor in connection
with the issuance by Borrower of any additional warrants to Lender in
connection with this Amendment (the "Amendment No. 7 Warrants") or in
connection with the exercisability of the Amendment No. 7 Warrants and (ii)
agrees and stipulates that to the extent any provisions of the Amendment No.
6 Warrants may be interrupted in any manner inconsistent with the waiver set
forth in clause (i) above, Lender hereby irrevocably waives any rights to any
adjustments based upon any such interpretations.
(b) Further, for purposes of the terms and conditions of the Amendment
No. 6 Warrants and the Amendment No. 7 Warrants, any substantial amendment
and restatement of the terms of the Credit Agreement which, in effect and
operation, is the substantial equivalent of the establishment of a new credit
facility, shall operate as a satisfaction of, and not an amendment to, the
Obligations hereunder.
4. Subject to and upon satisfaction of the conditions set forth in
paragraph 6 hereof, Section 5.10 of the ESOP Guaranty shall be and hereby is
amended as follows:
(a) Section 5.02 is hereby amended by deleting the quarterly
Consolidated EBITDA chart and substituting in lieu thereof the following:
4
<PAGE>
Consolidated
"Fiscal Quarter Ending EBITDA
---------------------- -------------
September 30, 1997 $ 3,400,000
December 31, 1997 $ 3,800,000
March 31, 1998 $ 4,000,000
June 30, 1998 $ 4,200,000
September 30, 1998 $ 4,400,000"
(b) Section 6.01(n) is hereby amended by deleting the clause
"February 28, 1998" and substituting in lieu thereof the clause
"October 1, 1998".
(c) Section 6.01(o) hereby in is amended in its entirety so that as
amended it shall read as follows:
"(o) if the Guarantor shall not have executed and delivered
to the Agent by September 30, 1997 a Warrant Certificate and a
Warrant Agreement evidencing the Agent's right to purchase up
to 291,918 shares of the Guarantor's common stock, par value
$.001 per share ("Common Stock"), subject to the terms and
conditions thereof."
5. Each of the Subsidiaries of the Borrower who has previously delivered a
Guaranty to the Agent has joined in the execution of this Amendment for the
purposes of consenting to this Amendment and affirming its guaranty and of the
Obligations of Borrower arising under the Agreement and the other Loan Documents
as amended by this Amendment, and of its other undertakings and obligations
under each of the other Loan Documents and ESOP Loan Documents to which it is a
signatory.
6. The Borrower hereby represents and warrants to the Agent and the Lender
that as of the date hereof the Agreement has been re-examined by the Borrower
and:
(i) The representations and warranties made by the Borrower therein and
in the other Loan Documents (including the Schedules to the Agreement and
the other Loan Documents) as modified to give effect to the information
contained in the disclosure schedules delivered by the Borrower (the "Vitas
Disclosure Schedules") in connection with its execution and delivery of the
Apria Acquisition Agreement and the financial and other information
previously provided to the Agent and the Lender by the Borrower in writing
(the "Vitas Information"), are true, complete and correct in all material
respects on and as of the date hereof, and shall survive the execution and
delivery of this Amendment;
(ii) The execution, delivery and performance of this Amendment will not
conflict with or result in the breach of any of the provisions of, or cause
a default under, the Articles of Incorporation or Bylaws of the Borrower, or
any applicable law, rule or regulation, or any judgment, order, writ,
injunction or decree of any court, administrative agency or other government
instrumentality to which the Borrower or any Subsidiary is subject or any
5
<PAGE>
agreement or instrument to which the Borrower or any Subsidiary is a party,
the effect of which would have any material adverse effect on the ability of
the Borrower or any Guarantor to observe the covenants and agreements
contained in the Agreement or in any other Loan Document or any of the CHC
Transaction Documents or to pay the Obligations, and will not result in the
creation or imposition of any security interest, lien, charge or encumbrance
on any of the assets of the Borrower or any Subsidiary.
7. As conditions to the effectiveness of this Amendment:
A. the Borrower shall have delivered to the Agent:
(a) counterparts of this Amendment duly executed by the
Borrower and each of the Guarantors; and
(b) such other documents and certifications as the Agent or the
Lender may reasonably request.
B. there shall not have occurred either (i) any Default or Event of
Default which shall not have been waived or (ii) any material adverse change
in the business, financial condition or operations of the Borrower or any
Subsidiary since September 30, 1996, except as disclosed in the Vitas
Disclosure Schedules, the Vitas Information and other than the termination
of the Apria Transaction.
8. This Amendment sets forth the entire understanding and agreement of
the parties hereto in relation to the subject matter hereof and supersedes
any prior negotiations and agreements among the parties relative to such
subject matter. No promise, condition, representation or warranty, express or
implied, not herein set forth shall bind any party hereto, and none of them
has relied on any such promise, condition, representation or warranty. Each
of the parties hereto acknowledges that, except as in this Amendment
otherwise expressly stated, no representations, warranties or commitments,
express or implied, have been made by any party to the other.
9. Except as specifically amended, modified or supplemented by this
Amendment, all of the other documents delivered in connection with the Loans, as
heretofore amended, shall remain in full force and effect according to their
respective terms.
10. Should any stamp or excise tax become payable under the laws of the
United States or of any state or any subdivision thereof or municipality therein
in respect of this Amendment, the Borrower shall pay the same (including
interest penalties, if any) and shall hold the Lender and the Agent harmless
with respect thereto.
11. This Amendment may be executed in any number of counterparts, each of
which shall be deemed to be an original as against any party whose signature
appears thereon, and all of which shall together constitute one and the same
instrument.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed by their duly authorized officers, all as of the day and year first
above written.
VITAS HEALTHCARE CORPORATION
WITNESS:
By: /s/ David Wester
- ------------------------- -------------------------------
Name: David Wester
-----------------------------
- ------------------------- Title: Chief Financial Officer
----------------------------
7
<PAGE>
GUARANTORS:
VITAS HEALTHCARE CORPORATION
OF FLORIDA
By: /s/ David Wester
-------------------------------
Name: David Wester
-----------------------------
Title: Vice President
----------------------------
VITAS HEALTHCARE CORPORATION
OF OHIO
By: /s/ David Wester
-------------------------------
Name: David Wester
-----------------------------
Title: Vice President
----------------------------
VITAS HEALTHCARE CORPORATION
OF PENNSYLVANIA
By: /s/ David Wester
-------------------------------
Name: David Wester
-----------------------------
Title: Vice President
----------------------------
VITAS HEALTHCARE CORPORATION
OF CALIFORNIA
By: /s/ David Wester
-------------------------------
Name: David Wester
-----------------------------
Title: Vice President
----------------------------
VITAS HEALTHCARE CORPORATION
OF CENTRAL FLORIDA
By: /s/ David Wester
-------------------------------
Name: David Wester
-----------------------------
Title: Vice President
----------------------------
9
<PAGE>
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent
By: /s/ Allison Freeland
-----------------------------------
Name: Allison Freeland
---------------------------------
Title: Senior Vice President
--------------------------------
NATIONSBANK, NATIONAL ASSOCIATION,
as Lender
By: /s/ Allison Freeland
-----------------------------------
Name: Allison Freeland
---------------------------------
Title: Senior Vice President
--------------------------------
6
<PAGE>
EXHIBIT 10.49
AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT (this "Security
Agreement") is made as of this 17th day of February, 1995, by and between VITAS
HEALTHCARE CORPORATION, a Delaware corporation having its principal place of
business in Miami, Dade County, Florida (the "Borrower"), and NATIONSBANK OF
FLORIDA, NATIONAL ASSOCIATION, a national banking association ("NationsBank"),
for itself and as agent (in such agency capacity and together with any successor
agent, the "Agent") for certain lenders (the "Lenders") party to the Credit
Agreement described below (in such capacities as described below and together
with any successor agent acting as such under the Credit Agreement described
below, the "Secured Party").
W I T N E S S E T H:
WHEREAS, (i) pursuant to a Revolving Credit and Reimbursement Agreement
dated as of August 11, 1994 (the "Prior Credit Agreement") among the Borrower,
NationsBank and NationsBank as agent, NationsBank made available to the Borrower
a revolving credit facility in the aggregate principal amount of up to
$15,000,000, including within such revolving credit facility the issuance of
letters of credit for the account of the Borrower and (ii) pursuant to a
Guaranty and Contingent Purchase Agreement of even date with the Prior Credit
Agreement between the Borrower and NationsBank (the "Prior Guaranty" and,
together with the Prior Credit Agreement, the "Prior Agreements"), NationsBank
extended a term loan of $2,386,670 to the Vitas Healthcare Corporation Employee
Stock Ownership Trust (the "Trust") to refinance certain indebtedness owing from
the Trust to the Borrower, the repayment of which loan was, inter alia,
guaranteed under the Prior Guaranty; and
WHEREAS, as security for its obligations and liabilities under the Prior
Agreements, the Borrower entered into a Pledge and Security Agreement of even
date with the Prior Credit Agreement granting to the agent under the Prior
Credit Agreement and to NationsBank upon the occurrence of certain events
therein specified a security interest in certain property of the Borrower; and
WHEREAS, the Borrower and Vitas Healthcare Corporation of California, a
Subsidiary of the Borrower ("Vitas California"), have entered into an Asset
Purchase Agreement with the Sellers (as hereinafter defined) dated as of
December 27, 1994 (the "Asset Purchase Agreement") pursuant to which Vitas
California has agreed to purchase substantially all of the operating assets of
the CHC Entities (as defined in the Credit Agreement) pursuant to the terms and
subject to the conditions set forth therein and, in connection therewith, the
Borrower has requested that the Prior Credit Agreement be amended and restated
to increase the revolving credit
<PAGE>
facility from $15,000,000 to $20,000,000, to provide for a $25,000,000 term loan
facility, and to make certain other modifications, and that the Prior Guaranty
be amended and restated to reflect the agreement of the parties; and
WHEREAS, at the request of the Borrower and to effect the modifications
referred to above, (i) the Borrower, the Agent and the Lenders are entering into
an Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement
of even date herewith (as the same may be modified, amended or restated from
time to time, the "Credit Agreement") and (ii) the Borrower and NationsBank are
entering into an Amended and Restated Guaranty and Contingent Purchase Agreement
of even date herewith (as the same may be modified, amended or restated from
time to time, the "Guaranty" and, together with the Credit Agreement, the
"Agreements"); and
WHEREAS, the Lenders are unwilling to extend the amend and increase the
revolving credit facility or make such term loan pursuant to the Credit
Agreement, and NationsBank is unwilling to amend the Prior Agreements as
reflected in the Agreements to permit the consummation of the CHC Transaction,
unless the Borrower enters into this Security Agreement pursuant to which it
secures all of its obligations and liabilities arising under the Agreements;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and promises herein contained, the parties hereto agree as follows:
1. Certain Definitions. Unless otherwise defined herein, capitalized terms
used in this Security Agreement shall have the respective meanings therefor
provided in the Credit Agreement.
2. Grant of Security Interest. As collateral security for the full and
prompt payment, satisfaction and performance of (i) all Obligations under the
Credit Agreement and (ii) all obligations and liabilities of the Borrower under
the Guaranty, whether now existing or hereafter arising (the "Guaranty
Obligations" and, collectively with the Obligations, the "Secured Obligations"),
Borrower hereby grants to the Secured Party a continuing security interest in
all of its right, title and interest in and to all of the following property in
which Borrower now has or hereafter acquires an interest, whether now owned or
existing or hereafter acquired or arising and wheresoever located:
(A) All accounts, accounts receivable, notes, bills, acceptances,
choses in action, chattel paper, instruments, documents, and other forms
of obligations at any time owing to Borrower, the proceeds thereof and all
of Borrower's rights with respect to any goods represented thereby,
whether or not delivered, goods returned by customers and all rights as an
unpaid vendor or lienor, including rights of stoppage in transit and of
recovering possession by proceedings including replevin and reclamation,
together with all customer lists,
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books and records, ledger and account cards, computer tapes, software, disks,
printouts and records, whether now in existence or hereafter created, relating
thereto (collectively referred to hereinafter as "Accounts");
(B) All goods of Borrower, including without limitation, all
machinery, equipment, motor vehicles, parts, supplies, apparatus,
appliances, tools, patterns, molds, dies, blueprints, fittings, furniture,
furnishings, fixtures and articles of tangible personal property of every
description now or hereafter owned by Borrower or in which Borrower may
have or may hereafter acquire any interest, but as to leasehold interests
in personal property, only to the extent assignable (collectively referred
to hereinafter as "Equipment");
(C) All general intangibles of Borrower, now existing or hereafter
owned or acquired or arising or in which Borrower now has or hereafter
acquires any rights, including but not limited to causes of action,
corporate or business records, inventions, designs, patents, patent
applications, trademarks, trademark registrations and applications
therefor, goodwill, trade names, trade secrets, trade processes,
copyrights, copyright registrations and applications therefor, licenses
(to the extent assignable), permits (to the extent assignable),
franchises, customer lists (to the extent permitted by law), computer
programs, all claims under guaranties, tax refund claims, rights and
claims against carriers and shippers, leases (to the extent assignable),
claims under insurance policies, all rights to indemnification and all
other intangible personal property of every kind and nature (collectively
referred to hereinafter as "General Intangibles");
(D) All inventory of Borrower wherever located, including without
limitation, all goods manufactured or acquired for sale or lease, and any
piece goods, raw materials, work in process and finished merchandise,
findings or component materials, and all supplies, goods, incidentals,
office supplies, packaging materials and any and all items used or
consumed in the operation of the business of Borrower or which may
contribute to the finished product or to the sale, promotion and shipment
thereof, in which Borrower now or at any time hereafter may have an
interest, whether or not the same is in transit or in the constructive,
actual or exclusive occupancy or possession of Borrower or is held by
Borrower or by others for Borrower's account (collectively referred to
hereinafter as "Inventory");
(E) To the extent assignable, all rights now or hereafter arising to
any Borrower under contracts, leases, agreements or other instruments of
every character and description, and all rights of enforcement thereunder
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(collectively referred to as hereinafter as "Contract Rights");
(F) All monies, certificates of deposit, commercial paper, cash
equivalents, account balances, notes, options, interests, and securities
(certificated or uncertificated), wheresoever located; excluding, however,
the equity interests (other than interests in money market funds) of the
Borrower in Persons not constituting Subsidiaries;
(G) All accessions to, substitutions for and all replacements,
products and proceeds of the foregoing including, without limitation,
proceeds of insurance policies insuring the Collateral (as hereinafter
defined); and
(H) All books and records (including without limitation, customer
data, credit files, computer programs, printouts, and other computer
materials and records of the Borrower and all documents) pertaining to any
of the foregoing.
All of the property and interests in property described in subsections (A)
through (H) and all other property and interests in personal property which
shall, from time to time, secure the Secured Obligations are herein collectively
referred to as the "Collateral".
3. Financing Statements. At the time of execution of this Security
Agreement, Borrower shall have (i) furnished the Secured Party with financing
statements, approved by the Secured Party and executed by the Borrower, as
prescribed by the Uniform Commercial Code as presently in effect in the states
of California, Florida, Texas, Illinois, Wisconsin and Indiana, and the District
of Columbia, and where other Collateral is located, as may be reasonably
requested by the Secured Party, in form and number sufficient to perfect in
favor of the Secured Party the security interest in the Collateral, and (ii)
delivered to Secured Party's possession certificated securities (with duly
executed stock powers in blank affixed thereto) representing the Borrower's
interests in Subsidiaries, in order that the Secured Party shall have a
perfected security interest in the Collateral following such filing of such
financing statements with the appropriate local and state governmental
authorities and the delivery of such securities (to the extent that a security
interest in such Collateral is capable of perfection by such filing or
possession), and subject only to (a) permitted liens described in the Credit
Agreement, (b) such other security interests, liens and encumbrances currently
existing and set forth in Exhibit A attached hereto and by reference made a part
hereof, or as shall otherwise be acceptable to the Secured Party in its sole
discretion, and (c) limitations under applicable law which may limit the
creation, perfection or priority of liens on Government Receivables
(collectively referred to hereinafter as "Permitted Liens"); provided, however,
that with respect to the items of property described in clause (F) of Section 2,
the
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security interest in such property will not be perfected until the Secured Party
or any Lender takes possession thereof or otherwise obtains perfection in
accordance with the applicable requirements of the Uniform Commercial Code.
Borrower shall execute as reasonably required by the Secured Party any
additional financing statements or other documents to effect a perfected
security interest in the Collateral to the extent contemplated hereby, together
with any necessary continuation statements so long as this Security Agreement
remains in effect.
4. Maintenance of Security Interest. Borrower will, from time to time,
upon the request of the Secured Party, deliver specific assignments of
Collateral, together with such other instruments and documents, financing
statements, amendments thereto, assignments or other writings as the Secured
Party or any Lender may reasonably request to carry out the terms of this
Security Agreement or to protect or enforce the Secured Party's security
interest in the Collateral.
With respect to any and all Collateral as to which a security interest is
granted under this Security Agreement, Borrower agrees to do and cause to be
done all things necessary to perfect and keep in full force the security
interest granted in favor of the Secured Party, including, but not limited to,
the prompt payment of all fees and expenses incurred in connection with any
filings made to perfect a security interest in the Collateral in favor of the
Secured Party.
Borrower agrees to make appropriate entries upon its financial statements
and books and records disclosing the Secured Party's security interest in the
Collateral.
5. Collections; Secured Party's Right to Notify Account Debtors and to
Endorse Each Borrower's Name. Borrower hereby authorizes Secured Party at any
time after the occurrence and during the continuation of an Event of Default
subject, with respect to the Guaranty Obligations, to Section 2.08 of the
Guaranty, (a) to open Borrower's mail and collect any and all amounts due to
Borrower from persons obligated on any Accounts ("Account Debtors"), but only to
the extent permitted by law with respect to Government Receivables; (b) to take
over Borrower's post office boxes or make other arrangements as Secured Party
deems necessary to receive Borrower's mail, including notifying the post office
authorities to change the address for delivery of Borrower's mail to such
address as Secured Party may designate; and (c) to notify any or all Account
Debtors, but only to the extent permitted by law with respect to Government
Receivables, that the Accounts have been assigned to Secured Party and that
Secured Party has a security interest therein. Borrower irrevocably makes,
constitutes and appoints Secured Party and all Persons designated by Secured
Party for that purpose as Borrower's true and lawful attorney (and
agent-in-fact) after the occurrence and during the continuation of an Event of
Default subject to the limitations set forth in the
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immediately preceding sentence and, with respect to the Guaranty Obligations, to
Section 2.08 of the Guaranty, to endorse Borrower's name on any checks, notes,
drafts or any other payment relating to and/or proceeds of the Collateral which
comes into Secured Party's possession or Secured Party's control, and apply the
same on account of the Secured Obligations as provided herein and in the
Agreements, in such order as Secured Party may elect. Secured Party shall
promptly furnish Borrower with a copy of any such notice sent with respect to
Accounts of Borrower and Borrower hereby agrees that any such notice, in Secured
Party's sole discretion, may be sent on Borrower's stationery, in which event
Borrower shall co-sign such notice with Secured Party.
6. Collateral. Borrower covenants with Lender that:
(A) Inspection. Secured Party and any Lender (by any of its
officers, employees and agents) shall have the right, at any time or times
during Borrower's usual business hours, to inspect the Collateral, all
records related thereto (and to make extracts or copies from such
records), and the premises upon which any of the Collateral is located, to
discuss Borrower's affairs and finances with its principal officers and
independent auditors and to verify the amount, quality, quantity, value
and condition of, or any other matter relating to, the Collateral. Upon or
after the occurrence of a Default or an Event of Default, Secured Party
may at any time and from time to time employ and maintain at Borrower's
premises a custodian selected by Secured Party who shall have full
authority to do all acts necessary to protect Secured Party's interest.
All reasonable expenses incurred by Secured Party by reason of the
employment of such custodian shall be paid by the Borrower, added to the
Secured Obligations and secured by the Collateral.
(B) Assignments, Records and Schedules of Accounts. Borrower shall
keep accurate and complete records of its Accounts ("Account Records")
and, upon Secured Party's request from time to time at intervals
acceptable to Secured Party, Borrower shall reasonably provide Secured
Party and each Lender with a Schedule of Accounts in form and substance
reasonably acceptable to the Secured Party describing all Accounts created
or acquired by Borrower ("Schedule of Accounts") and shall at the request
of Secured Party execute and deliver further written assignments of such
Accounts to Secured Party; provided however, that Borrower's failure to
execute and deliver any such Schedule of Accounts or assignments shall not
affect or limit Secured Party's security interest or other rights in and
to any Accounts. If requested by Secured Party, Borrower shall furnish
Secured Party with copies of proof of delivery of invoices and the
original copy of all documents, including, without limitation, repayment
histories and present status reports, relating to the Accounts so
scheduled (collectively, "Account Documents") and such
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other matter and information relating to the status of then existing Accounts as
Secured Party shall reasonably request.
(C) Notice Regarding Disputed Accounts. In the event any amounts due
and owing in excess of $100,000 are in dispute between any Account Debtor
and Borrower (which shall include, without limitation, any dispute in
which an offset claim or counterclaim may result), Borrower shall provide
the Secured Party with written notice thereof promptly, explaining in
detail the reason for the dispute, all claims related thereto and the
amount in controversy.
(D) Verification of Accounts. Whether or not a Default or an Event
of Default has occurred, any of Secured Party's officers, employees, or
agents shall have the right, at any time or times hereafter, to verify
under reasonable procedures the validity, amount or any other matter
relating to any Accounts by mail, telephone, telegraph or otherwise.
(E) Change of Trade Styles. Borrower shall not change, amend, alter,
terminate, or cease using its trade names or styles under which it
provides services giving rise to Accounts as of the date of this Agreement
("Trade Styles"), or use additional Trade Styles, except upon giving not
less than ten (10) days prior written notice to the Secured Party and
taking or causing to be taken all such action at Borrower's expense as may
be reasonably requested by the Secured Party (including the furnishing of
additional financing statements) to enable the Secured Party to perfect or
maintain the perfection of the security interest of the Secured Party in
Accounts, General Intangibles, Contract Rights and related Collateral.
(F) Safekeeping of Inventory. Borrower shall be responsible for the
safekeeping of its Inventory, and in no event shall Secured Party or any
Lender have any responsibility for:
(i) Any loss or damage to Inventory or destruction thereof
occurring or arising in any manner or fashion from any cause other
than as a result of gross negligence, bad faith or willful
misconduct of the Agent or any Lender;
(ii) Any diminution in the value of Inventory; or
(iii) Any act or default of any carrier, warehouseman, bailee
or forwarding agency thereof or other Person in any way dealing with
or handling Inventory.
(G) Records and Schedules of Inventory. Borrower shall keep correct
and accurate records on a perpetual basis, itemizing and describing the
kind, type, location, quality and
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quantity of Inventory owned by it, if any, from time to time, and such
Borrower's cost therefor and selling price thereof, and at the reasonable
request of the Secured Party shall furnish to the Secured Party a current
Schedule of Inventory ("Schedule of Inventory"). Borrower shall conduct a
physical inventory, of which Secured Party shall be given prior written
notice and shall have the right to be present, no less than annually, and
shall furnish to Secured Party such other documents and reports as Secured
Party shall reasonably request with respect to the Inventory, including,
without limitation, invoices relating to Borrower's purchase of Inventory.
(H) Evidence of Ownership of Equipment. Borrower, promptly on
request therefor by the Secured Party, shall deliver to the Secured Party
any and all evidence of ownership of any of the Equipment (including
without limitation certificates of title and applications for title).
(I) Records and Schedules of Equipment. Borrower shall maintain
accurate, itemized records describing in reasonable detail its Equipment
and shall furnish the Secured Party upon reasonable request with a current
schedule containing the foregoing information ("Schedule of Equipment").
(J) Administration of Collateral. So long as no Event of Default
shall have occurred and be continuing, Borrower may (to the extent not
inconsistent with the provisions of the Loan Documents or the ESOP Loan
Documents) (i) sell, transfer or dispose of any asset owned by it or (ii)
collect or compromise Accounts and General Intangibles in the ordinary
course of business in any lawful manner.
(K) Voting Rights, Consensual Rights, Dividends and Distributions.
A. So long as no Event of Default shall have occurred and be continuing:
1. the Borrower shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Collateral or
any part thereof for any purpose not inconsistent with the terms of
this Security Agreement, the Credit Agreement, the other Loan
Documents or the other ESOP Loan Documents;
2. the Borrower shall be entitled to receive and retain any
and all cash distributions or dividends paid on the Collateral which
they are otherwise entitled to receive, notwithstanding the
assignment and transfer of the Collateral and the grant of security
interest in Section 2 of this Security Agreement (provided that any
cash distributions or dividends received upon the occurrence and
during the continuance of a Default shall remain segregated from all
other funds of the Borrower
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<PAGE>
and deposited with the Secured Party), but any and all stock
dividends, liquidating dividends, distributions in property, returns
of capital or other distributions made on or in respect of any of
the Collateral, whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock of any issuer of
the Collateral or received in exchange for the Collateral or any
part thereof or as a result of any merger, consolidation,
acquisition or other exchange of assets to which any issuer of any
Collateral may be a party or otherwise, and any and all cash and
other property received in exchange for any of the Collateral shall
be and become part of the Collateral hereunder and, if received by
the Borrower, shall forthwith be delivered to the Secured Party, to
the extent the Collateral for which it was exchanged was held or
required to be held by the Secured Party; and
3. the Secured Party shall execute and deliver (or cause to be
executed and delivered) to the Borrower all such proxies and other
instruments as the Borrower may reasonably request for the purpose
of enabling the Borrower to exercise the voting, consensual and
other rights which the Borrower are entitled to exercise pursuant to
subparagraph (1) above and to receive such distributions and
dividends which it is authorized to receive and retain pursuant to
subparagraph (2) above.
B. Upon the occurrence and during the continuance of an Event of
Default:
1. subject, with respect to Guaranty Obligations to Section
2.08 of the Guaranty, all rights of the Borrower to exercise the
voting and other consensual rights which it would otherwise be
entitled to exercise pursuant to Section 6(K)A.1 and to receive and
retain the distributions and dividends which it would otherwise be
authorized to receive and retain pursuant to Section 6(K)A.2, shall
become vested in the Secured Party, which shall thereupon have the
sole right to exercise such voting and other consensual rights and
to receive and hold as Collateral such distributions and dividends
(whether or not the relevant Collateral shall have been transferred
into the name of the Secured Party or any of its nominees, the
Borrower hereby irrevocably appointing and constituting the Secured
Party as proxy and attorney-in-fact of Borrower, which appointment
is coupled with an interest and is irrevocable, with full power of
substitution, to act as if the Secured Party were the outright owner
thereof); and
2. all distributions and dividends which are received by the
Borrower contrary to the provisions of
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Section 6(K)A.2 or Section 6(K)B.l shall be received in trust for
the benefit of the Secured Party, shall be segregated from other
funds of Borrower and shall be paid over to the Secured Party
forthwith as Collateral in the same form as so received (with any
necessary endorsement).
7. Warranties Regarding Collateral. Borrower warrants and represents that
it is and will continue to be the owner of the Collateral, now owned and upon
the acquisition of the same, free and clear of all encumbrances and security
interests other than the security interest in favor of Secured Party hereunder
and Permitted Liens, and that it will defend the Collateral and the Secured
Party's security interest therein and any products and proceeds thereof against
all claims and demands of all Persons at any time claiming the same or any
interest therein adverse to the Secured Party or any Lender.
8. Account Warranties and Representations. With respect to its Accounts,
Borrower warrants and represents to the Secured Party and the Lenders that they
may rely on all statements or representations made by Borrower on or with
respect to any Schedule of Accounts prepared and delivered by Borrower and,
unless otherwise indicated in writing by Borrower, that:
(A) All Account Records and Account Documents are located and shall
be kept only at Borrower's location as set forth in Section 6.04 of the
Credit Agreement;
(B) They are genuine, are in all material respects what they purport
to be, are not evidenced by a judgment instrument or document or, if
evidenced by an instrument or document, are only evidenced by one original
instrument or document, which has been delivered to the Secured Party;
(C) They cover the bona fide rendition of services, or the bona fide
sales and deliveries of Inventory usually dealt in by Borrower, in the
ordinary course of business;
(D) Each Account is actually and absolutely owing to Borrower in the
face value thereof, is valid and enforceable against the applicable
Account Debtor, and is not subject to any setoffs, discounts, allowances,
claims, counterclaims, disputes or doubtful collectibility except (i) as
is customary for Accounts of the type represented by such Account
(including the nature of the Account Debtor) of the Borrower in the
ordinary course of Borrower's business and consistent with past practices,
and (ii) as is reflected by reserves and reductions in the stated value of
such Account, computed in a manner consistent with Borrower's policies and
practices in preparing the financial statements described in Sections 7.01
and 8.01 of the Credit Agreement and Sections 3.01(f) and 4.01 of the
Guaranty, included in such financial statements, in the
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Schedule of Accounts and in any report or certificate including financial
information regarding such Account furnished to the Secured Party pursuant
to the Loan Documents or the ESOP Loan Documents.
(E) The goods or services giving rise thereto are not, and were not
at the time of the sale or performance thereof, subject to any lien,
claim, encumbrance or security interest, except those of the Secured Party
and those removed or terminated prior to the date hereof;
(F) They have not been pledged to any Person other than to Secured
Party under this Security Agreement and will be owned by Borrower free and
clear of any liens, claims or encumbrances except Permitted Liens; and
(G) Secured Party's security interest therein will not be subject to
any offset, deduction, counterclaim, lien or other adverse condition,
other than Permitted Liens or as is consistent with Section 8(D) above.
9. Inventory Warranties and Representations. With respect to Inventory,
Borrower warrants and represents to the Secured Party and the Lenders that they
may rely on all statements or representations made by Borrower on or with
respect to any Inventory and, unless otherwise indicated in writing by Borrower,
that:
(A) Except for the relocation of Inventory from time to time in the
ordinary course of business not aggregating more than $100,000 at any one
time in any location other than those set forth in Schedules 6.03 and 6.04
delivered pursuant to the Credit Agreement or Schedule 4.22 delivered
pursuant to the Guaranty, the Borrower shall not locate or relocate
inventory to any location other than those set forth in Schedules 6.03 and
6.04 delivered pursuant to the Credit Agreement or Schedule 4.22 delivered
pursuant to the Guaranty without giving the Secured Party not less than
thirty (30) days prior written notice and taking or causing to be taken at
its expense all steps as may be reasonably requested by the Secured Party
(including the furnishing of additional financing statements) to enable
the Secured Party to perfect or continue the perfection of its security
interest in such property.
(B) No Inventory is or will be subject to any lien, claim,
encumbrance or security interest whatsoever, except for the security
interest of Secured Party hereunder and Permitted Liens;
(C) No Inventory having an aggregate value in excess of $100,000 is
now, and shall not at any time or times hereafter be, stored with a
bailee, warehouseman, or similar party
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without Secured Party's prior written consent and, if Secured Party gives
such consent, Borrower will concurrently therewith cause any such bailee,
warehouseman, or similar party to issue and deliver to Secured Party in
form and substance acceptable to Secured Party, warehouse receipts
therefor in Secured Party's name; and
(D) No Inventory is under consignment to any Person.
10. Equipment Warranties and Representations. With respect to Equipment,
Borrower warrants and represents to the Secured Party and each Lender that:
(A) Except for the relocation of Equipment from time to time in the
ordinary course of business not aggregating more than $100,000 at any one
time in any location other than those set forth in Schedules 6.03 and 6.04
delivered pursuant to the Credit Agreement or Schedule 4.22 delivered
pursuant to the Guaranty, the Borrower shall not locate or relocate
Equipment to any location other than those set forth in Schedules 6.03 and
6.04 delivered pursuant to the Credit Agreement or Schedule 4.22 delivered
pursuant to the Guaranty without giving the Secured Party not less than
thirty (30) days prior written notice and taking or causing to be taken at
their expense all steps as may be reasonably requested by the Secured
Party (including the furnishing of additional financing statements) to
enable the Secured Party to perfect or continue the perfection of its
security interest in such property; and
(B) Borrower has and at all times will have good and marketable
title to and ownership of the Equipment free and clear of any lien, claim,
encumbrance, or security interest whatsoever, except for (i) the security
interest of Secured Party created hereunder and (ii) Permitted Liens.
11. Casualty and Liability Insurance Required. (A) Borrower will keep the
Collateral continuously insured as may be expressly required by the Agreements.
(B) Each insurance policy obtained in satisfaction of the
requirements of Section 11(A) hereof:
(i) shall be by such insurer (or insurers) as shall be
financially responsible and qualified to do business in the
applicable jurisdictions;
(ii) shall be in such form and have such provisions
(including, without limitation, the loss payable clause, the waiver
of subrogation clause, the deductible amount, if any, and the
standard mortgagee endorsement clause), as are generally considered
standard provisions for the type of
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insurance involved and are acceptable in all respects to Secured
Party;
(iii) shall prohibit cancellation or substantial modification,
termination or lapse in coverage by the insurer without at least 30
days' prior written notice to Secured Party;
(iv) shall provide that the interest of Secured Party shall
not be impaired or invalidated by any act or neglect of Borrower nor
by the occupation of the premises wherein such Collateral is located
for purposes more hazardous than are permitted by said policy;
(v) without limiting the generality of the foregoing, all
insurance policies covering loss or damage to the Collateral shall
name Secured Party as mortgagee, loss payee and a party insured
thereunder and any loss thereunder shall be paid directly to Secured
Party.
(C) Prior to expiration of any such policy, Borrower shall furnish
Secured Party with evidence reasonably satisfactory to Secured Party that
the policy or certificate has been renewed or replaced or is no longer
required by this Security Agreement.
(D) Borrower hereby irrevocably makes, constitutes and appoints
Secured Party (and all officers, employees or agents designated by Secured
Party), effective upon the occurrence of an Event of Default which has not
been waived or cured, as Borrower's true and lawful attorney (and
agent-in-fact) for the purpose of making, settling and adjusting claims
under such policies of insurance, endorsing the name of Borrower on any
check, draft, instrument or other item or payment for the proceeds of such
policies of insurance and for making all determinations and decisions with
respect to such policies of insurance.
(E) In the event Borrower shall fail to maintain, or cause to be
maintained, the full insurance coverage required hereunder or shall fail
to keep any Collateral in good repair and good operating condition, the
Secured Party may (but shall be under no obligation to), without waiving
or releasing any Secured Obligation or Event of Default, after giving
notice to the Borrower, contract for the required policies of insurance
and pay the premiums on the same or make any required repairs, renewals
and replacements; and all sums so disbursed by Secured Party, including
reasonable attorneys' fees, court costs, expenses and other charges
related thereto, shall be payable on demand by Borrower to Secured Party
and shall be additional Secured Obligations secured by the Collateral.
(F) In case of any material damage to or destruction of all or any
part of the Collateral, Borrower shall give prompt notice thereof to
Secured Party. Each such notice shall describe generally
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the nature and extent of such damage, destruction, taking, loss, proceeding or
negotiations.
12. Rights and Remedies Upon Default. Subject, with respect to the
Guaranty Obligations, to Section 2.08 of the Guaranty, upon and after an Event
of Default which has not been waived or cured, the Secured Party shall have the
following rights and remedies, all of which may be exercised with or without
notice to Borrower:
(A) All of the rights and remedies of a secured party under the
Uniform Commercial Code of the state where such rights and remedies are
asserted, or under other applicable law, all of which rights and remedies
shall be cumulative, and none of which shall be exclusive, to the extent
permitted by law, in addition to any other rights and remedies contained
in this Security Agreement, the Agreements, or any of the other Loan
Documents or ESOP Loan Documents;
(B) The right to foreclose the liens and security instruments
created under this Security Agreement or any of the other Loan Documents
or ESOP Loan Documents by any available judicial procedure or without
judicial process;
(C) The right to (i) enter upon the premises of Borrower through
self-help and without judicial process, without first obtaining a final
judgment or giving Borrower notice and opportunity for a hearing on the
validity of Secured Party's claim and without any obligation to pay rent
to Borrower, or any other place or places where any Collateral is located
and kept, and remove the Collateral therefrom to the premises of Secured
Party or any agent of Secured Party, for such time as Secured Party may
desire, in order to effectively collect or liquidate the Collateral,
and/or (ii) require Borrower to assemble the Collateral and make it
available to Secured Party at a place to be designated by Secured Party in
its sole discretion;
(D) The right (to the extent permissible by law with respect to
Government Receivables) to (i) demand payment of the Accounts; (ii)
enforce payment of the Accounts and General Intangibles and enforce all
Contract Rights, by legal proceedings or otherwise; (iii) exercise all or
any of Borrower's rights and remedies with respect to the collection of
the Accounts and General Intangibles and in respect of Contract Rights;
(iv) settle, adjust, compromise, extend or renew the Accounts; (v) settle,
adjust or compromise any legal proceedings brought to collect the Accounts
or General Intangibles or to enforce Contract Rights; (vi) sell or assign
the Accounts, General Intangibles, Contract Rights or other Collateral
upon such terms, for such amounts and at such time or times as Secured
Party deems advisable; (vii) discharge and release the Accounts; (viii)
take control, in any manner, of any item of payment or proceeds; (ix)
prepare, file and sign
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Borrower's name on a Proof of Claim in bankruptcy or similar document
against any account obligor; (x) prepare, file and sign Borrower's name on
any notice of lien, assignment or satisfaction of lien or similar document
in connection with the Accounts; (xi) endorse the name of Borrower upon
any chattel paper, document, instrument, invoice, freight bill, bill of
lading or similar document or agreement relating to the Accounts or
Inventory; (xii) use Borrower's stationery for verifications of the
Accounts and notices thereof to account obligors; (xiii) use the
information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts, General
Intangibles, Equipment, Contract Rights or Inventory to which Borrower has
access; and (xiv) do all acts and things and execute all documents
necessary, in Secured Party's sole discretion, to collect the Accounts and
General Intangibles;
(E) The right to sell, assign, lease or to otherwise dispose of all
or any Collateral in its then condition, or after any further
manufacturing or processing thereof, at public or private sale or sales,
with such notice as may be required by law, in lots or in bulk, for cash
or on credit, with or without representations and warranties, all as
Secured Party, in its sole discretion, may deem advisable (except, in the
case of Government Receivables, to the extent such sales or other
disposition are prohibited by applicable law). Secured Party shall have
the right to conduct such sales on Borrower's premises or elsewhere and
shall have the right to use Borrower's premises without charge for such
sales for such time or times as Secured Party may see fit. Secured Party
may, if it deems it reasonable, postpone or adjourn any sale of the
Collateral from time to time by an announcement at the time and place of
such postponed or adjourned sale, without being required to give a new
notice of sale. Borrower agrees that Secured Party has no obligation to
preserve rights to the Collateral against prior parties or to marshall any
Collateral for the benefit of any Person. Secured Party is hereby granted
a license or other right to use, without charge, Borrower's labels,
patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of,
advertising for sale and selling any Collateral and Borrower's rights
under any license and any franchise agreement shall inure to Secured
Party's benefit. If any of the Collateral shall require repairs,
maintenance, preparation or the like, or is in process or other unfinished
state, Secured Party shall have the right, but shall not be obligated to
perform such repairs, maintenance, preparation, processing or completion
of manufacturing for the purpose of putting the same in such saleable form
as Secured Party shall deem appropriate, but Secured Party shall have the
right to sell or dispose of the Collateral without such processing. In
addition, Borrower
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<PAGE>
agrees that in the event notice is necessary under applicable law, written
notice mailed to Borrower in the manner specified in either of the
Agreements ten (10) days prior to the date of public sale of any of the
Collateral or prior to the date after which any private sale or other
disposition of the Collateral will be made shall constitute commercially
reasonable notice to Borrower. Secured Party or any Lender may purchase
all or any part of the Collateral at public or, if permitted by law,
private sale, free from any right of redemption which is hereby expressly
waived by Borrower and, in lieu of actual payment of such purchase price,
may set off the amount of such price against the Secured Obligations. The
net cash proceeds resulting from the collection, liquidation, sale, lease
or other disposition of the Collateral shall be applied first to the
reasonable expenses (including all reasonable attorneys' fees) of
retaking, holding, storing, processing and preparing for sale, selling,
collecting, liquidating and the like (collectively, the "Administration
Expenses"), and then to the satisfaction of all Secured Obligations,
application as to particular Secured Obligations or against principal or
interest to be in subject to the terms of Section 13 hereof and of the
Agreements. Borrower shall be liable to Secured Party and the Lenders and
shall pay to the Secured Party on demand any deficiency which may remain
after such sale, disposition, collection or liquidation of the Collateral.
Borrower recognizes that the Secured Party may be unable to effect a
public sale of securities constituting Collateral by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities or Blue Sky laws, and
as a consequence may be compelled to resort to one or more private sales
to a restricted group of purchasers who will be obliged to agree, among
other things, to acquire such Collateral for their own account, for
investment and not with a view to the distribution or resale thereof.
Borrower agrees and acknowledges that private sales so made may be at
prices and upon terms less favorable to Borrower than if such Collateral
were sold at public sales and that the Secured Party has no obligation to
delay the sale of any of the Collateral for the period of time necessary
to permit the issuer of such Collateral to register or otherwise qualify
them, even if such issuer would agree to register or otherwise qualify
such Collateral for public sale under the Securities Act and applicable
state securities or Blue Sky laws. Borrower further agrees, to the extent
permitted by applicable law, that the use of private sales made under the
foregoing circumstances to dispose of the Collateral shall be deemed to be
dispositions in a commercially reasonable manner;
(F) The rights and remedies provided to Secured Party or any Lender
under this Security Agreement or any of the other Loan Documents or ESOP
Loan Documents.
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13. Pari Passu Secured Obligations. The parties hereto acknowledge that
the Obligations and the Guaranty Obligations shall rank pari passu with respect
to the application of proceeds of Collateral to satisfy the same and, in
accordance therewith, agree that the proceeds of Collateral, after payment of
all Administration Expenses, shall be applied ratably to Obligations and
Guaranty Obligations in accordance with the respective amounts thereof
outstanding as of the date of any application of proceeds of Collateral for such
purpose.
14. Anti-Marshalling Provisions. The right is hereby given by Borrower to
Secured Party and the Lenders to make releases (whether in whole or in part) of
all or any part of the Collateral agreeable to Secured Party and the Lenders
without notice to, or the consent, approval or agreement of other parties and
interests, including junior lienors, which releases shall not impair in any
manner the validity of or priority of the liens and security interest in the
remaining Collateral conferred under such documents, nor release Borrower from
personal liability for the indebtedness hereby secured. Notwithstanding the
existence of any other security interest in the Collateral held by Secured Party
or any Lender, Secured Party and the Lenders shall have the right to determine
the order in which any or all of the Collateral shall be subjected to the
remedies provided in this Security Agreement. The proceeds realized upon the
exercise of the remedies provided herein shall be applied as provided herein and
in the Agreements. Borrower hereby waives any and all right to require the
marshalling of assets in connection with the exercise of any of the remedies
permitted by applicable law or provided herein.
15. Appointment of Secured Party as Borrower's Lawful Attorney. Upon and
after an Event of Default which has not been waived or cured, Borrower
irrevocably designates, makes, constitutes and appoints Secured Party (and all
Persons designated by Lender) as Borrower's true and lawful attorney (and
agent-in-fact). To the extent permitted by law, all acts of Secured Party or its
designee lawfully taken pursuant to Section 13 are hereby ratified and confirmed
and Secured Party or its designee shall not be liable for any acts of omission
or commission nor for any error of judgment or mistake of fact or law which does
not constitute bad faith, willful misconduct or gross negligence. This power,
being coupled with an interest, is irrevocable by Borrower until all Secured
Obligations are finally paid in full.
16. Rights and Remedies Cumulative; Non-Waiver; Etc. The enumeration of
Secured Party's and Lenders' rights and remedies set forth in this Security
Agreement is not intended to be exhaustive and the exercise by the Secured Party
or any Lender of any right or remedy shall not preclude the exercise of any
other rights or remedies, all of which shall be cumulative, and shall be in
addition to any other right or remedy given hereunder, or under any other
agreement between Borrower and Secured Party or any Lender or which may now or
hereafter exist in law or in equity or by suit or
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<PAGE>
otherwise. No delay or failure to take action on the part of Lender in
exercising any right, power or privilege shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or be construed to be a waiver of any Event of Default. No
waiver by a party hereunder shall be effective unless it is in writing and
signed by the party making such waiver, and then only to the extent specifically
stated in such writing. No course of dealing between Borrower and the Secured
Party or any Lender or their respective agents or employees shall be effective
to change, modify or discharge any provision of this Security Agreement or to
constitute a waiver of any Event of Default.
17. Waivers. In addition to the other waivers contained herein and in any
other agreement between Borrower and Secured Party or any Lender, Borrower
hereby expressly waives, to the extent permitted by law: presentment for
payment, demand, protest, notice of demand, notice of protest, notice of default
or dishonor, notice of payments and nonpayments and all other notices and
consents that Secured Party may release, compromise, settle, extend or renew any
commercial paper, instruments or guaranties at any time held by Secured Party or
any Lender on which Borrower may in any way be liable and notice of any action
taken by Secured Party or any Lender unless expressly required by this Security
Agreement, the Agreements or by law.
18. Notice. Except as otherwise provided herein, all notices, requests and
demands to or upon a party hereto shall be effective as provided (i) as among
the Borrower, the Agent and the Lenders, for the giving of notices to such
parties in the Credit Agreement and (ii) as between the Borrower and
NationsBank, for the giving of notices to such parties in the Guaranty.
19. Applicable Law. This Security Agreement shall be governed in all
respects by, and construed in accordance with, the internal laws of the State of
Florida without reference to choice of laws principles.
20. References to Credit Agreement Definitions. In the event that the
Credit Agreement shall no longer be in effect at any time while the Guaranty
shall continue in effect or there shall otherwise continue to remain outstanding
Secured Obligations, all references to the Credit Agreement, including terms
defined by reference to their respective definitions contained in the Credit
Agreement, shall be deemed to refer to the Credit Agreement as in effect as of
the date hereof, with such amendments thereto to which the Secured Party shall
have given its express consent in accordance with the Loan Documents and the
ESOP Loan Documents.
21. Entire Agreement. This Security Agreement, together with the
Agreements and other Loan Documents and ESOP Loan Documents, constitute and
express the entire understanding between the parties
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hereto with respect to the subject matter hereof, and supersede all prior
agreements and understandings, inducements, commitments or conditions, express
or implied, oral or written, except as herein contained. The express terms
hereof control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof. Neither this Security Agreement nor
any portion or provision hereof may be changed, altered, waived, modified,
supplemented, discharged, canceled, terminated, or amended orally or in any
manner other than (i) as to the Agent, as provided in the Credit Agreement and
(ii) as to NationsBank, by the express written consent of NationsBank in each
instance.
22. Section Headings. The Section headings in this Security Agreement are
for convenience of reference only; they form no part of this Security Agreement
and shall not affect its interpretation.
23. Severability. The provisions of this Security Agreement are
independent of and separable from each other. If any provision hereof shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect the validity or enforceability of any other provision hereof,
but this Security Agreement shall be construed as if much invalid or
unenforceable provision had never been contained herein.
24. Successors and Assigns. This Security Agreement shall be binding upon
the successors and assigns of Borrower and shall inure to the benefit of and be
enforceable by the Secured Party and its successors and assigns; provided,
however, the obligations of Borrower hereunder may not be assigned or delegated
to any other Person without the prior written consent of the Secured Party.
25. Agency. Notwithstanding the foregoing references to the Secured Party,
Borrower acknowledges and agrees that so long as NationsBank shall be the sole
Lender under the Credit Agreement, the term "Agent" shall mean NationsBank as
Lender. When and if there shall be more than one Lender party to the Credit
Agreement, then the term "Agent" shall refer to the Agent under the Credit
Agreement pursuant to the provisions of Article XI of the Credit Agreement, to
which reference is hereby made.
26. Termination. In the event that all of the Secured Obligations shall be
fully, finally and indefeasibly paid and satisfied in full (subject to
provisions of the Agreements that expressly survive), the Agreements shall be
terminated and there shall be no Outstanding Letters of Credit, the Secured
Party shall, at the request and at the expense of the Borrower, terminate the
security interest and powers of attorney herein conferred and, in furtherance
thereof, execute such Uniform Commercial Code termination statements and such
other documents in form and substance reasonably satisfactory to the Secured
Party to release and terminate the Lien hereof of record. Notwithstanding the
foregoing provisions of this Section 26, in the event that any payment made or
deemed made to the Secured Party or any Lender in
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<PAGE>
payment of any Secured Obligation shall be rescinded or declared to be or become
void, voidable or otherwise recoverable from the Secured Party or such Lender
for any reason whatsoever, the Lien in favor of the Secured Party created
hereunder shall be and become reinstituted in respect of such Secured
Obligations until the same shall be thereafter fully and finally paid, satisfied
and discharged.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed by authority duly given as of the day and year first above
written.
WITNESS: VITAS HEALTHCARE CORPORATION
/s/ Terry L. Scaggs By: /s/ Mark W. Ohlendorf
- ----------------------------- -----------------------------------
/s/ Meganne Cusato Mark W. Ohlendorf
- ----------------------------- Vice President
SECURED PARTY:
WITNESS: NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION, as Agent
/s/ Terry L. Scaggs By: /s/ Allison S. Freeland
- ----------------------------- -----------------------------------
/s/ Meganne Cusato Allison S. Freeland
Vice President
WITNESS: NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION
/s/ Terry L. Scaggs By: /s/ Allison S. Freeland
- ----------------------------- -----------------------------------
/s/ Meganne Cusato Allison S. Freeland
- ----------------------------- Vice President
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EXHIBIT A
Permitted Encumbrances
Schedule 7.01(g) delivered pursuant to the Credit Agreement as in effect on the
Closing Date is incorporated by reference herein.
<PAGE>
EXHIBIT 10.50
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (this "Security Agreement") is made
this 17th day of February, 1995, by and between VITAS HEALTHCARE CORPORATION OF
CALIFORNIA, a Delaware corporation having its principal place of business in
Miami, Dade County, California, (the "Pledgor"), and NATIONSBANK OF FLORIDA,
NATIONAL ASSOCIATION, a national banking association ("NationsBank"), for itself
and as agent (in such agency capacity and together with any successor agent, the
"Agent") for certain lenders (the "Lenders") party to the Credit Agreement
described below (in such capacities as described below and together with any
successor agent acting as such under the Credit Agreement described below, the
"Secured Party").
W I T N E S S E T H:
WHEREAS, (i) pursuant to a Revolving Credit and Reimbursement Agreement
dated as of August 11, 1994 (the "Prior Credit Agreement") among Vitas
Healthcare Corporation (the "Company"), NationsBank as agent and NationsBank as
the lender thereunder, NationsBank has extended to the Company a revolving
credit facility in the aggregate principal amount of up to $15,000,000,
including within such revolving credit facility the issuance of letters of
credit for the account of the Company and (ii) pursuant to a Guaranty and
Contingent Purchase Agreement of even date with the Prior Credit Agreement
between the Company and NationsBank (the "Prior Company Guaranty" and, together
with the Prior Credit Agreement, the "Prior Agreements"), NationsBank extended a
term loan of $2,386,670 to the Vitas Healthcare Corporation Employee Stock
Ownership Trust (the "Trust") to refinance certain indebtedness owing from the
Trust to the Company, the repayment of which loan has been, inter alia,
guaranteed under the Prior Guaranty; and
WHEREAS, the Company and Pledgor, a Subsidiary of the Company, have
entered into an Asset Purchase Agreement with the Sellers (as defined in the
Credit Agreement) dated as of December 27, 1994 (the "Asset Purchase Agreement")
pursuant to which the Pledgor has agreed to purchase substantially all of the
operating assets of the CHC Entities (as defined in the Credit Agreement)
pursuant to the terms and subject to the conditions set forth therein and, in
connection therewith, the Company has requested that the Prior Credit Agreement
be amended and restated to increase the revolving credit facility from
$15,000,000 to $20,000,000, to provide for a $25,000,000 term loan facility, and
to make certain other modifications, and that the Prior Company Guaranty be
amended and restated to reflect the agreement of the parties; and
<PAGE>
WHEREAS, at the request of the Company and to effect the modifications
referred to above, (i) the Company, the Agent and the Lenders are entering into
an Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement
of even date herewith (as the same may be modified, amended or restated from
time to time, the "Credit Agreement"), and (ii) the Company and NationsBank are
entering into an Amended and Restated Guaranty and Contingent Purchase Agreement
of even date herewith (as the same may be modified, amended or restated from
time to time, the "Company Guaranty" and, together with the Credit Agreement,
the "Agreements"); and
WHEREAS, pursuant to the Agreements, the Pledgor has executed and
delivered its Guaranty and Suretyship Agreement of even date herewith (as the
same may be amended, modified or restated from time to time, the "Pledgor
Guaranty") guaranteeing the payment and performance by the Company, inter alia,
of its obligations under the Agreements; and
WHEREAS, the Lenders are unwilling to extend the amend and increase the
revolving credit facility or make such term loan pursuant to the Credit
Agreement, and NationsBank is unwilling to amend the Prior Agreements as
reflected in the Agreements to permit the consummation of the CHC Transaction,
unless the Pledgor enters into this Security Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and promises herein contained, the parties hereto agree as follows:
1. Certain Definitions. Unless otherwise defined herein, capitalized terms
used in this Security Agreement shall have the respective meanings therefor
provided in the Credit Agreement.
2. Grant of Security Interest. As collateral security for the full and
prompt payment, satisfaction and performance of all obligations and liabilities
of the Pledgor under the Pledgor Guaranty, whether now existing or hereafter
arising (the "Secured Obligations"), Pledgor hereby grants to the Secured Party
a continuing security interest in all of its right, title and interest in and to
all of the following property in which Pledgor now has or hereafter acquires an
interest, whether now owned or existing or hereafter acquired or arising and
wheresoever located:
(A) All accounts, accounts receivable, notes, bills, acceptances,
choses in action, chattel paper, instruments, documents, and other forms
of obligations at any time owing to Pledgor, the proceeds thereof and all
of Pledgor's rights with respect to any goods represented thereby, whether
or not delivered, goods returned by customers and all rights as an unpaid
vendor or lienor, including rights of stoppage in transit and of
recovering possession by proceedings
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including replevin and reclamation, together with all customer lists, books and
records, ledger and account cards, computer tapes, software, disks, printouts
and records, whether now in existence or hereafter created relating thereto
(collectively referred to hereinafter as "Accounts");
(B) All goods of Pledgor, including without limitation, all
machinery, equipment, motor vehicles, parts, supplies, apparatus,
appliances, tools, patterns, molds, dies, blueprints, fittings, furniture,
furnishings, fixtures and articles of tangible personal property of every
description now or hereafter owned by Pledgor or in which Pledgor may have
or may hereafter acquire any interest, but as to leasehold interests in
personal property, only to the extent assignable (collectively referred to
hereinafter as "Equipment");
(C) All general intangibles of Pledgor, now existing or hereafter
owned or acquired or arising or in which Pledgor now has or hereafter
acquires any rights, including but not limited to causes of action,
corporate or business records, inventions, designs, patents, patent
applications, trademarks, trademark registrations and applications
therefor, goodwill, trade names, trade secrets, trade processes,
copyrights, copyright registrations and applications therefor, licenses
(to the extent assignable), permits (to the extent assignable),
franchises, customer lists (to the extent permitted by law), computer
programs, all claims under guaranties, tax refund claims, rights and
claims against carriers and shippers, leases (to the extent assignable),
claims under insurance policies, all rights to indemnification and all
other intangible personal property of every kind and nature (collectively
referred to hereinafter as "General Intangibles");
(D) All inventory of Pledgor wherever located, including without
limitation, all goods manufactured or acquired for sale or lease, and any
piece goods, raw materials, work in process and finished merchandise,
findings or component materials, and all supplies, goods, incidentals,
office supplies, packaging materials and any and all items used or
consumed in the operation of the business of Pledgor or which may
contribute to the finished product or to the sale, promotion and shipment
thereof, in which Pledgor now or at any time hereafter may have an
interest, whether or not the same is in transit or in the constructive,
actual or exclusive occupancy or possession of Pledgor or is held by
Pledgor or by others for Pledgor's account (collectively referred to
hereinafter as "Inventory");
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<PAGE>
(E) To the extent assignable, all rights now or hereafter arising to
any Pledgor under contracts, leases, agreements or other instruments of
every character and description, and all rights of enforcement thereunder
(collectively referred to as hereinafter as "Contract Rights");
(F) All monies, certificates of deposit, commercial paper, cash
equivalents, account balances, notes, options, interests, and securities
(certificated or uncertificated), wheresoever located; excluding, however,
(x) the equity interests (other than interests in money market funds) of
the Pledgor in Persons not constituting Subsidiaries and (y) the Joint
Account established under the Joint Account Agreement (as defined in the
Asset Purchase Agreement) and all funds deposited therein or investments
credited thereto;
(G) All accessions to, substitutions for and all replacements,
products and proceeds of the foregoing including, without limitation,
proceeds of insurance policies insuring the Collateral (as hereinafter
defined); and
(H) All books and records (including without limitation, customer
data, credit files, computer programs, printouts, and other computer
materials and records of the Pledgor and all documents) pertaining to any
of the foregoing.
All of the property and interests in property described in subsections (A)
through (H) and all other property and interests in personal property which
shall, from time to time, secure the Secured Obligations are herein collectively
referred to as the "Collateral".
3. Financing Statements. At the time of execution of this Security
Agreement, Pledgor shall have (i) furnished the Secured Party with financing
statements, approved by the Secured Party and executed as prescribed by the
Uniform Commercial Code as presently in effect in the states of California and
Florida, and where other Collateral is located, as may be reasonably requested
by the Secured Party, in form and number sufficient to perfect in favor of the
Secured Party the security interest in the Collateral, and (ii) delivered to
Secured Party's possession certificated securities (with duly executed stock
powers in blank affixed thereto) representing the Pledgor's interests in
Subsidiaries, in order that the Secured Party shall have a perfected security
interest in the Collateral following such filing of such financing statements
with the appropriate local and state governmental authorities and the delivery
of such securities (to the extent that a security interest in such Collateral is
capable of perfection by such filing or possession), and subject only to (a)
permitted liens described in
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<PAGE>
the Credit Agreement, (b) such other security interests, liens and encumbrances
currently existing and set forth in Exhibit A attached hereto and by reference
made a part hereof, or as shall otherwise be acceptable to the Secured Party in
its sole discretion, and (c) limitations under applicable law which may limit
the creation, perfection or priority of liens on Government Receivables
(collectively referred to hereinafter as "Permitted Liens"); provided, however,
that with respect to the items of property described in clause (F) of Section 2,
the security interest in such property will not be perfected until the Secured
Party or any Lender takes possession thereof or otherwise obtains perfection in
accordance with the applicable requirements of the Uniform Commercial Code.
Pledgor shall execute as reasonably required by the Secured Party any additional
financing statements or other documents to effect a perfected security interest
in the Collateral to the extent contemplated hereby, together with any necessary
continuation statements so long as this Security Agreement remains in effect.
4. Maintenance of Security Interest. Pledgor will, from time to time, upon
the request of the Secured Party, deliver specific assignments of Collateral,
together with such other instruments and documents, financing statements,
amendments thereto, assignments or other writings as the Secured Party or any
Lender may reasonably request to carry out the terms of this Security Agreement
or to protect or enforce the Secured Party's security interest in the
Collateral.
With respect to any and all Collateral as to which a security interest is
granted under this Security Agreement, Pledgor agrees to do and cause to be done
all things necessary to perfect and keep in full force the security interest
granted in favor of the Secured Party, including, but not limited to, the prompt
payment of all fees and expenses incurred in connection with any filings made to
perfect a security interest in the Collateral in favor of the Secured Party.
Pledgor agrees to make appropriate entries upon its financial statements
and books and records disclosing the Secured Party's security interest in the
Collateral.
5. Collections: Secured Party's Right to Notify Account Debtors and to
Endorse Each Pledgor's Name. Pledgor hereby authorizes Secured Party at any time
after the occurrence and during the continuation of an Event of Default subject,
with respect to the Secured Obligations relating to the Company's obligations
under the Company Guaranty, to Section 2.08 of the Company Guaranty, (a) to open
Pledgor's mail and collect any and all amounts due to Pledgor from persons
obligated on any Accounts ("Account Debtors"), but only to the extent permitted
by law with respect to Government Receivables; (b) to take over Pledgor's post
office boxes or make other arrangements as Secured Party deems necessary to
receive Pledgor's mail, including notifying
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<PAGE>
the post office authorities to change the address for delivery of Pledgor's mail
to such address as Secured Party may designate; and (c) to notify any or all
Account Debtors, but only to the extent permitted by law with respect to
Government Receivables, that the Accounts have been assigned to Secured Party
and that Secured Party has a security interest therein. Pledgor irrevocably
makes, constitutes and appoints Secured Party and all Persons designated by
Secured Party for that purpose as Pledgor's true and lawful attorney (and
agent-in-fact) after the occurrence and during the continuation of an Event of
Default, subject to the limitations set forth in the immediately preceding
sentence and, with respect to the Secured Obligations relating to the Company's
obligations under the Company Guaranty, to Section 2.08 of the Company Guaranty,
to endorse such Pledgor's name on any checks, notes, drafts or any other payment
relating to and/or proceeds of the Collateral which comes into Secured Party's
possession or Secured Party's control, and apply the same on account of the
Secured Obligations as provided herein and in the Agreements, in such order as
Secured Party may elect. Secured Party shall promptly furnish Pledgor with a
copy of any such notice sent with respect to Accounts of Pledgor and Pledgor
hereby agrees that any such notice, in Secured Party's sole discretion, may be
sent on Pledgor's stationery, in which event Pledgor shall co-sign such notice
with Secured Party.
6. Collateral. Pledgor covenants with Lender that:
(A) Inspection. Secured Party and any Lender (by any of its
officers, employees and agents) shall have the right, at any time or times
during Pledgor's usual business hours, to inspect the Collateral, all
records related thereto (and to make extracts or copies from such
records), and the premises upon which any of the Collateral is located, to
discuss Pledgor's affairs and finances with its principal officers and
independent auditors and to verify the amount, quality, quantity, value
and condition of, or any other matter relating to, the Collateral. Upon or
after the occurrence of a Default or an Event of Default, Secured Party
may at any time and from time to time employ and maintain at Pledgor's
premises a custodian selected by Secured Party who shall have full
authority to do all acts necessary to protect Secured Party's interest.
All reasonable expenses incurred by Secured Party by reason of the
employment of such custodian shall be paid by the Pledgor, added to the
Secured Obligations and secured by the Collateral.
(B) Assignments, Records and Schedules of Accounts. Pledgor shall
keep accurate and complete records of its Accounts ("Account Records")
and, upon Secured Party's request from time to time at intervals
acceptable to Secured Party, Pledgor shall reasonably provide Secured
Party and each Lender with a Schedule of Accounts in form and
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substance reasonably acceptable to the Secured Party describing all
Accounts created or acquired by such Pledgor ("Schedule of Accounts") and
shall at the request of Secured Party execute and deliver further written
assignments of such Accounts to Secured Party; provided however, that
Pledgor's failure to execute and deliver any such Schedule of Accounts or
assignments shall not affect or limit Secured Party's security interest or
other rights in and to any Accounts. If requested by Secured Party,
Pledgor shall furnish Secured Party with copies of proof of delivery of
invoices and the original copy of all documents, including, without
limitation, repayment histories and present status reports, relating to
the Accounts so scheduled (collectively, "Account Documents") and such
other matter and information relating to the status of then existing
Accounts as Secured Party shall reasonably request.
(C) Notice Regarding Disputed Account. In the event any amounts due
and owing in excess of $100,000 are in dispute between any Account Debtor
and Pledgor (which shall include, without limitation, any dispute in which
an offset claim or counterclaim may result), Pledgor shall provide the
Secured Party with written notice thereof promptly, explaining in detail
the reason for the dispute, all claims related thereto and the amount in
controversy.
(D) Verification of Accounts. Whether or not a Default or an Event
of Default has occurred, any of Secured Party's, employees, or agents
shall have the right, at any time or times hereafter, to verify under
reasonable procedures the validity, amount or any other matter relating to
any Accounts by mail, telephone, telegraph or otherwise.
(E) Change of Trade Styles. Set forth on Schedule 6(E) delivered to
the Secured Party simultaneously with the execution of this Security
Agreement are all tradenames and trade styles under which Pledgor provides
services giving rise to Accounts as of the date of this Agreement ("Trade
Styles"). Pledgor shall not change, amend, alter, terminate, or cease
using its Trade Styles, or use additional Trade Styles, except upon giving
not less than ten (10) days prior written notice to the Secured Party and
taking or causing to be taken all such action at Pledgor's expense as may
be reasonably requested by the Secured Party (including the furnishing of
additional financing statements) to enable the Secured Party to perfect or
maintain the perfection of the security interest of the Secured Party in
Accounts, General Intangibles, Contract Rights and related Collateral.
(F) Safekeeping of Inventory. Pledgor shall be responsible for the
safekeeping of its Inventory, and in no event shall Secured Party or any
Lender have any responsibility for:
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(i) Any loss or damage to Inventory or destruction thereof
occurring or arising in any manner or fashion from any cause other
than as a result of gross negligence, bad faith or willful
misconduct of the Agent or any Lender;
(ii) Any diminution in the value of Inventory; or
(iii) Any act or default of any carrier, warehouse-man, bailee
or forwarding agency thereof or other Person in any way dealing with
or handling Inventory.
(G) Records and Schedules of Inventory. Pledgor shall keep correct
and accurate records on a perpetual basis, itemizing and describing the
kind, type, location, quality and quantity of Inventory owned by it, if
any, from time to time, and such Pledgor's cost therefor and selling price
thereof, and at the reasonable request of the Secured Party shall furnish
to the Secured Party, a current Schedule of Inventory ("Schedule of
Inventory"). Pledgor shall conduct a physical inventory, of which Secured
Party shall be given prior written notice and shall have the right to be
present no less than annually, and shall furnish to Secured Party such
other documents and reports as Secured Party shall reasonably request with
respect to the Inventory, including, without limitation, invoices relating
to Pledgor's purchase of Inventory.
(H) Evidence of Ownership of Equipment. Pledgor, promptly on request
therefor by the Secured Party, shall deliver to the Secured Party any and
all evidence of ownership of any of the Equipment (including without
limitation certificates of title and applications for title)
(I) Records and Schedules of Equipment. Pledgor shall maintain
accurate, itemized records describing in reasonable detail its Equipment
and shall furnish the Secured Party upon reasonable request with a current
schedule containing the foregoing information ("Schedule of Equipment").
(J) Administration of Collateral. So long as no Event of Default
shall have occurred and be continuing, Pledgor may (to the extent not
inconsistent with the provisions of the Loan Documents or the ESOP Loan
Documents) (i) sell, transfer or dispose of any asset owned by it or (ii)
collect or compromise Accounts and General Intangibles in the ordinary
course of business in any lawful manner.
(K) Voting Rights, Consensual Rights, Dividends and Distributions.
So long as no Event of Default shall have occurred and be continuing:
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1. the Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Collateral or any part thereof
for any purpose not inconsistent with the terms of this Security
Agreement, the Credit Agreement, the other Loan Documents or the other
ESOP Loan Documents;
2. the Pledgor shall be entitled to receive and retain any and all
cash distributions or dividends paid on the Collateral which they are
otherwise entitled to receive, notwithstanding the assignment and transfer
of the Collateral and the grant of security interest in Section 2 of this
Security Agreement (provided that any cash distributions or dividends
received upon the occurrence and during the continuance of a Default shall
remain segregated from all other funds of the Pledgor and deposited with
the Secured Party), but any and all stock dividends, liquidating
dividends, distributions in property, returns of capital or other
distributions made on or in respect of any of the Collateral, whether
resulting from a subdivision, combination or reclassification of the
outstanding capital stock of any issuer of the Collateral or received in
exchange for the Collateral or any part thereof or as a result of any
merger, consolidation, acquisition or other exchange of assets to which
any issuer of any Collateral may be a party or otherwise, and any and all
cash and other property received in exchange for any of the Collateral
shall be and become part of the Collateral hereunder and, if received by
the Pledgor, shall forthwith be delivered to the Secured Party, to the
extent the Collateral for which it was exchanged was held or required to
be held by the Secured Party; and
3. the Secured Party shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and other
instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting, consensual and other rights
which the Pledgor are entitled to exercise pursuant to subparagraph (1)
above and to receive such distributions and dividends which it is
authorized to receive and retain pursuant to subparagraph (2) above.
B. Upon the occurrence and during the continuance of an Event of Default:
1. subject, with respect to the Secured Obligations relating to the
Company's obligations under the Company Guaranty to Section 2.08 of the
Company Guaranty, all rights of the Pledgor to exercise the voting and
other consensual rights which it would
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otherwise be entitled to exercise pursuant to Section 6(K)A.1 and to
receive and retain the distributions and dividends which it would
otherwise be authorized to receive and retain pursuant to Section 6(K)A.2,
shall become vested in the Secured Party, which shall thereupon have the
sole right to exercise such voting and other consensual rights and to
receive and hold as Collateral such distributions and dividends (whether
or not the relevant Collateral shall have been transferred into the name
of the Secured Party or any of its nominees, the Pledgor hereby
irrevocably appointing and constituting the Secured Party as proxy and
attorney-in-fact of Pledgor, which appointment is coupled with an interest
and is irrevocable, with full power of substitution, to act as if the
Secured Party were the outright owner thereof); and
2. all distributions and dividends which are received by the Pledgor
contrary to the provisions of Section 6(K)A.2 or Section 6(K)B.1 shall be
received in trust for the benefit of the Secured Party, shall be
segregated from other funds of Pledgor and shall be paid over to the
Secured Party forthwith as Collateral in the same form as so received
(with any necessary endorsement).
7. Warranties Regarding Collateral. Pledgor warrants and represents that
it is and will continue to be the owner of the Collateral, now owned and upon
the acquisition of the same, free and clear of all encumbrances and security
interests other than the security interest in favor of Secured Party hereunder
and Permitted Liens, and that it will defend the Collateral and the Secured
Party's security interest therein and any products and proceeds thereof against
all claims and demands of all Persons at any time claiming the same or any
interest therein adverse to the Secured Party or any Lender.
8. Account Warranties and Representation. With respect to its Accounts,
Pledgor warrants and represents to the Secured Party and the Lenders that they
may rely on all statements or representations made by Pledgor on or with respect
to any Schedule of Accounts prepared and delivered by Pledgor and, unless
otherwise indicated in writing by Pledgor, that:
(A) All Account Records and Account Documents are located and shall
be kept only at Pledgor's chief executive offices located at the locations
described in Schedule 6.04 delivered to the Agent pursuant to the Credit
Agreement and Schedule 4.22 delivered to the Bank pursuant to the Company
Guaranty;
(B) They are genuine, are in all material respects what they purport
to be, are not evidenced by a judgment
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instrument or document or, if evidenced by an instrument or document, are
only evidenced by one original instrument or document, which has been
delivered to the Secured Party;
(C) They cover the bona fide rendition of services, or the bona fide
sales and deliveries of Inventory usually dealt in by Pledgor, in the
ordinary course of business;
(D) Each Account is actually and absolutely owing to Pledgor in the
face value thereof, is valid and enforceable against the applicable
Account Debtor, and is not subject to any setoffs, discounts, allowances,
claims, counterclaims, disputes or doubtful collectibility except (i) as
is customary for Accounts of the type represented by such Account
(including the nature of the Account Debtor) of the Pledgor in the
ordinary course of Pledgor's business and consistent with past practices,
and (ii) as is reflected by reserves and reductions in the stated value of
such Account, computed in a manner consistent with the Company's policies
and practices in preparing the financial statements described in Sections
7.01 and 8.01 of the Credit Agreement and Sections 3.01(f) and 4.01 of the
Company Guaranty, included in such financial statements, in the Schedule
of Accounts and in any report or certificate including financial
information regarding such Account furnished to the Secured Party pursuant
to the Loan Documents or the ESOP Loan Documents.
(E) The goods or services giving rise thereto are not, and were not
at the time of the sale or performance thereof, subject to any lien,
claim, encumbrance or security interest, except those of the Secured Party
and those removed or terminated prior to the date hereof;
(F) They have not been pledged to any Person other than to Secured
Party under this Security Agreement and will be owned by Pledgor free and
clear of any liens, claims or encumbrances except Permitted Liens; and
(G) Secured Party's security interest therein will not be subject to
any offset, deduction, counterclaim, lien or other adverse condition,
other than Permitted Liens or as is consistent with Section 8(D) above.
9. Inventory Warranties and Representations. With respect to Inventory,
Pledgor warrants and represents to the Secured Party and the Lenders that they
may rely on all statements or representations made by Pledgor on or with respect
to any Inventory and, unless otherwise indicated in writing by Pledgor, that
(A) Except for the relocation of Inventory from time to time in the
ordinary course of business not aggregating
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more than $100,000 at any one time in any location other than those set
forth in Schedules 6.03 and 6.04 delivered pursuant to the Credit
Agreement or Schedules 4.22 and 4.23 delivered pursuant to the Company
Guaranty, the Pledgor shall not locate or relocate inventory to any
location other than those set forth in Section 8(A) above or Schedules
6.03 and 6.04 delivered pursuant to the Credit Agreement or Schedules 4.22
and 4.23 delivered pursuant to the Company Guaranty without giving the
Secured Party not less than thirty (30) days prior written notice and
taking or causing to be taken at its expense all steps as may be
reasonably requested by the Secured Party (including the furnishing or
additional financing statements) to enable the Secured Party to perfect or
continue the perfection of its security interest in such property.
(B) No Inventory is or will be subject to any lien, claim,
encumbrance or security interest whatsoever, except for the security
interest of Secured Party hereunder and Permitted Liens;
(C) No Inventory having an aggregate value in excess of $100,000 is
now, and shall not at any time or times hereafter be, stored with a
bailee, warehouseman or similar party without Secured Party's prior
written consent and, if Secured Party gives such consent, Pledgor will
concurrently therewith cause any such bailee, warehouseman, or similar
party to issue and deliver to Secured Party in form and substance
acceptable to Secured Party, warehouse receipts therefor in Secured
Party's name; and
(D) No Inventory is under consignment to any Person.
10. Equipment Warranties and Representations. With respect to Equipment,
Pledgor warrants and represents to the Secured Party and each Lender that:
(A) Except for the relocation of Equipment from time to time in the
ordinary course of business not aggregating more than $100,000 at any one
time in any location other than those set forth in Schedules 6.03 and 6.04
of the Credit Agreement and Schedules 4.22 and 4.23 of the Company
Guaranty, the Pledgor shall not locate or relocate Equipment to any
location other than those set forth in Schedules 6.03 and 6.04 of the
Credit Agreement and Schedules 4.22 and 4.23 of the Company Guaranty
without giving the Secured Party not less than thirty (30) days prior
written notice and taking or causing to be taken at their expense all
steps as may be reasonably requested by the Secured Party (including the
furnishing of additional financing statements) to enable the Secured Party
to perfect or continue the perfection of its security interest in such
property; and
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(B) Pledgor has and at all times will have good and marketable title
to and ownership of the Equipment free and clear of any lien, claim,
encumbrance, or security interest whatsoever, except for (i) the security
interest of Secured Party created hereunder and (ii) Permitted Liens.
11. Casualty and Liability Insurance Required. (A) Pledgor will keep the
Collateral continuously insured as may be expressly required by the Agreements.
(B) Each insurance policy obtained in satisfaction of the
requirements of Section 11(A) hereof:
(i) shall be by such insurer (or insurers) as shall be
financially responsible and qualified to do business in the
applicable jurisdictions;
(ii) shall be in such form and have such provisions
(including, without limitation, the loss payable clause, the waiver
of subrogation clause, the deductible amount, if any, and the
standard mortgagee endorsement clause), as are generally considered
standard provisions for the type of insurance involved and are
acceptable in all respects to Secured Party;
(iii) shall prohibit cancellation or substantial modification,
termination or lapse in coverage by the insurer without at least 30
days' prior written notice to Secured Party;
(iv) shall provide that the interest of Secured Party shall
not be impaired or invalidated by any act or neglect of Pledgor nor
by the occupation of the premises wherein such Collateral is located
for purposes more hazardous than are permitted by said policy;
(v) without limiting the generality of the foregoing, all
insurance policies covering loss or damage to the Collateral shall
name Secured Party as mortgagee, loss payee and a party insured
thereunder and any loss thereunder shall be paid directly to Secured
Party.
(C) Prior to expiration of any such policy, Pledgor shall furnish
Secured Party with evidence reasonably satisfactory to Secured Party that
the policy or certificate has been renewed or replaced or is no longer
required by this Security Agreement.
(D) Pledgor hereby irrevocably makes, constitutes and appoints
Secured Party (and all officers, employees or agents designated by Secured
Party), effective upon the occurrence of an Event of Default which has not
been waived or cured, as Pledgor's true and lawful attorney (and
agent-in-fact) for the purpose of making, settling and adjusting claims
under such policies of
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insurance, endorsing the name of Pledgor on any check, draft, instrument
or other item or payment for the proceeds of such policies of insurance
and for making all determinations and decisions with respect to such
policies of insurance.
(E) In the event Pledgor shall fail to maintain, or cause to be
maintained, the full insurance coverage required hereunder or shall fail
to keep any Collateral in good repair and good operating condition, the
Secured Party may (but shall be under no obligation to), without waiving
or releasing any Secured Obligation or Event of Default, after giving
notice to the Pledgor, contract for the required policies of insurance and
pay the premiums on the same or make any required repairs, renewals and
replacements; and all sums so disbursed by Secured Party, including
reasonable attorneys' fees, court costs, expenses and other charges
related thereto, shall be payable on demand by Pledgor to Secured Party
and shall be additional Secured Obligations secured by the Collateral.
(F) In case of any material damage to or destruction of all or any
part of the Collateral, Pledgor shall give prompt notice thereof to
Secured Party. Each such notice shall describe generally the nature and
extent of such damage, destruction, taking, loss, proceeding or
negotiations.
12. Rights and Remedies Upon Default. Subject, with respect to the Secured
Obligations relating to the Company's obligations under the Company Guaranty, to
Section 2.08 of the Company Guaranty, upon and after an Event of Default which
has not been waived or cured, the Secured Party shall have the following rights
and remedies, all of which may be exercised with or without notice to Pledgor:
(A) All of the rights and remedies of a secured party under the
Uniform Commercial Code of the state where such rights and remedies are
asserted, or under other applicable law, all of which rights and remedies
shall be cumulative, and none of which shall be exclusive, to the extent
permitted by law, in addition to any other rights and remedies contained
in this Security Agreement, the Agreements, or any of the other Loan
Documents or ESOP Loan Documents;
(B) The right to foreclose the liens and security instruments
created under this Security Agreement or any of the other Loan Documents
or ESOP Loan Documents by any available judicial procedure or without
judicial process;
(C) The right to (i) enter upon the premises of Pledgor through
self-help and without judicial process, without first obtaining a final
judgment or giving Pledgor notice and opportunity for a hearing on the
validity of Secured Party's claim and without any obligation to pay rent
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<PAGE>
to Pledgor, or any other place or places where any Collateral is located
and kept, and remove the Collateral therefrom to the premises of Secured
Party or any agent of Secured Party for such time as Secured Party may
desire, in order to effectively collect or liquidate the Collateral,
and/or (ii) require Pledgor to assemble the Collateral and make it
available to Secured Party at a place to be designated by Secured Party in
its sole discretion;
(D) The right (to the extent permissible by law with respect to
Governmental Receivables) to (i) demand payment of the Accounts; (ii)
enforce payment of the Accounts and General Intangibles and enforce all
Contract Rights, by legal proceedings or otherwise; (iii) exercise all or
any of Pledgor's rights and remedies with respect to the collection of the
Accounts and General Intangibles and in respect of Contract Rights; (iv)
settle, adjust, compromise, extend or renew the Accounts; (v) settle,
adjust or compromise any legal proceedings brought to collect the Accounts
or General Intangibles or to enforce Contract Rights; (vi) sell or assign
the Accounts, General Intangibles, Contract Rights or other Collateral
upon such terms, for such amounts and at such time or times as Secured
Party deems advisable; (vii) discharge and release the Accounts; (viii)
take control, in any manner, of any item of payment or proceeds; (ix)
prepare, file and sign Pledgor's name on a Proof of Claim in bankruptcy or
similar document against any account obligor; (x) prepare, file and sign
Pledgor's name on any notice of lien, assignment or satisfaction of lien
or similar document in connection with the Accounts; (xi) endorse the name
of Pledgor upon any chattel paper, document, instrument, invoice, freight
bill, bill of lading or similar document or agreement relating to the
Accounts or Inventory; (xii) use Pledgor's stationery for verifications of
the Accounts and notices thereof to account obligors; (xiii) use the
information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts, General
Intangibles, Equipment, Contract Rights or Inventory to which Pledgor has
access; and (xiv) do all acts and things and execute all documents
necessary, in Secured Party's sole discretion, to collect the Accounts and
General Intangibles;
(E) The right to sell, assign, lease or to otherwise dispose of all
or any Collateral in its then condition, or after any further
manufacturing or processing thereof, at public or private sale or sales,
with such notice as may be required by law, in lots or in bulk, for cash
or on credit, with or without representations and warranties, all as
Secured Party, in its sole discretion, may deem advisable (except, in the
case of Government Receivables, to the extent such sales or other
disposition are prohibited by applicable law). Secured Party shall have
the right to
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<PAGE>
conduct such sales on Pledgor's premises or elsewhere and shall have the
right to use Pledgor's premises without charge for such sales for such
time or times as Secured Party may see fit. Secured Party may, if it deems
it reasonable, postpone or adjourn any sale of the Collateral from time to
time by an announcement at the time and place of such postponed or
adjourned sale, without being required to give a new notice of sale.
Pledgor agrees that Secured Party has no obligation to preserve rights to
the Collateral against prior parties or to marshall any Collateral for the
benefit of any Person. Secured Party is hereby granted a license or other
right to use, without charge, Pledgor's labels, patents, copyrights,
rights of use of any name, trade secrets, tradenames, trademarks and
advertising matter, or any property of a similar nature, as it pertains to
the Collateral, in completing production of, advertising for sale and
selling any Collateral and Pledgor's rights under any license and any
franchise agreement shall inure to Secured Party's benefit. If any of the
Collateral shall require repairs, maintenance, preparation or the like, or
is in process or other unfinished state, Secured Party shall have the
right, but shall not be obligated to perform such repairs, maintenance,
preparation, processing or completion of manufacturing for the purpose of
putting the same in such saleable form as Secured Party shall deem
appropriate, but Secured Party shall have the right to sell or dispose of
the Collateral without such processing. In addition, Pledgor agrees that
in the event notice is necessary under applicable law, written notice
mailed to Pledgor in the manner specified in either of the Agreements ten
(10) days prior to the date of public sale of any of the Collateral or
prior to the date after which any private sale or other disposition of the
Collateral will be made shall constitute commercially reasonable notice to
Pledgor. Secured Party or any Lender may purchase all or any part of the
Collateral at public or, if permitted by law, private sale, free from any
right of redemption which is hereby expressly waived by Pledgor and, in
lieu of actual payment of such purchase price, may set off the amount of
such price against the Secured Obligations. The net cash proceeds
resulting from the collection, liquidation, sale, lease or other
disposition of the Collateral shall be applied first to the reasonable
expenses (including all reasonable attorneys' fees) of retaking, holding,
storing, processing and preparing for sale, selling, collecting,
liquidating and the like (collectively, the "Administration Expenses"),
and then to the satisfaction of all Secured Obligations, application as to
particular Secured Obligations or against principal or interest to be in
subject to the terms of Section 13 hereof and of the Agreements. Pledgor
shall be liable to Secured Party and the Lenders and shall pay to the
Secured Party on demand any deficiency which may remain after such sale,
disposition, collection or liquidation of the Collateral.
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Pledgor recognize that the Secured Party may be unable to effect a public
sale of securities constituting Collateral by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities or Blue Sky laws, and
as a consequence may be compelled to resort to one or more private sales
to a restricted group of purchasers who will be obliged to agree, among
other things, to acquire such Collateral for their own account, for
investment and not with a view to the distribution or resale thereof.
Pledgor agrees and acknowledges that private sales so made may be at
prices and upon terms less favorable to Pledgor than if such Collateral
were sold at public sales and that the Secured Party has no obligation to
delay the sale of any of the Collateral for the period of time necessary
to permit the issuer of such Collateral to register or otherwise qualify
them, even if such issuer would agree to register or otherwise qualify
such Collateral for public sale under the Securities Act and applicable
state securities or Blue Sky laws. Pledgor further agrees, to the extent
permitted by applicable law, that the use of private sales made under the
foregoing circumstances to dispose of the Collateral shall be deemed to be
dispositions in a commercially reasonable manner;
(F) The rights and remedies provided to Secured Party or any Lender
under this Security Agreement or any of the other Loan Documents or ESOP
Loan Documents.
13. Anti-Marshalling Provisions. The right is hereby given by Pledgor to
Secured Party and the Lenders to make releases (whether in whole or in part) of
all or any part of the Collateral agreeable to Secured Party and the Lenders
without notice to, or the consent, approval or agreement of other parties and
interests, including junior lienors, which releases shall not impair in any
manner the validity of or priority of the liens and security interest in the
remaining Collateral conferred under such documents, nor release Pledgor from
personal liability for the indebtedness hereby secured. Notwithstanding the
existence of any other security interest in the Collateral held by Secured Party
or any Lender, Secured Party and the Lenders shall have the right to determine
the order in which any or all of the Collateral shall be subjected to the
remedies provided in this Security Agreement. The proceeds realized upon the
exercise of the remedies provided herein shall be applied as provided herein, in
the Pledgor Guaranty and in the Agreements. Pledgor hereby waives any and all
right to require the marshalling of assets in connection with the exercise of
any of the remedies permitted by applicable law or provided herein.
14. Appointment of Secured Party as Pledgor's Lawful Attorney. Upon and
after an Event of Default which has not been waived or cured, Pledgor
irrevocably designates, makes,
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constitutes and appoints Secured Party (and all Persons designated by Lender) as
Pledgor's true and lawful attorney (and agent-in-fact). To the extent permitted
by law, all acts of Secured Party or its designee lawfully taken pursuant to
Section 13 are hereby ratified and confirmed and Secured Party or its designee
shall not be liable for any acts of omission or commission nor for any error of
judgment or mistake of fact or law which does not constitute bad faith, willful
misconduct or gross negligence. This power, being coupled with an interest, is
irrevocable by Pledgor until all Secured Obligations are finally paid in full.
15. Rights and Remedies Cumulative; Non-Waiver; Etc. The enumeration of
Secured Party's and Lenders' rights and remedies set forth in this Security
Agreement is not intended to be exhaustive and the exercise by the Secured Party
or any Lender of any right or remedy shall not preclude the exercise of any
other rights or remedies, all of which shall be cumulative, and shall be in
addition to any other right or remedy given hereunder, or under any other
agreement between Pledgor and Secured Party or any Lender or which may now or
hereafter exist in law or in equity or by suit or otherwise. No delay or failure
to take action on the part of Lender in exercising any right, power or privilege
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right power or privilege preclude other or further exercise thereof or
the exercise of any other right, power or privilege or be construed to be a
waiver of any Event of Default. No waiver by a party hereunder shall be
effective unless it is in writing and signed by the party making such waiver,
and then only to the extent specifically stated in such writing. No course of
dealing between Pledgor and the Secured Party or any Lender or their respective
agents or employees shall be effective to change, modify or discharge any
provision of this Security Agreement or to constitute a waiver of any Event of
Default.
16. Waivers. In addition to the other waivers contained herein and in any
other agreement between Pledgor and Secured Party or any Lender, Pledgor hereby
expressly waives, to the extent permitted by law: presentment for payment,
demand, protest, notice of demand, notice of protest, notice of default or
dishonor, notice of payments and nonpayments and all other notices and consents
that Secured Party may release, compromise, settle, extend or renew any
commercial paper, instruments or guaranties at any time held by Secured Party or
any Lender on which Pledgor may in any way be liable and notice of any action
taken by Secured Party or any Lender unless expressly required by this Security
Agreement or by law.
17. Notice. Except as otherwise provided herein, all notices, requests and
demands to or upon a party hereto shall be effective as provided in the Pledgor
Guaranty.
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18. Applicable Law. This Security Agreement shall be governed in all
respects by, and construed in accordance with, the internal laws of the State of
Florida without reference to choice of laws principles.
19. References to Credit Agreement Definitions. In the event that the
Credit Agreement shall no longer be in effect at any time while the Pledgor
Guaranty shall continue in effect or there shall otherwise continue to remain
outstanding Secured Obligations, all references to the Credit Agreement,
including terms defined by reference to their respective definitions contained
in the Credit Agreement, shall be deemed to refer to the Credit Agreement as in
effect as of the date hereof, with such amendments thereto to which the Secured
Party shall have given its express consent in accordance with the Loan Documents
and the ESOP Loan Documents.
20. Entire Agreement. This Security Agreement, together with the Credit
Agreement and other Loan Documents and ESOP Loan Documents, constitute and
express the entire understanding between the parties hereto with respect to the
subject matter hereof, and supersede all prior agreements and understandings,
inducements, commitments or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof. Neither this Security Agreement nor any portion or provision hereof may
be changed, altered, waived, modified, supplemented, discharged, canceled,
terminated, or amended orally or in any manner other than (i) as to the Agent,
as provided in the Credit Agreement and (ii) as to NationsBank, by the express
written consent of NationsBank in each instance.
21. Section Headings. The Section headings in this Security Agreement are
for convenience of reference only; they form no part of this Security Agreement
and shall not affect its interpretation.
22. Severability. The provisions of this Security Agreement are
independent of and separable from each other. If any provision hereof shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect the validity or enforceability of any other provision hereof,
but this Security Agreement shall be construed as if such invalid or
unenforceable provision had never been contained herein.
23. Successors and Assigns. This Security Agreement shall be binding upon
the successors and assigns of Pledgor and shall inure to the benefit of and be
enforceable by the Secured Party and their successors and assigns; provided,
however, the obligations of Pledgor hereunder may not be assigned or delegated
19
<PAGE>
to any other Person without the prior written consent of the Secured Party.
24. Agency. Notwithstanding the foregoing references to the Secured Party,
Pledgor acknowledges and agrees that so long as NationsBank shall be the sole
Lender under the Credit Agreement, the term "Agent" shall mean NationsBank as
Lender. When and if there shall be more than one Lender party to the Credit
Agreement, then the term "Agent" shall refer to the Agent under the Credit
Agreement pursuant to the provisions of Article XI of the Credit Agreement, to
which reference is hereby made.
25. Termination. In the event that all of the Secured Obligations shall be
fully, finally and indefeasibly paid and satisfied in full (subject to
provisions of the Agreements that expressly survive), the Agreements shall be
terminated and there shall be no Outstanding Letters of Credit, the Secured
Party shall, at the request and at the expense of the Pledgor, terminate the
security interest and powers of attorney herein conferred and, in furtherance
thereof, execute such Uniform Commercial Code termination statements and such
other documents in form and substance reasonably satisfactory to the Secured
Party to release and terminate the Lien hereof of record. Notwithstanding the
foregoing provisions of this Section 25, in the event that any payment made or
deemed made to the Secured Party or any Lender in payment of any Secured
Obligation shall be rescinded or declared to be or become void, voidable or
otherwise recoverable from the Secured Party or such Lender for any reason
whatsoever, the Lien in favor of the Secured Party created hereunder shall be
and become reinstituted in respect of such Secured Obligations until the same
shall be thereafter fully and finally paid, satisfied and discharged.
[Remainder of page intentionally left blank)
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed by authority duly given as of the day and year first above
written.
WITNESS: VITAS HEALTHCARE CORPORATION OF
CALIFORNIA
/s/ Terry L. Scaggs
- ----------------------------
/s/ Megann Cusato By: /s/ Mark W.Ohlendorf
- ---------------------------- ------------------------
Mark W.Ohlendorf
Vice President
SECURED PARTY:
WITNESS: NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION, as Agent
/s/ Terry L. Scaggs
- ---------------------------- By: /s/ Allison S. Freeland
-------------------------
/s/ Megann Cusato Allison S. Freeland
- ---------------------------- Vice President
WITNESS: NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION
/s/ Terry L. Scaggs By: /s/ Allison S. Freeland
- ---------------------------- -------------------------
Allison S. Freeland
/s/ Megann Cusato Vice President
- ----------------------------
21
<PAGE>
Vitas Healthcare Corporation of California
PLEDGE AND SECURITY AGREEMENT
INDEX TO EXHIBITS AND SCHEDULES*
1. Exhibit A Existing Liens on the Collateral
2. Schedule 6(E) Trade Styles
VITAS AGREES TO PROVIDE A COPY OF THE EXHIBIT AND SCHEDULE LISTED ABOVE TO THE
COMMISSION UPON REQUEST.
- ----------
* The inclusion of any information on any one of these Exhibits and
Schedules is not, and shall not be deemed to be, a representation that such
information must be set forth on such Exhibit or Schedule or any supplement
thereto or otherwise in the agreement to which such Exhibit or Schedule relates.
Information provided in any one Exhibit or Schedule shall be deemed to be
incorporated into each Exhibit and Schedule, as applicable.
<PAGE>
EXHIBIT 10.51
AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT (this "Security
Agreement") is made this 17th day of February, 1995, by and between VITAS
HEALTHCARE CORPORATION OF FLORIDA, a Florida corporation having its principal
place of business in Miami, Dade County, Florida, (the "Pledgor"), and
NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION, a national banking association
("NationsBank"), for itself and as agent (in such agency capacity and together
with any successor agent, the "Agent") for certain lenders (the "Lenders") party
to the Credit Agreement described below (in such capacities as described below
and together with any successor agent acting as such under the Credit Agreement
described below, the "Secured Party").
W I T N E S S E T H:
WHEREAS, (i) pursuant to a Revolving Credit and Reimbursement Agreement
dated as of August 11, 1994 ( the "Prior Credit Agreement") among Vitas
Healthcare Corporation (the "Company"), NationsBank as agent and NationsBank as
the lender thereunder, NationsBank has extended to the Company a revolving
credit facility in the aggregate principal amount of up to $15,000,000,
including within such revolving credit facility the issuance of letters of
credit for the account of the Company and (ii) pursuant to a Guaranty and
Contingent Purchase Agreement of even date with the Prior Credit Agreement
between the Company and NationsBank (the "Prior Company Guaranty" and, together
with the Prior Credit Agreement, the "Prior Agreements"), NationsBank extended a
term loan of $2,386,670 to the Vitas Healthcare Corporation Employee Stock
Ownership Trust (the "Trust") to refinance certain indebtedness owing from the
Trust to the Company, the repayment of which loan has been, inter alia,
guaranteed under the Prior Guaranty; and
WHEREAS, pursuant to the Prior Agreements, the Pledgor has executed and
delivered (i) its Guaranty and Suretyship Agreement of even date therewith (the
"Prior Pledgor Guaranty") guaranteeing the payment and performance by the
Company, inter alia, of its obligations under the Prior Agreements, and (ii) its
Pledge and Security Agreement of even date with the Prior Pledgor Guaranty
securing its obligations under the Prior Pledgor Guaranty (the "Prior Security
Agreement"); and
WHEREAS, the Company and Vitas Healthcare Corporation of California, a
Subsidiary of the Company ("Vitas California"), have entered into an Asset
Purchase Agreement with the Sellers (as defined in the Credit Agreement) dated
as of December 27, 1994 (the "Asset Purchase Agreement") pursuant to which Vitas
California has agreed to purchase substantially all of the operating assets of
the CHC Entities (as defined in the Credit
<PAGE>
Agreement) pursuant to the terms and subject to the conditions set forth therein
and, in connection therewith, the Company has requested that the Prior Credit
Agreement be amended and restated to increase the revolving credit facility from
$15,000,000 to $20,000,000, to provide for a $25,000,000 term loan facility, and
to make certain other modifications, and that the Prior Company Guaranty be
amended and restated to reflect the agreement of the parties; and
WHEREAS, at the request of the Company and to effect the modifications
referred to above, (i) the Company, the Agent and the Lenders are entering into
an Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement
of even date herewith (as the same may be modified, amended or restated from
time to time, the "Credit Agreement"), and (ii) the Company and NationsBank are
entering into an Amended and Restated Guaranty and Contingent Purchase Agreement
of even date herewith (as the same may be modified, amended or restated from
time to time, the "Company Guaranty" and, together with the Credit Agreement,
the "Agreements") ; and
WHEREAS, pursuant to the Agreements, the Pledgor has executed and
delivered its Amended and Restated Guaranty and Suretyship Agreement of even
date herewith (as the same may be amended, modified or restated from time to
time, the "Pledgor Guaranty") guaranteeing the payment and performance by the
Company, inter alia, of its obligations under the Agreements; and
WHEREAS, the Lenders are unwilling to extend the amend and increase the
revolving credit facility or make such term loan pursuant to the Credit
Agreement, and NationsBank is unwilling to amend the Prior Agreements as
reflected in the Agreements to permit the consummation of the CHC Transaction,
unless the Pledgor amends and restates its Prior Security Agreement by entering
into this Security Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and promises herein contained, the parties hereto agree as follows:
1. Certain Definitions. Unless otherwise defined herein, capitalized terms
used in this Security Agreement shall have the respective meanings therefor
provided in the Credit Agreement.
2. Grant of Security Interest. As collateral security for the full and
prompt payment, satisfaction and performance of all obligations and liabilities
of the Pledgor under the Pledgor Guaranty, whether now existing or hereafter
arising (the "Secured Obligations"), Pledgor hereby grants to the Secured Party
a continuing security interest in all of its right, title and interest in and to
all of the following property in which Pledgor now has or hereafter acquires an
interest, whether now owned or
2
<PAGE>
existing or hereafter acquired or arising and wheresoever located:
(A) All accounts, accounts receivable, notes, bills, acceptances,
choses in action, chattel paper, instruments, documents, and other forms
of obligations at any time owing to Pledgor, the proceeds thereof and all
of Pledgor's rights with respect to any goods represented thereby, whether
or not delivered, goods returned by customers and all rights as an unpaid
vendor or lienor, including rights of stoppage in transit and of
recovering possession by proceedings including replevin and reclamation,
together with all customer lists, books and records, ledger and account
cards, computer tapes, software, disks, printouts and records, whether now
in existence or hereafter created, relating thereto (collectively referred
to hereinafter as "Accounts");
(B) All goods of Pledgor, including without limitation, all
machinery, equipment, motor vehicles, parts, supplies, apparatus,
appliances, tools, patterns, molds, dies, blueprints, fittings, furniture,
furnishings, fixtures and articles of tangible personal property of every
description now or hereafter owned by Pledgor or in which Pledgor may have
or may hereafter acquire any interest, but as to leasehold interests in
personal property, only to the extent assignable (collectively referred to
hereinafter as "Equipment");
(C) All general intangibles of Pledgor, now existing or hereafter
owned or acquired or arising or in which Pledgor now has or hereafter
acquires any rights, including but not limited to causes of action,
corporate or business records, inventions, designs, patents, patent
applications, trademarks, trademark registrations and applications
therefor, goodwill, trade names, trade secrets, trade processes,
copyrights, copyright registrations and applications therefor, licenses
(to the extent assignable), permits (to the extent assignable),
franchises, customer lists (to the extent permitted by law), computer
programs, all claims under guaranties, tax refund claims, rights and
claims against carriers and shippers, leases (to the extent assignable),
claims under insurance policies, all rights to indemnification and all
other intangible personal property of every kind and nature (collectively
referred to hereinafter as "General Intangibles");
(D) All inventory of Pledgor wherever located, including without
limitation, all goods manufactured or acquired for sale or lease, and any
piece goods, raw materials, work in process and finished merchandise,
findings or component materials, and all supplies, goods, incidentals,
office supplies, packaging materials and any
3
<PAGE>
and all items used or consumed in the operation of the business of Pledgor
or which may contribute to the finished product or to the sale, promotion
and shipment thereof, in which Pledgor now or at any time hereafter may
have an interest, whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of Pledgor or is
held by Pledgor or by others for Pledgor's account (collectively referred
to hereinafter as "Inventory");
(E) To the extent assignable, all rights now or hereafter arising to
any Pledgor under contracts, leases, agreements or other instruments of
every character and description, and all rights of enforcement thereunder
(collectively referred to as hereinafter as "Contract Rights");
(F) All monies, certificates of deposit, commercial paper, cash
equivalents, account balances, notes, options, interests, and securities
(certificated or uncertificated), wheresoever located; excluding, however,
the equity interests (other than interests in money market funds) of the
Pledgor in Persons not constituting Subsidiaries;
(G) All accessions to, substitutions for and all replacements,
products and proceeds of the foregoing including, without limitation,
proceeds of insurance policies insuring the Collateral (as hereinafter
defined); and
(H) All books and records (including without limitation, customer
data, credit files, computer programs, printouts, and other computer
materials and records of the Pledgor and all documents) pertaining to any
of the foregoing.
All of the property and interests in property described in subsections (A)
through (H) and all other property and interests in personal property which
shall, from time to time, secure the Secured Obligations are herein collectively
referred to as the "Collateral".
3. Financing Statements. At the time of execution of this Security
Agreement, Pledgor shall have (i) furnished the Secured Party with financing
statements, approved by the Secured Party and executed as prescribed by the
Uniform Commercial Code as presently in effect in the state of Florida, and
where other Collateral is located, as may be reasonably requested by the Secured
Party, in form and number sufficient to perfect in favor of the Secured Party
the security interest in the Collateral, and (ii) delivered to Secured Party's
possession certificated securities (with duly executed stock powers in blank
affixed thereto) representing the Pledgor's interests in Subsidiaries, in
4
<PAGE>
order that the Secured Party shall have a perfected security interest in the
Collateral following such filing of such financing statements with the
appropriate local and state governmental authorities and the delivery of such
securities (to the extent that a security interest in such Collateral is capable
of perfection by such filing or possession), and subject only to (a) permitted
liens described in the Credit Agreement, (b) such other security interests,
liens and encumbrances currently existing and set forth in Exhibit A attached
hereto and by reference made a part hereof, or as shall otherwise be acceptable
to the Secured Party in its sole discretion, and (c) limitations under
applicable law which may limit the creation, perfection or priority of liens on
Government Receivables (collectively referred to hereinafter as "Permitted
Liens"); provided, however, that with respect to the items of property described
in clause (F) of Section 2, the security interest in such property will not be
perfected until the Secured Party or any Lender takes possession thereof or
otherwise obtains perfection in accordance with the applicable requirements of
the Uniform Commercial Code. Pledgor shall execute as reasonably required by the
Secured Party any additional financing statements or other documents to effect a
perfected security interest in the Collateral to the extent contemplated hereby,
together with any necessary continuation statements so long as this Security
Agreement remains in effect.
4. Maintenance of Security Interest. Pledgor will, from time to time, upon
the request of the Secured Party, deliver specific assignments of Collateral,
together with such other instruments and documents, financing statements,
amendments thereto, assignments or other writings as the Secured Party or any
Lender may reasonably request to carry out the terms of this Security Agreement
or to protect or enforce the Secured Party's security interest in the
Collateral.
With respect to any and all Collateral as to which a security interest is
granted under this Security Agreement, Pledgor agrees to do and cause to be done
all things necessary to perfect and keep in full force the security interest
granted in favor of the Secured Party, including, but not limited to, the prompt
payment of all fees and expenses incurred in connection with any filings made to
perfect a security interest in the Collateral in favor of the Secured Party.
Pledgor agrees to make appropriate entries upon its financial statements
and books and records disclosing the Secured Party's security interest in the
Collateral.
5. Collections; Secured Party's Right to Notify Account Debtors and to
Endorse Each Pledgor's Name. Pledgor hereby authorizes Secured Party at any time
after the occurrence and during the continuation of an Event of Default subject,
with respect to the Secured Obligations relating to the Company's obligations
under the Company Guaranty, to Section 2.08 of the
5
<PAGE>
Company Guaranty, (a) to open Pledgor's mail and collect any and all amounts due
to Pledgor from persons obligated on any Accounts ("Account Debtors"), but only
to the extent permitted by law with respect to Government Receivables; (b) to
take over Pledgor's post office boxes or make other arrangements as Secured
Party deems necessary to receive Pledgor's mail, including notifying the post
office authorities to change the address for delivery of Pledgor's mail to such
address as Secured Party may designate; and (c) to notify any or all Account
Debtors, but only to the extent permitted by law with respect to Government
Receivables, that the Accounts have been assigned to Secured Party and that
Secured Party has a security interest therein. Pledgor irrevocably makes,
constitutes and appoints Secured Party and all Persons designated by Secured
Party for that purpose as Pledgor's true and lawful attorney (and agent-in-fact)
after the occurrence and during the continuation of an Event of Default, subject
to the limitations set forth in the immediately preceding sentence and, with
respect to the Secured Obligations relating to the Company's obligations under
the Company Guaranty, to Section 2.08 of the Company Guaranty, to endorse such
Pledgor's name on any checks, notes, drafts or any other payment relating to
and/or proceeds of the Collateral which comes into Secured Party's possession or
Secured Party's control, and apply the same on account of the Secured
Obligations as provided herein and in the Agreements, in such order as Secured
Party may elect. Secured Party shall promptly furnish Pledgor with a copy of any
such notice sent with respect to Accounts of Pledgor and Pledgor hereby agrees
that any such notice, in Secured Party's sole discretion, may be sent on
Pledgor's stationery, in which event Pledgor shall co-sign such notice with
Secured Party.
6. Collateral. Pledgor covenants with Lender that:
(A) Inspection. Secured Party and any Lender (by any of its
officers, employees and agents) shall have the right, at any time or times
during Pledgor's usual business hours, to inspect the Collateral, all
records related thereto (and to make extracts or copies from such
records), and the premises upon which any of the Collateral is located, to
discuss Pledgor's affairs and finances with its principal officers and
independent auditors and to verify the amount, quality, quantity, value
and condition of, or any other matter relating to, the Collateral. Upon or
after the occurrence of a Default or an Event of Default, Secured Party
may at any time and from time to time employ and maintain at Pledgor's
premises a custodian selected by Secured Party who shall have full
authority to do all acts necessary to protect Secured Party's interest.
All reasonable expenses incurred by Secured Party by reason of the
employment of such custodian shall be paid by the Pledgor, added to the
Secured Obligations and secured by the Collateral.
6
<PAGE>
(B) Assignments, Records and Schedules of Account. Pledgor shall
keep accurate and complete records of its Accounts ("Account Records")
and, upon Secured Party's request from time to time at intervals
acceptable to Secured Party, Pledgor shall reasonably provide Secured
Party and each Lender with a Schedule of Accounts in form and substance
reasonably acceptable to the Secured Party describing all Accounts created
or acquired by such Pledgor ("Schedule of Accounts") and shall at the
request of Secured Party execute and deliver further written assignments
of such Accounts to Secured Party; provided however, that Pledgor's
failure to execute and deliver any such Schedule of Accounts or
assignments shall not affect or limit Secured Party's security interest or
other rights in and to any Accounts. If requested by Secured Party,
Pledgor shall furnish Secured Party with copies of proof of delivery of
invoices and the original copy of all documents, including, without
limitation, repayment histories and present status reports, relating to
the Accounts so scheduled (collectively, "Account Documents") and such
other matter and information relating to the status of then existing
Accounts as Secured Party shall reasonably request.
(C) Notice Regarding Disputed Accounts. In the event any amounts due
and owing in excess of $100,000 are in dispute between any Account Debtor
and Pledgor (which shall include, without limitation, any dispute in which
an offset claim or counterclaim may result), Pledgor shall provide the
Secured Party with written notice thereof promptly, explaining in detail
the reason for the dispute, all claims related thereto and the amount in
controversy.
(D) Verification of Accounts. Whether or not a Default or an Event
of Default has occurred, any of Secured Party's, employees, or agents
shall have the right, at any time or times hereafter, to verify under
reasonable procedures the validity, amount or any other matter relating to
any Accounts by mail, telephone, telegraph or otherwise.
(E) Change of Trade Styles. Set forth on Schedule 6(E) delivered to
the Secured Party simultaneously with the execution of this Security
Agreement are all tradenames and trade styles under which Pledgor provides
services giving rise to Accounts as of the date of this Agreement ("Trade
Styles"). Pledgor shall not change, amend, alter, terminate, or cease
using its Trade Styles, or use additional Trade Styles, except upon giving
not less than ten (10) days prior written notice to the Secured Party and
taking or causing to be taken all such action at Pledgor's expense as may
be reasonably requested by the Secured Party (including the furnishing of
additional financing statements) to enable the Secured Party to perfect or
maintain the perfection of the
7
<PAGE>
security interest of the Secured Party in Accounts, General Intangibles,
Contract Rights and related Collateral.
(F) Safekeeping of Inventory. Pledgor shall be responsible for the
safekeeping of its Inventory, and in no event shall Secured Party or any
Lender have any responsibility for:
(i) Any loss or damage to Inventory or destruction thereof
occurring or arising in any manner or fashion from any cause other
than as a result of gross negligence, bad faith or willful
misconduct of the Agent or any Lender;
(ii) Any diminution in the value of Inventory; or
(iii) Any act or default of any carrier, warehouseman, bailee
or forwarding agency thereof or other Person in any way dealing with
or handling Inventory.
(G) Records and Schedules of Inventory. Pledgor shall keep correct
and accurate records on a perpetual basis, itemizing and describing the
kind, type, location, quality and quantity of Inventory owned by it, if
any, from time to time, and such Pledgor's cost therefor and selling price
thereof, and at the reasonable request of the Secured Party shall furnish
to the Secured Party, a current Schedule of Inventory ("Schedule of
Inventory"). Pledgor shall conduct a physical inventory, of which Secured
Party shall be given prior written notice and shall have the right to be
present, no less than annually, and shall furnish to Secured Party such
other documents and reports as Secured Party shall reasonably request with
respect to the Inventory, including, without limitation, invoices relating
to Pledgor's purchase of Inventory.
(H) Evidence of Ownership of Equipment. Pledgor, promptly on request
therefor by the Secured Party, shall deliver to the Secured Party any and
all evidence of ownership of any of the Equipment (including without
limitation certificates of title and applications for title).
(I) Records and Schedules of Equipment. Pledgor shall maintain
accurate, itemized records describing in reasonable detail its Equipment
and shall furnish the Secured Party upon reasonable request with a current
schedule containing the foregoing information ("Schedule of Equipment").
(J) Administration of Collateral. So long as no Event of Default
shall have occurred and be continuing, Pledgor may (to the extent not
inconsistent with the provisions of the Loan Documents or the ESOP Loan
Documents) (i) sell,
8
<PAGE>
transfer or dispose of any asset owned by it or (ii) collect or compromise
Accounts and General Intangibles in the ordinary course of business in any
lawful manner.
(K) Voting Rights, Consensual Rights, Dividends and Distributions.
A. So long as no Event of Default shall have occurred and be continuing:
1. the Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Collateral or
any part thereof for any purpose not inconsistent with the terms of
this Security Agreement, the Credit Agreement, the other Loan
Documents or the other ESOP Loan Documents;
2. the Pledgor shall be entitled to receive and retain any and
all cash distributions or dividends paid on the Collateral which
they are otherwise entitled to receive, notwithstanding the
assignment and transfer of the Collateral and the grant of security
interest in Section 2 of this Security Agreement (provided that any
cash distributions or dividends received upon the occurrence and
during the continuance of a Default shall remain segregated from all
other funds of the Pledgor and deposited with the Secured Party),
but any and all stock dividends, liquidating dividends,
distributions in property, returns of capital or other distributions
made on or in respect of any of the Collateral, whether resulting
from a subdivision, combination or reclassification of the
outstanding capital stock of any issuer of the Collateral or
received in exchange for the Collateral or any part thereof or as a
result of any merger, consolidation, acquisition or other exchange
of assets to which any issuer of any Collateral may be a party or
otherwise, and any and all cash and other property received in
exchange for any of the Collateral shall be and become part of the
Collateral hereunder and, if received by the Pledgor, shall
forthwith be delivered to the Secured Party, to the extent the
Collateral for which it was exchanged was held or required to be
held by the Secured Party; and
3. the Secured Party shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and other
instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting, consensual and other
rights which the Pledgor are entitled to exercise pursuant to
subparagraph (1) above and to receive such distributions and
dividends which it is authorized to receive and retain pursuant to
subparagraph (2) above.
9
<PAGE>
B. Upon the occurrence and during the continuance of an Event of Default:
1. subject, with respect to the Secured Obligations relating
to the Company's obligations under the Company Guaranty to Section
2.08 of the Company Guaranty, all rights of the Pledgor to exercise
the voting and other consensual rights which it would otherwise be
entitled to exercise pursuant to Section 6(K)A.l and to receive and
retain the distributions and dividends which it would otherwise be
authorized to receive and retain pursuant to Section 6(K)A.2, shall
become vested in the Secured Party, which shall thereupon have the
sole right to exercise such voting and other consensual rights and
to receive and hold as Collateral such distributions and dividends
(whether or not the relevant Collateral shall have been transferred
into the name of the Secured Party or any of its nominees, the
Pledgor hereby irrevocably appointing and constituting the Secured
Party as proxy and attorney-in-fact of Pledgor, which appointment is
coupled with an interest and is irrevocable, with full power of
substitution, to act as if the Secured Party were the outright owner
thereof); and
2. all distributions and dividends which are received by the
Pledgor contrary to the provisions of Section 6(K)A.2 or Section
6(K)B.1 shall be received in trust for the benefit of the Secured
Party, shall be segregated from other funds of Pledgor and shall be
paid over to the Secured Party forthwith as Collateral in the same
form as so received (with any necessary endorsement).
7. Warranties Regarding Collateral. Pledgor warrants and represents that
it is and will continue to be the owner of the Collateral, now owned and upon
the acquisition of the same, free and clear of all encumbrances and security
interests other than the security interest in favor of Secured Party hereunder
and Permitted Liens, and that it will defend the Collateral and the Secured
Party's security interest therein and any products and proceeds thereof against
all claims and demands of all Persons at any time claiming the same or any
interest therein adverse to the Secured Party or any Lender.
8. Account Warranties and Representations. With respect to its Accounts,
Pledgor warrants and represents to the Secured Party and the Lenders that they
may rely on all statements or representations made by Pledgor on or with respect
to any Schedule of Accounts prepared and delivered by Pledgor and, unless
otherwise indicated in writing by Pledgor, that:
10
<PAGE>
(A) All Account Records and Account Documents are located and shall
be kept only at Pledgor's chief executive offices located at the locations
described in Schedule 6.04 delivered to the Agent pursuant to the Credit
Agreement and Schedule 4.22 delivered to the Bank pursuant to the Company
Guaranty;
(B) They are genuine, are in all material respects what they purport
to be, are not evidenced by a judgment instrument or document or, if
evidenced by an instrument or document, are only evidenced by one original
instrument or document, which has been delivered to the Secured Party;
(C) They cover the bona fide rendition of services, or the bona fide
sales and deliveries of Inventory usually dealt in by Pledgor, in the
ordinary course of business;
(D) Each Account is actually and absolutely owing to Pledgor in the
face value thereof, is valid and enforceable against the applicable
Account Debtor, and is not subject to any setoffs, discounts, allowances,
claims, counterclaims, disputes or doubtful collectibility except (i) as
is customary for Accounts of the type represented by such Account
(including the nature of the Account Debtor) of the Pledgor in the
ordinary course of Pledgor's business and consistent with past practices,
and (ii) as is reflected by reserves and reductions in the stated value of
such Account, computed in a manner consistent with the Company's policies
and practices in preparing the financial statements described in Sections
7.01 and 8.01 of the Credit Agreement and Sections 3.01(f) and 4.01 of the
Company Guaranty, included in such financial statements, in the Schedule
of Accounts and in any report or certificate including financial
information regarding such Account furnished to the Secured Party pursuant
to the Loan Documents or the ESOP Loan Documents.
(E) The goods or services giving rise thereto are not, and were not
at the time of the sale or performance thereof, subject to any lien,
claim, encumbrance or security interest, except those of the Secured Party
and those removed or terminated prior to the date hereof;
(F) They have not been pledged to any Person other than to Secured
Party under this Security Agreement and will be owned by Pledgor free and
clear of any liens, claims or encumbrances except Permitted Liens; and
(G) Secured Party's security interest therein will not be subject to
any offset, deduction, counterclaim, lien or other adverse condition,
other than Permitted Liens or as is consistent with Section 8(D) above.
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9. Inventory Warranties and Representation. With respect to Inventory,
Pledgor warrants and represents to the Secured Party and the Lenders that they
may rely on all statements or representations made by Pledgor on or with respect
to any Inventory and, unless otherwise indicated in writing by Pledgor, that
(A) Except for the relocation of Inventory from time to time in the
ordinary course of business not aggregating more than $100,000 at any one
time in any location other than those set forth in Schedules 6.03 and 6.04
delivered pursuant to the Credit Agreement or Schedules 4.22 and 4.23
delivered pursuant to the Company Guaranty, the Pledgor shall not locate
or relocate inventory to any location other than those set forth in
Section 8(A) above or Schedules 6.03 and 6.04 delivered pursuant to the
Credit Agreement or Schedules 4.22 and 4.23 delivered pursuant to the
Company Guaranty without giving the Secured Party not less than thirty
(30) days prior written notice and taking or causing to be taken at its
expense all steps as may be reasonably requested by the Secured Party
(including the furnishing of additional financing statements) to enable
the Secured Party to perfect or continue the perfection of its security
interest in such property.
(B) No Inventory is or will be subject to any lien, claim,
encumbrance or security interest whatsoever, except for the security
interest of Secured Party hereunder and Permitted Liens;
(C) No Inventory having an aggregate value in excess of $100,000 is
now, and shall not at any time or times hereafter be, stored with a
bailee, warehouseman, or similar party without Secured Party's prior
written consent and, if Secured Party gives such consent, Pledgor will
concurrently therewith cause any such bailee, warehouseman, or similar
party to issue and deliver to Secured Party in form and substance
acceptable to Secured Party, warehouse receipts therefor in Secured
Party's name; and
(D) No Inventory is under consignment to any Person.
10. Equipment Warranties and Representations. With respect to Equipment,
Pledgor warrants and represents to the Secured Party and each Lender that:
(A) Except for the relocation of Equipment from time to time in the
ordinary course of business not aggregating more than $100,000 at any one
time in any location other than those set forth in Schedules 6.03 and 6.04
of the Credit Agreement and Schedules 4.22 and 4.23 of the Company
Guaranty, the Pledgor shall not locate or relocate Equipment to any
location other than those set forth in Schedules 6.03
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and 6.04 of the Credit Agreement and Schedules 4.22 and 4.23 of the
Company Guaranty without giving the Secured Party not less than thirty
(30) days prior written notice and taking or causing to be taken at their
expense all steps as may be reasonably requested by the Secured Party
(including the furnishing of additional financing statements) to enable
the Secured Party to perfect or continue the perfection of its security
interest in such property; and
(B) Pledgor has and at all times will have good and marketable title
to and ownership of the Equipment free and clear of any lien, claim,
encumbrance, or security interest whatsoever, except for (i) the security
interest of Secured Party created hereunder and (ii) Permitted Liens.
11. Casualty and Liability Insurance Required. (A) Pledgor will keep the
Collateral continuously insured as may be expressly required by the Agreements.
(B) Each insurance policy obtained in satisfaction of the requirements of
Section 11(A) hereof:
(i) shall be by such insurer (or insurers) as shall be financially
responsible and qualified to do business in the applicable jurisdictions;
(ii) shall be in such form and have such provisions (including,
without limitation, the loss payable clause, the waiver of subrogation
clause, the deductible amount, if any, and the standard mortgagee
endorsement clause), as are generally considered standard provisions for
the type of insurance involved and are acceptable in all respects to
Secured Party;
(iii) shall prohibit cancellation or substantial modification,
termination or lapse in coverage by the insurer without at least 30 days'
prior written notice to Secured Party;
(iv) shall provide that the interest of Secured Party shall not be
impaired or invalidated by any act or neglect of Pledgor nor by the
occupation of the premises wherein such Collateral is located for purposes
more hazardous than are permitted by said policy;
(v) without limiting the generality of the foregoing, all insurance
policies covering loss or damage to the Collateral shall name Secured
Party as mortgagee, loss payee and a party insured thereunder and any loss
thereunder shall be paid directly to Secured Party.
(C) Prior to expiration of any such policy, Pledgor shall furnish Secured
Party with evidence reasonably satisfactory to
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<PAGE>
Secured Party that the policy or certificate has been renewed or replaced or is
no longer required by this Security Agreement.
(D) Pledgor hereby irrevocably makes, constitutes and appoints Secured
Party (and all officers, employees or agents designated by Secured Party),
effective upon the occurrence of an Event of Default which has not been waived
or cured, as Pledgor's true and lawful attorney (and agent-in-fact) for the
purpose of making, settling and adjusting claims under such policies of
insurance, endorsing the name of Pledgor on any check, draft, instrument or
other item or payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect to such policies of
insurance.
(E) In the event Pledgor shall fail to maintain, or cause to be
maintained, the full insurance coverage required hereunder or shall fail to keep
any Collateral in good repair and good operating condition, the Secured Party
may (but shall be under no obligation to), without waiving or releasing any
Secured Obligation or Event of Default, after giving notice to the Pledgor,
contract for the required policies of insurance and pay the premiums on the same
or make any required repairs, renewals and replacements; and all sums so
disbursed by Secured Party, including reasonable attorneys' fees, court costs,
expenses and other charges related thereto, shall be payable on demand by
Pledgor to Secured Party and shall be additional Secured Obligations secured by
the Collateral.
(F) In case of any material damage to or destruction of all or any part
of the Collateral, Pledgor shall give prompt notice thereof to Secured Party.
Each such notice shall describe generally the nature and extent of such damage,
destruction, taking, loss, proceeding or negotiations.
12. Rights and Remedies Upon Default. Subject, with respect to the
Secured Obligations relating to the Company's obligations under the Company
Guaranty, to Section 2.08 of the Company Guaranty, upon and after an Event of
Default which has not been waived or cured, the Secured Party shall have the
following rights and remedies, all of which may be exercised with or without
notice to Pledgor:
(A) All of the rights and remedies of a secured party under
the Uniform Commercial Code of the state where such rights and
remedies are asserted, or under other applicable law, all of which
rights and remedies shall be cumulative, and none of which shall be
exclusive, to the extent permitted by law, in addition to any other
rights and remedies contained in this Security Agreement, the
Agreements, or any of the other Loan Documents or ESOP Loan
Documents;
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(B) The right to foreclose the liens and security instruments
created under this Security Agreement or any of the other Loan
Documents or ESOP Loan Documents by any available judicial procedure
or without judicial process;
(C) The right to (i) enter upon the premises of Pledgor
through self-help and without judicial process, without first
obtaining a final judgment or giving Pledgor notice and opportunity
for a hearing on the validity of Secured Party's claim and without
any obligation to pay rent to Pledgor, or any other place or places
where any Collateral is located and kept, and remove the Collateral
therefrom to the premises of Secured Party or any agent of Secured
Party, for such time as Secured Party may desire, in order to
effectively collect or liquidate the Collateral, and/or (ii) require
Pledgor to assemble the Collateral and make it available to Secured
Party at a place to be designated by Secured Party in its sole
discretion;
(D) The right (to the extent permissible by law with respect
to Governmental Receivables) to (i) demand payment of the Accounts;
(ii) enforce payment of the Accounts and General Intangibles and
enforce all Contract Rights, by legal proceedings or otherwise;
(iii) exercise all or any of Pledgor's rights and remedies with
respect to the collection of the Accounts and General Intangibles
and in respect of Contract Rights; (iv) settle, adjust, compromise,
extend or renew the Accounts; (v) settle, adjust or compromise any
legal proceedings brought to collect the Accounts or General
Intangibles or to enforce Contract Rights; (vi) sell or assign the
Accounts, General Intangibles, Contract Rights or other Collateral
upon such terms, for such amounts and at such time or times as
Secured Party deems advisable; (vii) discharge and release the
Accounts; (viii) take control, in any manner, of any item of payment
or proceeds; (ix) prepare, file and sign Pledgor's name on a Proof
of Claim in bankruptcy or similar document against any account
obligor; (x) prepare, file and sign Pledgor's name on any notice of
lien, assignment or satisfaction of lien or similar document in
connection with the Accounts; (xi) endorse the name of Pledgor upon
any chattel paper, document, instrument, invoice, freight bill, bill
of lading or similar document or agreement relating to the Accounts
or Inventory; (xii) use Pledgor's stationery for verifications of
the Accounts and notices thereof to account obligors; (xiii) use the
information recorded on or contained in any data processing
equipment and computer hardware and software relating to the
Accounts, General Intangibles, Equipment, Contract Rights or
Inventory to which Pledgor has access; and (xiv) do all acts and
things and execute all documents necessary, in Secured Party's sole
discretion, to collect the Accounts and General Intangibles;
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<PAGE>
(E) The right to sell, assign, lease or to otherwise dispose
of all or any Collateral in its then condition, or after any further
manufacturing or processing thereof, at public or private sale or
sales, with such notice as may be required by law, in lots or in
bulk, for cash or on credit, with or without representations and
warranties, all as Secured Party, in its sole discretion, may deem
advisable (except, in the case of Government Receivables, to the
extent such sales or other disposition are prohibited by applicable
law). Secured Party shall have the right to conduct such sales on
Pledgor's premises or elsewhere and shall have the right to use
Pledgor's premises without charge for such sales for such time or
times as Secured Party may see fit. Secured Party may, if it deems
it reasonable, postpone or adjourn any sale of the Collateral from
time to time by an announcement at the time and place of such
postponed or adjourned sale, without being required to give a new
notice of sale. Pledgor agrees that Secured Party has no obligation
to preserve rights to the Collateral against prior parties or to
marshall any Collateral for the benefit of any Person. Secured Party
is hereby granted a license or other right to use, without charge,
Pledgor's labels, patents, copyrights, rights of use of any name,
trade secrets, tradenames, trademarks and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in
completing production of, advertising for sale and selling any
Collateral and Pledgor's rights under any license and any franchise
agreement shall inure to Secured Party's benefit. If any of the
Collateral shall require repairs, maintenance, preparation or the
like, or is in process or other unfinished state, Secured Party
shall have the right, but shall not be obligated to perform such
repairs, maintenance, preparation, processing or completion of
manufacturing for the purpose of putting the same in such saleable
form as Secured Party shall deem appropriate, but Secured Party
shall have the right to sell or dispose of the Collateral without
such processing. In addition, Pledgor agrees that in the event
notice is necessary under applicable law, written notice mailed to
Pledgor in the manner specified in either of the Agreements ten (10)
days prior to the date of public sale of any of the Collateral or
prior to the date after which any private sale or other disposition
of the Collateral will be made shall constitute commercially
reasonable notice to Pledgor. Secured Party or any Lender may
purchase all or any part of the Collateral at public or, if
permitted by law, private sale, free from any right of redemption
which is hereby expressly waived by Pledgor and, in lieu of actual
payment of such purchase price, may set off the amount of such
price against the Secured Obligations. The net cash proceeds
resulting from the collection, liquidation, sale, lease or other
disposition of the Collateral shall be applied first to the
reasonable expenses (including all reasonable attorneys'
16
<PAGE>
fees) of retaking, holding, storing, processing and preparing for
sale, selling, collecting, liquidating and the like (collectively,
the "Administration Expenses"), and then to the satisfaction of all
Secured Obligations, application as to particular Secured
Obligations or against principal or interest to be in subject to the
terms of Section 13 hereof and of the Agreements. Pledgor shall be
liable to Secured Party and the Lenders and shall pay to the Secured
Party on demand any deficiency which may remain after such sale,
disposition, collection or liquidation of the Collateral. Pledgor
recognize that the Secured Party may be unable to effect a public
sale of securities constituting Collateral by reason of certain
prohibitions contained in the Securities Act of 1933, as amended
(the "Securities Act"), and applicable state securities or Blue Sky
laws, and as a consequence may be compelled to resort to one or more
private sales to a restricted group of purchasers who will be
obliged to agree, among other things, to acquire such Collateral for
their own account, for investment and not with a view to the
distribution or resale thereof. Pledgor agrees and acknowledges that
private sales so made may be at prices and upon terms less favorable
to Pledgor than if such Collateral were sold at public sales and
that the Secured Party has no obligation to delay the sale of any of
the Collateral for the period of time necessary to permit the issuer
of such Collateral to register or otherwise qualify them, even if
such issuer would agree to register or otherwise qualify such
Collateral for public sale under the Securities Act and applicable
state securities or Blue Sky laws. Pledgor further agrees, to the
extent permitted by applicable law, that the use of private sales
made under the foregoing circumstances to dispose of the Collateral
shall be deemed to be dispositions in a commercially reasonable
manner;
(F) The rights and remedies provided to Secured Party or any
Lender under this Security Agreement or any of the other Loan
Documents or ESOP Loan Documents.
13. Anti-Marshalling Provisions. The right is hereby given by Pledgor to
Secured Party and the Lenders to make releases (whether in whole or in part) of
all or any part of the Collateral agreeable to Secured Party and the Lenders
without notice to, or the consent, approval or agreement of other parties and
interests, including junior lienors, which releases shall not impair in any
manner the validity of or priority of the liens and security interest in the
remaining Collateral conferred under such documents, nor release Pledgor from
personal liability for the indebtedness hereby secured. Notwithstanding the
existence of any other security interest in the Collateral held by Secured Party
or any Lender, Secured Party and the Lenders shall have the right to determine
the order in which any or all of the Collateral shall be subjected to the
remedies provided in this
17
<PAGE>
Security Agreement. The proceeds realized upon the exercise of the remedies
provided herein shall be applied as provided herein, in the Pledgor Guaranty and
in the Agreements. Pledgor hereby waives any and all right to require the
marshalling of assets in connection with the exercise of any of the remedies
permitted by applicable law or provided herein.
14. Appointment of Secured Party as Pledgor's Lawful Attorney. Upon and
after an Event of Default which has not been waived or cured, Pledgor
irrevocably designates, makes, constitutes and appoints Secured Party (and all
Persons designated by Lender) as Pledgor's true and lawful attorney (and
agent-in-fact). To the extent permitted by law, all acts of Secured Party or its
designee lawfully taken pursuant to Section 13 are hereby ratified and confirmed
and Secured Party or its designee shall not be liable for any acts of omission
or commission nor for any error of judgment or mistake of fact or law which does
not constitute bad faith, willful misconduct or gross negligence. This power,
being coupled with an interest, is irrevocable by Pledgor until all Secured
Obligations are finally paid in full.
15. Rights and Remedies Cumulative; Non-Waiver; Etc. The enumeration of
Secured Party's and Lenders' rights and remedies set forth in this Security
Agreement is not intended to be exhaustive and the exercise by the Secured Party
or any Lender of any right or remedy shall not preclude the exercise of any
other rights or remedies, all of which shall be cumulative, and shall be in
addition to any other right or remedy given hereunder, or under any other
agreement between Pledgor and Secured Party or any Lender or which may now or
hereafter exist in law or in equity or by suit or otherwise. No delay or failure
to take action on the part of Lender in exercising any right, power or privilege
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or privilege preclude other or further exercise thereof or
the exercise of any other right, power or privilege or be construed to be a
waiver of any Event of Default. No waiver by a party hereunder shall be
effective unless it is in writing and signed by the party making such waiver,
and then only to the extent specifically stated in such writing. No course of
dealing between Pledgor and the Secured Party or any Lender or their respective
agents or employees shall be effective to change, modify or discharge any
provision of this Security Agreement or to constitute a waiver of any Event of
Default.
16. Waivers. In addition to the other waivers contained herein and in any
other agreement between Pledgor and Secured Party or any Lender, Pledgor hereby
expressly waives, to the extent permitted by law: presentment for payment,
demand, protest, notice of demand, notice of protest, notice of default or
dishonor, notice of payments and nonpayments and all other notices and consents
that Secured Party may release, compromise,
18
<PAGE>
settle, extend or renew any commercial paper, instruments or guaranties at any
time held by Secured Party or any Lender on which Pledgor may in any way be
liable and notice of any action taken by Secured Party or any Lender unless
expressly required by this Security Agreement or by law.
17. Notice. Except as otherwise provided herein, all notices, requests and
demands to or upon a party hereto shall be effective as provided in the Pledgor
Guaranty.
18. Applicable Law. This Security Agreement shall be governed in all
respects by, and construed in accordance with, the internal laws of the State of
Florida without reference to choice of laws principles.
19. References to Credit Agreement Definitions. In the event that the
Credit Agreement shall no longer be in effect at any time while the Pledgor
Guaranty shall continue in effect or there shall otherwise continue to remain
outstanding Secured Obligations, all references to the Credit Agreement,
including terms defined by reference to their respective definitions contained
in the Credit Agreement, shall be deemed to refer to the Credit Agreement as in
effect as of the date hereof, with such amendments thereto to which the Secured
Party shall have given its express consent in accordance with the Loan Documents
and the ESOP Loan Documents.
20. Entire Agreement. This Security Agreement, together with the Credit
Agreement and other Loan Documents and ESOP Loan Documents, constitute and
express the entire understanding between the parties hereto with respect to the
subject matter hereof, and supersede all prior agreements and understandings,
inducements, commitments or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof. Neither this Security Agreement nor any portion or provision hereof may
be changed, altered, waived, modified, supplemented, discharged, canceled,
terminated, or amended orally or in any manner other than (i) as to the Agent,
as provided in the Credit Agreement and (ii) as to NationsBank, by the express
written consent of NationsBank in each instance.
21. Section Headings. The Section headings in this Security Agreement are
for convenience of reference only; they form no part of this Security Agreement
and shall not affect its interpretation.
22. Severability. The provisions of this Security Agreement are
independent of and separable from each other. If any provision hereof shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect the validity or enforceability of any other provision
19
<PAGE>
hereof, but this Security Agreement shall be construed as if such invalid or
unenforceable provision had never been contained herein.
23. Successors and Assigns. This Security Agreement shall be binding upon
the successors and assigns of Pledgor and shall inure to the benefit of and be
enforceable by the Secured Party and their successors and assigns; provided,
however, the obligations of Pledgor hereunder may not be assigned or delegated
to any other Person without the prior written consent of the Secured Party.
24. Agency. Notwithstanding the foregoing references to the Secured Party,
Pledgor acknowledges and agrees that so long as NationsBank shall be the sole
Lender under the Credit Agreement, the term "Agent" shall mean NationsBank as
Lender. When and if there shall be more than one Lender party to the Credit
Agreement, then the term "Agent" shall refer to the Agent under the Credit
Agreement pursuant to the provisions of Article XI of the Credit Agreement, to
which reference is hereby made.
25. Termination. In the event that all of the Secured Obligations shall be
fully, finally and indefeasibly paid and satisfied in full (subject to
provisions of the Agreements that expressly survive), the Agreements shall be
terminated and there shall be no Outstanding Letters of Credit, the Secured
Party shall, at the request and at the expense of the Pledgor, terminate the
security interest and powers of attorney herein conferred and, in furtherance
thereof, execute such Uniform Commercial Code termination statements and such
other documents in form and substance reasonably satisfactory to the Secured
Party to release and terminate the Lien hereof of record. Notwithstanding the
foregoing provisions of this Section 25, in the event that any payment made or
deemed made to the Secured Party or any Lender in payment of any Secured
Obligation shall be rescinded or declared to be or become void, voidable or
otherwise recoverable from the Secured Party or such Lender for any reason
whatsoever, the Lien in favor of the Secured Party created hereunder shall be
and become reinstituted in respect of such Secured Obligations until the same
shall be thereafter fully and finally paid, satisfied and discharged.
[Remainder of page intentionally left blank]
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed by authority duly given as of the day and year first above
written.
WITNESS: VITAS HEALTHCARE CORPORATION OF FLORIDA
/s/ Terry L. Scaggs By: /s/ Mark W. Ohlendorf
- --------------------------------- ---------------------------------
Mark W. Ohlendorf
/s/ Meganne Cusato Vice President
- ---------------------------------
SECURED PARTY:
WITNESS: NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION, as Agent
/s/ Terry L. Scaggs By: /s/ Allison S. Freeland
- --------------------------------- ---------------------------------
Allison S. Freeland
/s/ Meganne Cusato Vice President
- ---------------------------------
WITNESS: NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION
/s/ Terry L. Scaggs By: /s/ Allison S. Freeland
- --------------------------------- ---------------------------------
Allison S. Freeland
/s/ Meganne Cusato Vice President
- ---------------------------------
21
<PAGE>
Vitas Healthcare Corporation of Florida
PLEDGE AND SECURITY AGREEMENT
INDEX TO EXHIBITS AND SCHEDULES*
1. Exhibit A Existing Liens on the Collateral
2. Schedule 6(E) Trade Styles
VITAS AGREES TO PROVIDE A COPY OF THE EXHIBIT AND SCHEDULE LISTED ABOVE TO THE
COMMISSION UPON REQUEST
- ----------
* The inclusion of any information on any one of these Exhibits and Schedules is
not, and shall not be deemed to be, a representation that such information must
be set forth on such Exhibit or Schedule or any supplement thereto or otherwise
in the agreement to which such Exhibit or Schedule relates. Information provided
in any one Exhibit or Schedule shall be deemed to be incorporated into each
Exhibit and Schedule, as applicable.
Execution: February 10,1995
<PAGE>
EXHIBIT 10.52
AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT (this "Security
Agreement") is made this 17th day of February, 1995, by and between VITAS
HEALTHCARE CORPORATION OF OHIO, a Delaware corporation having its principal
place of business in Miami, Dade County, Florida, (the "Pledgor"), and
NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION, a national banking association
("NationsBank"), for itself and as agent (in such agency capacity and together
with any successor agent, the "Agent") for certain lenders (the "Lenders") party
to the Credit Agreement described below (in such capacities as described below
and together with any successor agent acting as such under the Credit Agreement
described below, the "Secured Party").
W I T N E S S E T H:
WHEREAS, (i) pursuant to a Revolving Credit and Reimbursement Agreement
dated as of August 11, 1994 (the "Prior Credit Agreement") among Vitas
Healthcare Corporation (the "Company"), NationsBank as agent and NationsBank as
the lender thereunder, NationsBank has extended to the Company a revolving
credit facility in the aggregate principal amount of up to $15,000,000,
including within such revolving credit facility the issuance of letters of
credit for the account of the Company and (ii) pursuant to a Guaranty and
Contingent Purchase Agreement of even date with the Prior Credit Agreement
between the Company and NationsBank (the "Prior Company Guaranty" and, together
with the Prior Credit Agreement, the "Prior Agreements"), NationsBank extended a
term loan of $2,386,670 to the Vitas Healthcare Corporation Employee Stock
Ownership Trust (the "Trust") to refinance certain indebtedness owing from the
Trust to the Company, the repayment of which loan has been, inter alia,
guaranteed under the Prior Guaranty; and
WHEREAS, pursuant to the Prior Agreements, the Pledgor has executed and
delivered (i) its Guaranty and Suretyship Agreement of even date therewith (the
"Prior Pledgor Guaranty") guaranteeing the payment and performance by the
Company, inter alia, of its obligations under the Prior Agreements, and (ii) its
Pledge and Security Agreement of even date with the Prior Pledgor Guaranty
securing its obligations under the Prior Pledgor Guaranty (the "Prior Security
Agreement"); and
WHEREAS, the Company and Vitas Healthcare Corporation of California, a
Subsidiary of the Company ("Vitas California"), have entered into an Asset
Purchase Agreement with the Sellers (as defined in the Credit Agreement) dated
as of December 27, 1994 (the "Asset Purchase Agreement") pursuant to which Vitas
California has agreed to purchase substantially all of the operating assets of
the CHC Entities (as defined in the Credit
<PAGE>
Agreement) pursuant to the terms and subject to the conditions set forth therein
and, in connection therewith, the Company has requested that the Prior Credit
Agreement be amended and restated to increase the revolving credit facility from
$15,000,000 to $20,000,000, to provide for a $25,000,000 term loan facility, and
to make certain other modifications, and that the Prior Company Guaranty be
amended and restated to reflect the agreement of the parties; and
WHEREAS, at the request of the Company and to effect the modifications
referred to above, (i) the Company, the Agent and the Lenders are entering into
an Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement
of even date herewith (as the same may be modified, amended or restated from
time to time, the "Credit Agreement"), and (ii) the Company and NationsBank are
entering into an Amended and Restated Guaranty and Contingent Purchase Agreement
of even date herewith (as the same may be modified, amended or restated from
time to time, the "Company Guaranty" and, together with the Credit Agreement,
the "Agreements") ; and
WHEREAS, pursuant to the Agreements, the Pledgor has executed and
delivered its Amended and Restated Guaranty and suretyship Agreement of even
date herewith (as the same may be amended, modified or restated from time to
time, the "Pledgor Guaranty") guaranteeing the payment and performance by the
Company, inter alia, of its obligations under the Agreements; and
WHEREAS, the Lenders are unwilling to extend the amend and increase the
revolving credit facility or make such term loan pursuant to the Credit
Agreement, and NationsBank is unwilling to amend the Prior Agreements as
reflected in the Agreements to permit the consummation of the CHC Transaction,
unless the Pledgor amends and restates its Prior Secuirty Agreement by entering
into this Security Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and promises herein contained, the parties hereto agree as follows:
1. Certain Definitions. Unless otherwise defined herein, capitalized terms
used in this Security Agreement shall have the respective meanings therefor
provided in the Credit Agreement.
2. Grant of Security Interest. As collateral security for the full and
prompt payment, satisfaction and performance of all obligations and liabilities
of the Pledgor under the Pledgor Guaranty, whether now existing or hereafter
arising (the "Secured Obligations"), Pledgor hereby grants to the Secured Party
a continuing security interest in all of its right, title and interest in and to
all of the following property in which Pledgor now has or hereafter acquires an
interest, whether now owned or
2
<PAGE>
existing or hereafter acquired or arising and wheresoever located:
(A) All accounts, accounts receivable, notes, bills, acceptances,
choses in action, chattel paper, instruments, documents, and other forms
of obligations at any time owing to Pledgor, the proceeds thereof and all
of Pledgor's rights with respect to any goods represented thereby, whether
or not delivered, goods returned by customers and all rights as an unpaid
vendor or lienor, including rights of stoppage in transit and of
recovering possession by proceedings including replevin and reclamation,
together with all customer lists, books and records, ledger and account
cards, computer tapes, software, disks, printouts and records, whether now
in existence or hereafter created, relating thereto (collectively referred
to hereinafter as "Accounts");
(B) All goods of Pledgor, including without limitation, all
machinery, equipment, motor vehicles, parts, supplies, apparatus,
appliances, tools, patterns, molds, dies, blueprints, fittings, furniture,
furnishings, fixtures and articles of tangible personal property of every
description now or hereafter owned by Pledgor or in which Pledgor may have
or may hereafter acquire any interest, but as to leasehold interests in
personal property, only to the extent assignable (collectively referred to
hereinafter as "Equipment");
(C) All general intangibles of Pledgor, now existing or hereafter
owned or acquired or arising or in which Pledgor now has or hereafter
acquires any rights, including but not limited to causes of action,
corporate or business records, inventions, designs, patents, patent
applications, trademarks, trademark registrations and applications
therefor, goodwill, trade names, trade secrets, trade processes,
copyrights, copyright registrations and applications therefor, licenses
(to the extent assignable), permits (to the extent assignable),
franchises, customer lists (to the extent permitted by law), computer
programs, all claims under guaranties, tax refund claims, rights and
claims against carriers and shippers, leases (to the extent assignable),
claims under insurance policies, all rights to indemnification and all
other intangible personal property of every kind and nature (collectively
referred to hereinafter as "General Intangibles");
(D) All inventory of Pledgor wherever located, including without
limitation, all goods manufactured or acquired for sale or lease, and any
piece goods, raw materials, work in process and finished merchandise,
findings or component materials, and all supplies, goods, incidentals,
office supplies, packaging materials and any
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and all items used or consumed in the operation of the business of Pledgor
or which may contribute to the finished product or to the sale, promotion
and shipment thereof, in which Pledgor now or at any time hereafter may
have an interest, whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of Pledgor or is
held by Pledgor or by others for Pledgor's account (collectively referred
to hereinafter as "Inventory");
(E) To the extent assignable, all rights now or hereafter arising to
any Pledgor under contracts, leases, agreements or other instruments of
every character and description, and all rights of enforcement thereunder
(collectively referred to as hereinafter as "Contract Rights");
(F) All monies, certificates of deposit, commercial paper, cash
equivalents, account balances, notes, options, interests, and securities
(certificated or uncertificated), wheresoever located; excluding, however,
the equity interests (other than interests in money market funds) of the
Pledgor in Persons not constituting Subsidiaries;
(G) All accessions to, substitutions for and all replacements,
products and proceeds of the foregoing including, without limitation,
proceeds of insurance policies insuring the Collateral (as hereinafter
defined); and
(H) All books and records (including without limitation, customer
data, credit files, computer programs, printouts, and other computer
materials and records of the Pledgor and all documents) pertaining to any
of the foregoing.
All of the property and interests in property described in subsections (A)
through (H) and all other property and interests in personal property which
shall, from time to time, secure the Secured Obligations are herein collectively
referred to as the "Collateral".
3. Financing Statements. At the time of execution of this Security
Agreement, Pledgor shall have (i) furnished the Secured Party with financing
statements, approved by the Secured Party and executed as prescribed by the
Uniform Commercial Code as presently in effect in the states of Ohio and
Florida, and where other Collateral is located, as may be reasonably requested
by the Secured Party, in form and number sufficient to perfect in favor of the
Secured Party the security interest in the Collateral, and (ii) delivered to
Secured Party's possession certificated securities (with duly executed stock
powers in blank affixed thereto) representing the Pledgor's interests in
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Subsidiaries, in order that the Secured Party shall have a perfected security
interest in the Collateral following such filing of such financing statements
with the appropriate local and state governmental authorities and the delivery
of such securities (to the extent that a security interest in such Collateral is
capable of perfection by such filing or possession), and subject only to (a)
permitted liens described in the Credit Agreement, (b) such other security
interests, liens and encumbrances currently existing and set forth in Exhibit A
attached hereto and by reference made a part hereof, or as shall otherwise be
acceptable to the Secured Party in its sole discretion, and (c) limitations
under applicable law which may limit the creation, perfection or priority of
liens on Government Receivables (collectively referred to hereinafter as
"Permitted Liens"); provided, however, that with respect to the items of
property described in clause (F) of Section 2, the security interest in such
property will not be perfected until the Secured Party or any Lender takes
possession thereof or otherwise obtains perfection in accordance with the
applicable requirements of the Uniform Commercial Code. Pledgor shall execute as
reasonably required by the Secured Party any additional financing statements or
other documents to effect a perfected security interest in the Collateral to the
extent contemplated hereby, together with any necessary continuation statements
so long as this Security Agreement remains in effect.
4. Maintenance of Security Interest. Pledgor will, from time to time, upon
the request of the Secured Party, deliver specific assignments of Collateral,
together with such other instruments and documents, financing statements,
amendments thereto, assignments or other writings as the Secured Party or any
Lender may reasonably request to carry out the terms of this Security Agreement
or to protect or enforce the Secured Party's security interest in the
Collateral.
With respect to any and all Collateral as to which a security interest is
granted under this Security Agreement, Pledgor agrees to do and cause to be done
all things necessary to perfect and keep in full force the security interest
granted in favor of the Secured Party, including, but not limited to, the prompt
payment of all fees and expenses incurred in connection with any filings made to
perfect a security interest in the Collateral in favor of the Secured Party.
Pledgor agrees to make appropriate entries upon its financial statements
and books and records disclosing the Secured Party's security interest in the
Collateral.
5. Collections; Secured Party's Right to Notify Account Debtors and to
Endorse Each Pledgor's Name. Pledgor hereby authorizes Secured Party at any time
after the occurrence and during the continuation of an Event of Default subject,
with respect to the Secured Obligations relating to the Company's
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obligations under the Company Guaranty, to Section 2.08 of the Company Guaranty,
(a) to open Pledgor's mail and collect any and all amounts due to Pledgor from
persons obligated on any Accounts ("Account Debtors"), but only to the extent
permitted by law with respect to Government Receivables; (b) to take over
Pledgor's post office boxes or make other arrangements as Secured Party deems
necessary to receive Pledgor's mail, including notifying the post office
authorities to change the address for delivery of Pledgor's mail to such address
as Secured Party may designate; and (c) to notify any or all Account Debtors,
but only to the extent permitted by law with respect to Government Receivables,
that the Accounts have been assigned to Secured Party and that Secured Party has
a security interest therein. Pledgor irrevocably makes, constitutes and appoints
Secured Party and all Persons designated by Secured Party for that purpose as
Pledgor's true and lawful attorney (and agent-in-fact) after the occurrence and
during the continuation of an Event of Default, subject to the limitations set
forth in the immediately preceding sentence and, with respect to the Secured
Obligations relating to the Company's obligations under the Company Guaranty, to
Section 2.08 of the Company Guaranty, to endorse such Pledgor's name on any
checks, notes, drafts or any other payment relating to and/or proceeds of the
Collateral which comes into Secured Party's possession or Secured Party's
control, and apply the same on account of the Secured Obligations as provided
herein and in the Agreements, in such order as Secured Party may elect. Secured
Party shall promptly furnish Pledgor with a copy of any such notice sent with
respect to Accounts of Pledgor and Pledgor hereby agrees that any such notice,
in Secured Party's sole discretion, may be sent on Pledgor's stationery, in
which event Pledgor shall co-sign such notice with Secured Party.
6. Collateral. Pledgor covenants with Lender that:
(A) Inspection. Secured Party and any Lender (by any of its
officers, employees and agents) shall have the right, at any time or times
during Pledgor's usual business hours, to inspect the Collateral, all
records related thereto (and to make extracts or copies from such
records), and the premises upon which any of the Collateral is located, to
discuss Pledgor's affairs and finances with its principal officers and
independent auditors and to verify the amount, quality, quantity, value
and condition of, or any other matter relating to, the Collateral. Upon or
after the occurrence of a Default or an Event of Default, Secured Party
may at any time and from time to time employ and maintain at Pledgor's
premises a custodian selected by Secured Party who shall have full
authority to do all acts necessary to protect Secured Party's interest.
All reasonable expenses incurred by Secured Party by reason of the
employment of such custodian shall be paid by the Pledgor, added to the
Secured Obligations and secured by the Collateral.
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(B) Assignments, Records and Schedules of Accounts. Pledgor shall
keep accurate and complete records of its Accounts ("Account Records")
and, upon Secured Party's request from time to time at intervals
acceptable to Secured Party, Pledgor shall reasonably provide Secured
Party and each Lender with a Schedule of Accounts in form and substance
reasonably acceptable to the Secured Party describing all Accounts created
or acquired by such Pledgor ("Schedule of Accounts") and shall at the
request of Secured Party execute and deliver further written assignments
of such Accounts to Secured Party; provided however, that Pledgor's
failure to execute and deliver any such Schedule of Accounts or
assignments shall not affect or limit Secured Party's security interest or
other rights in and to any Accounts. If requested by Secured Party,
Pledgor shall furnish Secured Party with copies of proof of delivery of
invoices and the original copy of all documents, including, without
limitation, repayment histories and present status reports, relating to
the Accounts so scheduled (collectively, "Account Documents") and such
other matter and information relating to the status of then existing
Accounts as Secured Party shall reasonably request.
(C) Notice Regarding Disputed Accounts. In the event any amounts due
and owing in excess of $100,000 are in dispute between any Account Debtor
and Pledgor (which shall include, without limitation, any dispute in which
an offset claim or counterclaim may result), Pledgor shall provide the
Secured Party with written notice thereof promptly, explaining in detail
the reason for the dispute, all claims related thereto and the amount in
controversy.
(D) Verification of Accounts. Whether or not a Default or an Event
of Default has occurred, any of Secured Party's, employees, or agents
shall have the right, at any time or times hereafter, to verify under
reasonable procedures the validity, amount or any other matter relating to
any Accounts by mail, telephone, telegraph or otherwise.
(E) Change of Trade Styles. Set forth on Schedule 6(E) delivered to
the Secured Party simultaneously with the execution of this Security
Agreement are all tradenames and trade styles under which Pledgor provides
services giving rise to Accounts as of the date of this Agreement ("Trade
Styles"). Pledgor shall not change, amend, alter, terminate, or cease
using its Trade Styles, or use additional Trade Styles, except upon giving
not less than ten (10) days prior written notice to the Secured Party and
taking or causing to be taken all such action at Pledgor's expense as may
be reasonably requested by the Secured Party (including the furnishing of
additional financing statements) to enable the Secured Party to perfect or
maintain the perfection of the
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security interest of the Secured Party in Accounts, General Intangibles,
Contract Rights and related Collateral.
(F) Safekeeping of Inventory. Pledgor shall be responsible for the
safekeeping of its Inventory, and in no event shall Secured Party or any Lender
have any responsibility for:
(i) Any loss or damage to Inventory or destruction thereof occurring
or arising in any manner or fashion from any cause other than as a result
of gross negligence, bad faith or willful misconduct of the Agent or any
Lender;
(ii) Any diminution in the value of Inventory; or
(iii) Any act or default of any carrier, warehouseman, bailee or
forwarding agency thereof or other Person in any way dealing with or
handling Inventory.
(G) Records and Schedules of Inventory. Pledgor shall keep correct and
accurate records on a perpetual basis, itemizing and describing the kind, type,
location, quality and quantity of Inventory owned by it, if any, from time to
time, and such Pledgor's cost therefor and selling price thereof, and at the
reasonable request of the Secured Party shall furnish to the Secured Party, a
current Schedule of Inventory ("Schedule of Inventory"). Pledgor shall conduct a
physical inventory, of which Secured Party shall be given prior written notice
and shall have the right to be present, no less than annually, and shall furnish
to Secured Party such other documents and reports as Secured Party shall
reasonably request with respect to the Inventory, including, without limitation,
invoices relating to Pledgor's purchase of Inventory.
(H) Evidence of Ownership of Equipment. Pledgor, promptly on request
therefor by the Secured Party, shall deliver to the Secured Party any and all
evidence of ownership of any of the Equipment (including without limitation
certificates of title and applications for title).
(I) Records and Schedules of Equipment. Pledgor shall maintain accurate,
itemized records describing in reasonable detail its Equipment and shall furnish
the Secured Party upon reasonable request with a current schedule containing the
foregoing information ("Schedule of Equipment").
(J) Administration of Collateral. So long as no Event of Default shall
have occurred and be continuing, Pledgor may (to the extent not inconsistent
with the provisions of the Loan Documents or the ESOP Loan Documents) (i) sell,
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transfer or dispose of any asset owned by it or (ii) collect or compromise
Accounts and General Intangibles in the ordinary course of business in any
lawful manner.
(K) Voting Rights, Consensual Rights, Dividends and Distributions. A. So
long as no Event of Default shall have occurred and be continuing:
1. the Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Collateral or any part thereof
for any purpose not inconsistent with the terms of this Security
Agreement, the Credit Agreement, the other Loan Documents or the other
ESOP Loan Documents;
2. the Pledgor shall be entitled to receive and retain any and all
cash distributions or dividends paid on the Collateral which they are
otherwise entitled to receive, notwithstanding the assignment and transfer
of the Collateral and the grant of security interest in Section 2 of this
Security Agreement (provided that any cash distributions or dividends
received upon the occurrence and during the continuance of a Default shall
remain segregated from all other funds of the Pledgor and deposited with
the Secured Party), but any and all stock dividends, liquidating
dividends, distributions in property, returns of capital or other
distributions made on or in respect of any of the Collateral, whether
resulting from a subdivision, combination or reclassification of the
outstanding capital stock of any issuer of the Collateral or received in
exchange for the Collateral or any part thereof or as a result of any
merger, consolidation, acquisition or other exchange of assets to which
any issuer of any Collateral may be a party or otherwise, and any and all
cash and other property received in exchange for any of the Collateral
shall be and become part of the Collateral hereunder and, if received by
the Pledgor, shall forthwith be delivered to the Secured Party, to the
extent the Collateral for which it was exchanged was held or required to
be held by the Secured Party; and
3. the Secured Party shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and other
instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting, consensual and other rights
which the Pledgor are entitled to exercise pursuant to subparagraph (1)
above and to receive such distributions and dividends which it is
authorized to receive and retain pursuant to subparagraph (2) above.
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<PAGE>
B. Upon the occurrence and during the continuance of an Event of
Default:
1. subject, with respect to the Secured Obligations relating
to the Company's obligations under the Company Guaranty to Section
2.08 of the Company Guaranty, all rights of the Pledgor to exercise
the voting and other consensual rights which it would otherwise be
entitled to exercise pursuant to Section 6(K)A.l and to receive and
retain the distributions and dividends which it would otherwise be
authorized to receive and retain pursuant to Section 6(K)A.2, shall
become vested in the Secured Party, which shall thereupon have the
sole right to exercise such voting and other consensual rights and
to receive and hold as Collateral such distributions and dividends
(whether or not the relevant Collateral shall have been transferred
into the name of the Secured Party or any of its nominees, the
Pledgor hereby irrevocably appointing and constituting the Secured
Party as proxy and attorney-in-fact of Pledgor, which appointment is
coupled with an interest and is irrevocable, with full power of
substitution, to act as if the Secured Party were the outright owner
thereof); and
2. all distributions and dividends which are received by the
Pledgor contrary to the provisions of Section 6(K)A.2 or Section
6(K)B.l shall be received in trust for the benefit of the Secured
Party, shall be segregated from other funds of Pledgor and shall be
paid over to the Secured Party forthwith as Collateral in the same
form as so received (with any necessary endorsement).
7. Warranties Regarding Collateral. Pledgor warrants and represents that
it is and will continue to be the owner of the Collateral, now owned and upon
the acquisition of the same, free and clear of all encumbrances and security
interests other than the security interest in favor of Secured Party hereunder
and Permitted Liens, and that it will defend the Collateral and the Secured
Party's security interest therein and any products and proceeds thereof against
all claims and demands of all Persons at any time claiming the same or any
interest therein adverse to the Secured Party or any Lender.
8. Account Warranties and Representations. With respect to its Accounts,
Pledgor warrants and represents to the Secured Party and the Lenders that they
may rely on all statements or representations made by Pledgor on or with respect
to any Schedule of Accounts prepared and delivered by Pledgor and, unless
otherwise indicated in writing by Pledgor, that:
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(A) All Account Records and Account Documents are located and shall be
kept only at Pledgor's chief executive offices located at the locations
described in Schedule 6.04 delivered to the Agent pursuant to the Credit
Agreement and Schedule 4.22 delivered to the Bank pursuant to the Company
Guaranty;
(B) They are genuine, are in all material respects what they purport to
be, are not evidenced by a judgment instrument or document or, if evidenced by
an instrument or document, are only evidenced by one original instrument or
document, which has been delivered to the Secured Party;
(C) They cover the bona fide rendition of services, or the bona fide sales
and deliveries of Inventory usually dealt in by Pledgor, in the ordinary course
of business;
(D) Each Account is actually and absolutely owing to Pledgor in the face
value thereof, is valid and enforceable against the applicable Account Debtor,
and is not subject to any setoffs, discounts, allowances, claims, counterclaims,
disputes or doubtful collectibility except (i) as is customary for Accounts of
the type represented by such Account (including the nature of the Account
Debtor) of the Pledgor in the ordinary course of Pledgor's business and
consistent with past practices, and (ii) as is reflected by reserves and
reductions in the stated value of such Account, computed in a manner consistent
with the Company's policies and practices in preparing the financial statements
described in Sections 7.01 and 8.01 of the Credit Agreement and Sections 3.01(f)
and 4.01 of the Company Guaranty, included in such financial statements, in the
Schedule of Accounts and in any report or certificate including financial
information regarding such Account furnished to the Secured Party pursuant to
the Loan Documents or the ESOP Loan Documents.
(E) The goods or services giving rise thereto are not, and were not at the
time of the sale or performance thereof, subject to any lien, claim, encumbrance
or security interest, except those of the Secured Party and those removed or
terminated prior to the date hereof;
(F) They have not been pledged to any Person other than to Secured Party
under this Security Agreement and will be owned by Pledgor free and clear of any
liens, claims or encumbrances except Permitted Liens; and
(G) Secured Party's security interest therein will not be subject to any
offset, deduction, counterclaim, lien or other adverse condition, other than
Permitted Liens or as is consistent with Section 8(D) above.
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9. Inventory Warranties and Representations. With respect to Inventory,
Pledgor warrants and represents to the Secured Party and the Lenders that they
may rely on all statements or representations made by Pledgor on or with respect
to any Inventory and, unless otherwise indicated in writing by Pledgor, that
(A) Except for the relocation of Inventory from time to time in the
ordinary course of business not aggregating more than $100,000 at any one
time in any location other than those set forth in Schedules 6.03 and 6.04
delivered pursuant to the Credit Agreement or Schedules 4.22 and 4.23
delivered pursuant to the Company Guaranty, the Pledgor shall not locate
or relocate inventory to any location other than those set forth in
Section 8(A) above or Schedules 6.03 and 6.04 delivered pursuant to the
Credit Agreement or Schedules 4.22 and 4.23 delivered pursuant to the
Company Guaranty without giving the Secured Party not less than thirty
(30) days prior written notice and taking or causing to be taken at its
expense all steps as may be reasonably requested by the Secured Party
(including the furnishing of additional financing statements) to enable
the Secured Party to perfect or continue the perfection of its security
interest in such property.
(B) No Inventory is or will be subject to any lien, claim,
encumbrance or security interest whatsoever, except for the security
interest of Secured Party hereunder and Permitted Liens;
(C) No Inventory having an aggregate value in excess of $100,000 is
now, and shall not at any time or times hereafter be, stored with a
bailee, warehouseman, or similar party without Secured Party's prior
written consent and, if Secured Party gives such consent, Pledgor will
concurrently therewith cause any such bailee, warehouseman, or similar
party to issue and deliver to Secured Party in form and substance
acceptable to Secured Party, warehouse receipts therefor in Secured
Party's name; and
(D) No Inventory is under consignment to any Person.
10. Equipment Warranties and Representations. With respect to Equipment,
Pledgor warrants and represents to the Secured Party and each Lender that:
(A) Except for the relocation of Equipment from time to time in the
ordinary course of business not aggregating more than $100,000 at any one
time in any location other than those set forth in Schedules 6.03 and 6.04
of the Credit Agreement and Schedules 4.22 and 4.23 of the Company
Guaranty, the Pledgor shall not locate or relocate Equipment to any
location other than those set forth in Schedules 6.03
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<PAGE>
and 6.04 of the Credit Agreement and Schedules 4.22 and 4.23 of the
Company Guaranty without giving the Secured Party not less than thirty
(30) days prior written notice and taking or causing to be taken at their
expense all steps as may be reasonably requested by the Secured Party
(including the furnishing of additional financing statements) to enable
the Secured Party to perfect or continue the perfection of its security
interest in such property; and
(B) Pledgor has and at all times will have good and marketable title
to and ownership of the Equipment free and clear of any lien, claim,
encumbrance, or security interest whatsoever, except for (i) the security
interest of Secured Party created hereunder and (ii) Permitted Liens.
11. Casualty and Liability Insurance Required. (A) Pledgor will keep the
Collateral continuously insured as may be expressly required by the Agreements.
(B) Each insurance policy obtained in satisfaction of the requirements of
Section 11(A) hereof:
(i) shall be by such insurer (or insurers) as shall be financially
responsible and qualified to do business in the applicable jurisdictions;
(ii) shall be in such form and have such provisions (including,
without limitation, the loss payable clause, the waiver of subrogation
clause, the deductible amount, if any, and the standard mortgagee
endorsement clause), as are generally considered standard provisions for
the type of insurance involved and are acceptable in all respects to
Secured Party;
(iii) shall prohibit cancellation or substantial modification,
termination or lapse in coverage by the insurer without at least 30 days'
prior written notice to Secured Party;
(iv) shall provide that the interest of Secured Party shall not be
impaired or invalidated by any act or neglect of Pledgor nor by the
occupation of the premises wherein such Collateral is located for purposes
more hazardous than are permitted by said policy;
(v) without limiting the generality of the foregoing, all insurance
policies covering loss or damage to the Collateral shall name Secured
Party as mortgagee, loss payee and a party insured thereunder and any loss
thereunder shall be paid directly to Secured Party.
(C) Prior to expiration of any such policy, Pledgor shall furnish Secured
Party with evidence reasonably satisfactory to
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<PAGE>
Secured Party that the policy or certificate has been renewed or replaced or is
no longer required by this Security Agreement.
(D) Pledgor hereby irrevocably makes, constitutes and appoints Secured
Party (and all officers, employees or agents designated by Secured Party),
effective upon the occurrence of an Event of Default which has not been waived
or cured, as Pledgor's true and lawful attorney (and agent-in-fact) for the
purpose of making, settling and adjusting claims under such policies of
insurance, endorsing the name of Pledgor on any check, draft, instrument or
other item or payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect to such policies of
insurance.
(E) In the event Pledgor shall fail to maintain, or cause to be
maintained, the full insurance coverage required hereunder or shall fail to keep
any Collateral in good repair and good operating condition, the Secured Party
may (but shall be under no obligation to), without waiving or releasing any
Secured Obligation or Event of Default, after giving notice to the Pledgor,
contract for the required policies of insurance and pay the premiums on the same
or make any required repairs, renewals and replacements; and all sums so
disbursed by Secured Party, including reasonable attorneys' fees, court costs,
expenses and other charges related thereto, shall be payable on demand by
Pledgor to Secured Party and shall be additional Secured Obligations secured by
the Collateral.
(F) In case of any material damage to or destruction of all or any part of
the Collateral, Pledgor shall give prompt notice thereof to Secured Party. Each
such notice shall describe generally the nature and extent of such damage,
destruction, taking, loss, proceeding or negotiations.
12. Rights and Remedies Upon Default. Subject, with respect to the Secured
Obligations relating to the Company's obligations under the Company Guaranty, to
Section 2.08 of the Company Guaranty, upon and after an Event of Default which
has not been waived or cured, the Secured Party shall have the following rights
and remedies, all of which may be exercised with or without notice to Pledgor:
(A) All of the rights and remedies of a secured party under the
Uniform Commercial Code of the state where such rights and remedies are
asserted, or under other applicable law, all of which rights and remedies
shall be cumulative, and none of which shall be exclusive, to the extent
permitted by law, in addition to any other rights and remedies contained
in this Security Agreement, the Agreements, or any of the other Loan
Documents or ESOP Loan Documents;
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(B) The right to foreclose the liens and security instruments
created under this Security Agreement or any of the other Loan Documents
or ESOP Loan Documents by any available judicial procedure or without
judicial process;
(C) The right to (i) enter upon the premises of Pledgor through
self-help and without judicial process, without first obtaining a final
judgment or giving Pledgor notice and opportunity for a hearing on the
validity of Secured Party's claim and without any obligation to pay rent
to Pledgor, or any other place or places where any Collateral is located
and kept, and remove the Collateral therefrom to the premises of Secured
Party or any agent of Secured Party, for such time as Secured Party may
desire, in order to effectively collect or liquidate the Collateral,
and/or (ii) require Pledgor to assemble the Collateral and make it
available to Secured Party at a place to be designated by Secured Party in
its sole discretion;
(D) The right (to the extent permissible by law with respect to
Governmental Receivables) to (i) demand payment of the Accounts; (ii)
enforce payment of the Accounts and General Intangibles and enforce all
Contract Rights, by legal proceedings or otherwise; (iii) exercise all or
any of Pledgor's rights and remedies with respect to the collection of the
Accounts and General Intangibles and in respect of Contract Rights; (iv)
settle, adjust, compromise, extend or renew the Accounts; (v) settle,
adjust or compromise any legal proceedings brought to collect the Accounts
or General Intangibles or to enforce Contract Rights; (vi) sell or assign
the Accounts, General Intangibles, Contract Rights or other Collateral
upon such terms, for such amounts and at such time or times as Secured
Party deems advisable; (vii) discharge and release the Accounts; (viii)
take control, in any manner, of any item of payment or proceeds; (ix)
prepare, file and sign Pledgor's name on a Proof of Claim in bankruptcy or
similar document against any account obligor; (x) prepare, file and sign
Pledgor's name on any notice of lien, assignment or satisfaction of lien
or similar document in connection with the Accounts; (xi) endorse the name
of Pledgor upon any chattel paper, document, instrument, invoice, freight
bill, bill of lading or similar document or agreement relating to the
Accounts or Inventory; (xii) use Pledgor's stationery for verifications of
the Accounts and notices thereof to account obligors; (xiii) use the
information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts, General
Intangibles, Equipment, Contract Rights or Inventory to which Pledgor has
access; and (xiv) do all acts and things and execute all documents
necessary, in Secured Party's sole discretion, to collect the Accounts and
General Intangibles;
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(E) The right to sell, assign, lease or to otherwise dispose of all
or any Collateral in its then condition, or after any further
manufacturing or processing thereof, at public or private sale or sales,
with such notice as may be required by law, in lots or in bulk, for cash
or on credit, with or without representations and warranties, all as
Secured Party, in its sole discretion, may deem advisable (except, in the
case of Government Receivables, to the extent such sales or other
disposition are prohibited by applicable law). Secured Party shall have
the right to conduct such sales on Pledgor's premises or elsewhere and
shall have the right to use Pledgor's premises without charge for such
sales for such time or times as Secured Party may see fit. Secured Party
may, if it deems it reasonable, postpone or adjourn any sale of the
Collateral from time to time by an announcement at the time and place of
such postponed or adjourned sale, without being required to give a new
notice of sale. Pledgor agrees that Secured Party has no obligation to
preserve rights to the Collateral against prior parties or to marshall any
Collateral for the benefit of any Person. Secured Party is hereby granted
a license or other right to use, without charge, Pledgor's labels,
patents, copyrights, rights of use of any name, trade secrets, tradenames,
trademarks and advertising matter, or any property of a similar nature, as
it pertains to the Collateral, in completing production of, advertising
for sale and selling any Collateral and Pledgor's rights under any license
and any franchise agreement shall inure to Secured Party's benefit. If any
of the Collateral shall require repairs, maintenance, preparation or the
like, or is in process or other unfinished state, Secured Party shall have
the right, but shall not be obligated to perform such repairs,
maintenance, preparation, processing or completion of manufacturing for
the purpose of putting the same in such saleable form as Secured Party
shall deem appropriate, but Secured Party shall have the right to sell or
dispose of the Collateral without such processing. In addition, Pledgor
agrees that in the event notice is necessary under applicable law, written
notice mailed to Pledgor in the manner specified in either of the
Agreements ten (10) days prior to the date of public sale of any of the
Collateral or prior to the date after which any private sale or other
disposition of the Collateral will be made shall constitute commercially
reasonable notice to Pledgor. Secured Party or any Lender may purchase all
or any part of the Collateral at public or, if permitted by law, private
sale, free from any right of redemption which is hereby expressly waived
by Pledgor and, in lieu of actual payment of such purchase price, may set
off the amount of such price against the Secured Obligations. The net
cash proceeds resulting from the collection, liquidation, sale, lease or
other disposition of the Collateral shall be applied first to the
reasonable expenses (including all reasonable attorneys'
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fees) of retaking, holding, storing, processing and preparing for sale,
selling, collecting, liquidating and the like (collectively, the
"Administration Expenses"), and then to the satisfaction of all Secured
Obligations, application as to particular Secured Obligations or against
principal or interest to be in subject to the terms of Section 13 hereof
and of the Agreements. Pledgor shall be liable to Secured Party and the
Lenders and shall pay to the Secured Party on demand any deficiency which
may remain after such sale, disposition, collection or liquidation of the
Collateral. Pledgor recognize that the Secured Party may be unable to
effect a public sale of securities constituting Collateral by reason of
certain prohibitions contained in the Securities Act of 1933, as amended
(the "Securities Act"), and applicable state securities or Blue Sky laws,
and as a consequence may be compelled to resort to one or more private
sales to a restricted group of purchasers who will be obliged to agree,
among other things, to acquire such Collateral for their own account, for
investment and not with a view to the distribution or resale thereof.
Pledgor agrees and acknowledges that private sales so made may be at
prices and upon terms less favorable to Pledgor than if such Collateral
were sold at public sales and that the Secured Party has no obligation to
delay the sale of any of the Collateral for the period of time necessary
to permit the issuer of such Collateral to register or otherwise qualify
them, even if such issuer would agree to register or otherwise qualify
such Collateral for public sale under the Securities Act and applicable
state securities or Blue Sky laws. Pledgor further agrees, to the extent
permitted by applicable law, that the use of private sales made under the
foregoing circumstances to dispose of the Collateral shall be deemed to be
dispositions in a commercially reasonable manner;
(F) The rights and remedies provided to Secured Party or any Lender
under this Security Agreement or any of the other Loan Documents or ESOP
Loan Documents.
13. Anti-Marshalling Provisions. The right is hereby given by Pledgor to
Secured Party and the Lenders to make releases (whether in whole or in part) of
all or any part of the Collateral agreeable to Secured Party and the Lenders
without notice to, or the consent, approval or agreement of other parties and
interests, including junior lienors, which releases shall not impair in any
manner the validity of or priority of the liens and security interest in the
remaining Collateral conferred under such documents, nor release Pledgor from
personal liability for the indebtedness hereby secured. Notwithstanding the
existence of any other security interest in the Collateral held by Secured Party
or any Lender, Secured Party and the Lenders shall have the right to determine
the order in which any or all of the Collateral shall be subjected to the
remedies provided in this
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Security Agreement. The proceeds realized upon the exercise of the remedies
provided herein shall be applied as provided herein, in the Pledgor Guaranty and
in the Agreements. Pledgor hereby waives any and all right to require the
marshalling of assets in connection with the exercise of any of the remedies
permitted by applicable law or provided herein.
14. Appointment of Secured Party as Pledgor's Lawful Attorney. Upon and
after an Event of Default which has not been waived or cured, Pledgor
irrevocably designates, makes, constitutes and appoints Secured Party (and all
Persons designated by Lender) as Pledgor's true and lawful attorney (and
agent-in-fact). To the extent permitted by law, all acts of Secured Party or its
designee lawfully taken pursuant to Section 13 are hereby ratified and confirmed
and Secured Party or its designee shall not be liable for any acts of omission
or commission nor for any error of judgment or mistake of fact or law which does
not constitute bad faith, willful misconduct or gross negligence. This power,
being coupled with an interest, is irrevocable by Pledgor until all Secured
Obligations are finally paid in full.
15. Rights and Remedies Cumulative; Non-Waiver; Etc. The enumeration of
Secured Party's and Lenders' rights and remedies set forth in this Security
Agreement is not intended to be exhaustive and the exercise by the Secured Party
or any Lender of any right or remedy shall not preclude the exercise of any
other rights or remedies, all of which shall be cumulative, and shall be in
addition to any other right or remedy given hereunder, or under any other
agreement between Pledgor and Secured Party or any Lender or which may now or
hereafter exist in law or in equity or by suit or otherwise. No delay or failure
to take action on the part of Lender in exercising any right, power or privilege
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or privilege preclude other or further exercise thereof or
the exercise of any other right, power or privilege or be construed to be a
waiver of any Event of Default. No waiver by a party hereunder shall be
effective unless it is in writing and signed by the party making such waiver,
and then only to the extent specifically stated in such writing. No course of
dealing between Pledgor and the Secured Party or any Lender or their respective
agents or employees shall be effective to change, modify or discharge any
provision of this Security Agreement or to constitute a waiver of any Event of
Default.
16. Waivers. In addition to the other waivers contained herein and in any
other agreement between Pledgor and Secured Party or any Lender, Pledgor hereby
expressly waives, to the extent permitted by law: presentment for payment,
demand, protest, notice of demand, notice of protest, notice of default or
dishonor, notice of payments and nonpayments and all other notices and consents
that Secured Party may release, compromise,
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<PAGE>
settle, extend or renew any commercial paper, instruments or guaranties at any
time held by Secured Party or any Lender on which Pledgor may in any way be
liable and notice of any action taken by Secured Party or any Lender unless
expressly required by this Security Agreement or by law.
17. Notice. Except as otherwise provided herein, all notices, requests and
demands to or upon a party hereto shall be effective as provided in the Pledgor
Guaranty.
18. Applicable Law. This Security Agreement shall be governed in all
respects by, and construed in accordance with, the internal laws of the State of
Florida without reference to choice of laws principles.
19. References to Credit Agreement Definitions. In the event that the
Credit Agreement shall no longer be in effect at any time while the Pledgor
Guaranty shall continue in effect or there shall otherwise continue to remain
outstanding Secured Obligations, all references to the Credit Agreement,
including terms defined by reference to their respective definitions contained
in the Credit Agreement, shall be deemed to refer to the Credit Agreement as in
effect as of the date hereof, with such amendments thereto to which the Secured
Party shall have given its express consent in accordance with the Loan Documents
and the ESOP Loan Documents.
20. Entire Agreement. This Security Agreement, together with the Credit
Agreement and other Loan Documents and ESOP Loan Documents, constitute and
express the entire understanding between the parties hereto with respect to the
subject matter hereof, and supersede all prior agreements and understandings,
inducements, commitments or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof. Neither this Security Agreement nor any portion or provision hereof may
be changed, altered, waived, modified, supplemented, discharged, canceled,
terminated, or amended orally or in any manner other than (i) as to the Agent,
as provided in the Credit Agreement and (ii) as to NationsBank, by the express
written consent of NationsBank in each instance.
21. Section Headings. The Section headings in this Security Agreement are
for convenience of reference only; they form no part of this Security Agreement
and shall not affect its interpretation.
22. Severability. The provisions of this Security Agreement are
independent of and separable from each other. If any provision hereof shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect the validity or enforceability of any other provision
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<PAGE>
hereof, but this Security Agreement shall be construed as if such invalid or
unenforceable provision had never been contained herein.
23. Successors and Assigns. This Security Agreement shall be binding upon
the successors and assigns of Pledgor and shall inure to the benefit of and be
enforceable by the Secured Party and their successors and assigns; provided,
however, the obligations of Pledgor hereunder may not be assigned or delegated
to any other Person without the prior written consent of the Secured Party.
24. Agency. Notwithstanding the foregoing references to the Secured Party,
Pledgor acknowledges and agrees that so long as NationsBank shall be the sole
Lender under the Credit Agreement, the term "Agent" shall mean NationsBank as
Lender. When and if there shall be more than one Lender party to the Credit
Agreement, then the term "Agent" shall refer to the Agent under the Credit
Agreement pursuant to the provisions of Article XI of the Credit Agreement, to
which reference is hereby made.
25. Termination. In the event that all of the Secured Obligations shall be
fully, finally and indefeasibly paid and satisfied in full (subject to
provisions of the Agreements that expressly survive), the Agreements shall be
terminated and there shall be no Outstanding Letters of Credit, the Secured
Party shall, at the request and at the expense of the Pledgor, terminate the
security interest and powers of attorney herein conferred and, in furtherance
thereof, execute such Uniform Commercial Code termination statements and such
other documents in form and substance reasonably satisfactory to the Secured
Party to release and terminate the Lien hereof of record. Notwithstanding the
foregoing provisions of this Section 25, in the event that any payment made or
deemed made to the Secured Party or any Lender in payment of any Secured
Obligation shall be rescinded or declared to be or become void, voidable or
otherwise recoverable from the Secured Party or such Lender for any reason
whatsoever, the Lien in favor of the Secured Party created hereunder shall be
and become reinstituted in respect of such Secured Obligations until the same
shall be thereafter fully and finally paid, satisfied and discharged.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed by authority duly given as of the day and year first above
written.
WITNESS: VITAS HEALTHCARE CORPORATION OF OHIO
/s/ Terry L. Scaggs By: /s/ Mark W. Ohlendorf
- ------------------------------- -------------------------------------
Mark W. Ohlendorf
/s/ Meganne Cusato Vice President
- --------------------------------
SECURED PARTY:
WITNESS: NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION, as Agent
/s/ Terry L. Scaggs By: /s/ Allison S. Freeland
- -------------------------------- -------------------------------------
Allison S. Freeland
/s/ Meganne Cusato Vice President
- --------------------------------
WITNESS: NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION
/s/ Terry L. Scaggs By: /s/ Allison S. Freeland
- -------------------------------- -------------------------------------
Allison S. Freeland
/s/ Meganne Cusato Vice President
- --------------------------------
21
<PAGE>
Vitas Healthcare Corporation of Ohio
PLEDGE AND SECURITY AGREEMENT
INDEX TO EXHIBITS AND SCHEDULES*
1. Exhibit A Existing Liens on the Collateral
2. Schedule 6(E) Trade Styles
VITAS AGREES TO PROVIDE A COPY OF THE EXHIBIT AND SCHEDULE LISTED ABOVE TO THE
COMMISSION UPON REQUEST.
- ----------
* The inclusion of any information on any one of these Exhibits and Schedules is
not and shall not be deemed to be, a representation that such information must
be set forth on such Exhibit or Schedule or any supplement thereto or otherwise
in the agreement to which such Exhibit or Schedule relates. Information provided
in any one Exhibit or Schedule shall be deemed to be incorporated into each
Exhibit and Schedule, as applicable.
<PAGE>
EXHIBIT 10.53
AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT (this "Security
Agreement") is made this 17th day of February, 1995, by and between VITAS
HEALTHCARE CORPORATION OF PENNSYLVANIA, a Delaware corporation having its
principal place of business in Miami, Dade County, Florida, (the "Pledgor"), and
NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION, a national banking association
("NationsBank"), for itself and as agent (in such agency capacity and together
with any successor agent, the "Agent") for certain lenders (the "Lenders") party
to the Credit Agreement described below (in such capacities as described below
and together with any successor agent acting as such under the Credit Agreement
described below, the "Secured Party").
W I T N E S S E T H:
WHEREAS, (i) pursuant to a Revolving Credit and Reimbursement Agreement
dated as of August 11, 1994 ( the "Prior Credit Agreement") among Vitas
Healthcare Corporation (the "Company"), NationsBank as agent and NationsBank as
the lender thereunder, NationsBank has extended to the Company a revolving
credit facility in the aggregate principal amount of up to $15,000,000,
including within such revolving credit facility the issuance of letters of
credit for the account of the Company and (ii) pursuant to a Guaranty and
Contingent Purchase Agreement of even date with the Prior Credit Agreement
between the Company and NationsBank (the "Prior Company Guaranty" and, together
with the Prior Credit Agreement, the "Prior Agreements"), NationsBank extended a
term loan of $2,386,670 to the Vitas Healthcare Corporation Employee Stock
Ownership Trust (the "Trust") to refinance certain indebtedness owing from the
Trust to the Company, the repayment of which loan has been, inter alia,
guaranteed under the Prior Guaranty; and
WHEREAS, pursuant to the Prior Agreements, the Pledgor has executed and
delivered (i) its Guaranty and Suretyship Agreement of even date therewith (the
"Prior Pledgor Guaranty") guaranteeing the payment and performance by the
Company, inter alia, of its obligations under the Prior Agreements, and (ii) its
Pledge and Security Agreement of even date with the Prior Pledgor Guaranty
securing its obligations under the Prior Pledgor Guaranty (the "Prior Security
Agreement"); and
WHEREAS, the Company and Vitas Healthcare Corporation of California, a
Subsidiary of the Company ("Vitas California"), have entered into an Asset
Purchase Agreement with the Sellers (as defined in the Credit Agreement) dated
as of December 27, 1994 (the "Asset Purchase Agreement") pursuant to which Vitas
California has agreed to purchase substantially all of the operating assets of
the CHC Entities (as defined in the Credit
<PAGE>
Agreement) pursuant to the terms and subject to the conditions set forth therein
and, in connection therewith, the Company has requested that the Prior Credit
Agreement be amended and restated to increase the revolving credit facility from
$15,000,000 to $20,000,000, to provide for a $25,000,000 term loan facility, and
to make certain other modifications, and that the Prior Company Guaranty be
amended and restated to reflect the agreement of the parties; and
WHEREAS, at the request of the Company and to effect the modifications
referred to above, (i) the Company, the Agent and the Lenders are entering into
an Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement
of even date herewith (as the same may be modified, amended or restated from
time to time, the "Credit Agreement"), and (ii) the Company and NationsBank are
entering into an Amended and Restated Guaranty and Contingent Purchase Agreement
of even date herewith (as the same may be modified, amended or restated from
time to time, the "Company Guaranty" and, together with the Credit Agreement,
the "Agreements"); and
WHEREAS, pursuant to the Agreements, the Pledgor has executed and
delivered its Amended and Restated Guaranty and Suretyship Agreement of even
date herewith (as the same may be amended, modified or restated from time to
time, the "Pledgor Guaranty") guaranteeing the payment and performance by the
Company, inter alia, of its obligations under the Agreements; and
WHEREAS, the Lenders are unwilling to extend the amend and increase the
revolving credit facility or make such term loan pursuant to the Credit
Agreement, and NationsBank is unwilling to amend the Prior Agreements as
reflected in the Agreements to permit the consummation of the CHC Transaction,
unless the Pledgor amends and restates its Prior Security Agreement by entering
into this Security Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and promises herein contained, the parties hereto agree as follows:
1. Certain Definitions. Unless otherwise defined herein, capitalized terms
used in this Security Agreement shall have the respective meanings therefor
provided in the Credit Agreement.
2. Grant of Security Interest. As collateral security for the full and
prompt payment, satisfaction and performance of all obligations and liabilities
of the Pledgor under the Pledgor Guaranty, whether now existing or hereafter
arising (the "Secured Obligations"), Pledgor hereby grants to the Secured Party
a continuing security interest in all of its right, title and interest in and to
all of the following property in which Pledgor now has or hereafter acquires an
interest, whether now owned or
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<PAGE>
existing or hereafter acquired or arising and wheresoever located:
(A) All accounts, accounts receivable, notes, bills, acceptances,
choses in action, chattel paper, instruments, documents, and other forms
of obligations at any time owing to Pledgor, the proceeds thereof and all
of Pledgor's rights with respect to any goods represented thereby, whether
or not delivered, goods returned by customers and all rights as an unpaid
vendor or lienor, including rights of stoppage in transit and of
recovering possession by proceedings including replevin and reclamation,
together with all customer lists, books and records, ledger and account
cards, computer tapes, software, disks, printouts and records, whether now
in existence or hereafter created, relating thereto (collectively referred
to hereinafter as "Accounts");
(B) All goods of Pledgor, including without limitation, all
machinery, equipment, motor vehicles, parts, supplies, apparatus,
appliances, tools, patterns, molds, dies, blueprints, fittings, furniture,
furnishings, fixtures and articles of tangible personal property of every
description now or hereafter owned by Pledgor or in which Pledgor may have
or may hereafter acquire any interest, but as to leasehold interests in
personal property, only to the extent assignable (collectively referred to
hereinafter as "Equipment");
(C) All general intangibles of Pledgor, now existing or hereafter
owned or acquired or arising or in which Pledgor now has or hereafter
acquires any rights, including but not limited to causes of action,
corporate or business records, inventions, designs, patents, patent
applications, trademarks, trademark registrations and applications
therefor, goodwill, trade names, trade secrets, trade processes,
copyrights, copyright registrations and applications therefor, licenses
(to the extent assignable), permits (to the extent assignable),
franchises, customer lists (to the extent permitted by law), computer
programs, all claims under guaranties, tax refund claims, rights and
claims against carriers and shippers, leases (to the extent assignable),
claims under insurance policies, all rights to indemnification and all
other intangible personal property of every kind and nature (collectively
referred to hereinafter as "General Intangibles");
(D) All inventory of Pledgor wherever located, including without
limitation, all goods manufactured or acquired for sale or lease, and any
piece goods, raw materials, work in process and finished merchandise,
findings or component materials, and all supplies, goods, incidentals,
office supplies, packaging materials and any
3
<PAGE>
and all items used or consumed in the operation of the business of Pledgor
or which may contribute to the finished product or to the sale, promotion
and shipment thereof, in which Pledgor now or at any time hereafter may
have an interest, whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of Pledgor or is
held by Pledgor or by others for Pledgor's account (collectively referred
to hereinafter as "Inventory");
(E) To the extent assignable, all rights now or hereafter arising to
any Pledgor under contracts, leases, agreements or other instruments of
every character and description, and all rights of enforcement thereunder
(collectively referred to as hereinafter as "Contract Rights");
(F) All monies, certificates of deposit, commercial paper, cash
equivalents, account balances, notes, options, interests, and securities
(certificated or uncertificated), wheresoever located; excluding, however,
the equity interests (other than interests in money market funds) of the
Pledgor in Persons not constituting Subsidiaries;
(G) All accessions to, substitutions for and all replacements,
products and proceeds of the foregoing including, without limitation,
proceeds of insurance policies insuring the Collateral (as hereinafter
defined); and
(H) All books and records (including without limitation, customer
data, credit files, computer programs, printouts, and other computer
materials and records of the Pledgor and all documents) pertaining to any
of the foregoing.
All of the property and interests in property described in subsections (A)
through (H) and all other property and interests in personal property which
shall, from time to time, secure the Secured Obligations are herein collectively
referred to as the "Collateral".
3. Financing Statements. At the time of execution of this Security
Agreement, Pledgor shall have (i) furnished the Secured Party with financing
statements, approved by the Secured Party and executed as prescribed by the
Uniform Commercial Code as presently in effect in the states of Pennsylvania,
New Jersey and Florida, and where other Collateral is located, as may be
reasonably requested by the Secured Party, in form and number sufficient to
perfect in favor of the Secured Party the security interest in the Collateral,
and (ii) delivered to Secured Party's possession certificated securities (with
duly executed stock powers in blank affixed thereto) representing the Pledgor's
4
<PAGE>
interests in Subsidiaries, in order that the Secured Party shall have a
perfected security interest in the Collateral following such filing of such
financing statements with the appropriate local and state governmental
authorities and the delivery of such securities (to the extent that a security
interest in such Collateral is capable of perfection by such filing or
possession), and subject only to (a) permitted liens described in the Credit
Agreement, (b) such other security interests, liens and encumbrances currently
existing and set forth in Exhibit A attached hereto and by reference made a part
hereof, or as shall otherwise be acceptable to the Secured Party in its sole
discretion, and (c) limitations under applicable law which may limit the
creation, perfection or priority of liens on Government Receivables
(collectively referred to hereinafter as "Permitted Liens"); provided, however,
that with respect to the items of property described in clause (F) of Section 2,
the security interest in such property will not be perfected until the Secured
Party or any Lender takes possession thereof or otherwise obtains perfection in
accordance with the applicable requirements of the Uniform Commercial Code.
Pledgor shall execute as reasonably required by the Secured Party any additional
financing statements or other documents to effect a perfected security interest
in the Collateral to the extent contemplated hereby, together with any necessary
continuation statements so long as this Security Agreement remains in effect.
4. Maintenance of Security Interest. Pledgor will, from time to time, upon
the request of the Secured Party, deliver specific assignments of Collateral,
together with such other instruments and documents, financing statements,
amendments thereto, assignments or other writings as the Secured Party or any
Lender may reasonably request to carry out the terms of this Security Agreement
or to protect or enforce the Secured Party's security interest in the
Collateral.
With respect to any and all Collateral as to which a security interest is
granted under this Security Agreement, Pledgor agrees to do and cause to be done
all things necessary to perfect and keep in full force the security interest
granted in favor of the Secured Party, including, but not limited to, the prompt
payment of all fees and expenses incurred in connection with any filings made to
perfect a security interest in the Collateral in favor of the Secured Party.
Pledgor agrees to make appropriate entries upon its financial statements
and books and records disclosing the Secured Party's security interest in the
Collateral.
5. Collections, Secured Party's Right to Notify Account Debtors and to
Endorse Each Pledgor's Name. Pledgor hereby authorizes Secured Party at any time
after the occurrence and during the continuation of an Event of Default subject,
with respect to the Secured Obligations relating to the Company's
5
<PAGE>
obligations under the Company Guaranty, to Section 2.08 of the Company Guaranty,
(a) to open Pledgor's mail and collect any and all amounts due to Pledgor from
persons obligated on any Accounts ("Account Debtors"), but only to the extent
permitted by law with respect to Government Receivables; (b) to take over
Pledgor's post office boxes or make other arrangements as Secured Party deems
necessary to receive Pledgor's mail, including notifying the post office
authorities to change the address for delivery of Pledgor's mail to such address
as Secured Party may designate; and (c) to notify any or all Account Debtors,
but only to the extent permitted by law with respect to Government Receivables,
that the Accounts have been assigned to Secured Party and that Secured Party has
a security interest therein. Pledgor irrevocably makes, constitutes and appoints
Secured Party and all Persons designated by Secured Party for that purpose as
Pledgor's true and lawful attorney (and agent-in-fact) after the occurrence and
during the continuation of an Event of Default, subject to the limitations set
forth in the immediately preceding sentence and, with respect to the Secured
Obligations relating to the Company's obligations under the Company Guaranty, to
Section 2.08 of the Company Guaranty, to endorse such Pledgor's name on any
checks, notes, drafts or any other payment relating to and/or proceeds of the
Collateral which comes into Secured Party's possession or Secured Party's
control, and apply the same on account of the Secured Obligations as provided
herein and in the Agreements, in such order as Secured Party may elect. Secured
Party shall promptly furnish Pledgor with a copy of any such notice sent with
respect to Accounts of Pledgor and Pledgor hereby agrees that any such notice,
in Secured Party's sole discretion, may be sent on Pledgor's stationery, in
which event Pledgor shall co-sign such notice with Secured Party.
6. Collateral. Pledgor covenants with Lender that:
(A) Inspection. Secured Party and any Lender (by any of its
officers, employees and agents) shall have the right, at any time or times
during Pledgor's usual business hours, to inspect the Collateral, all
records related thereto (and to make extracts or copies from such
records), and the premises upon which any of the Collateral is located, to
discuss Pledgor's affairs and finances with its principal officers and
independent auditors and to verify the amount, quality, quantity, value
and condition of, or any other matter relating to, the Collateral. Upon or
after the occurrence of a Default or an Event of Default, Secured Party
may at any time and from time to time employ and maintain at Pledgor's
premises a custodian selected by Secured Party who shall have full
authority to do all acts necessary to protect Secured Party's interest.
All reasonable expenses incurred by Secured Party by reason of the
employment of such custodian shall be paid by the Pledgor, added to the
Secured Obligations and secured by the Collateral.
6
<PAGE>
(B) Assignments, Records and Schedules of Accounts. Pledgor shall
keep accurate and complete records of its Accounts ("Account Records")
and, upon Secured Party's request from time to time at intervals
acceptable to Secured Party, Pledgor shall reasonably provide Secured
Party and each Lender with a Schedule of Accounts in form and substance
reasonably acceptable to the Secured Party describing all Accounts created
or acquired by such Pledgor ("Schedule of Accounts") and shall at the
request of Secured Party execute and deliver further written assignments
of such Accounts to Secured Party; provided however, that Pledgor's
failure to execute and deliver any such Schedule of Accounts or
assignments shall not affect or limit Secured Party's security interest or
other rights in and to any Accounts. If requested by Secured Party,
Pledgor shall furnish Secured Party with copies of proof of delivery of
invoices and the original copy of all documents, including, without
limitation, repayment histories and present status reports, relating to
the Accounts so scheduled (collectively, "Account Documents") and such
other matter and information relating to the status of then existing
Accounts as Secured Party shall reasonably request.
(C) Notice Regarding Disputed Accounts. In the event any amounts due
and owing in excess of $100,000 are in dispute between any Account Debtor
and Pledgor (which shall include, without limitation, any dispute in which
an offset claim or counterclaim may result), Pledgor shall provide the
Secured Party with written notice thereof promptly, explaining in detail
the reason for the dispute, all claims related thereto and the amount in
controversy.
(D) Verification of Accounts. Whether or not a Default or an Event
of Default has occurred, any of Secured Party's, employees, or agents
shall have the right, at any time or times hereafter, to verify under
reasonable procedures the validity, amount or any other matter relating to
any Accounts by mail, telephone, telegraph or otherwise.
(E) Change of Trade Styles. Set forth on Schedule 6(E) delivered to
the Secured Party simultaneously with the execution of this Security
Agreement are all tradenames and trade styles under which Pledgor provides
services giving rise to Accounts as of the date of this Agreement ("Trade
Styles"). Pledgor shall not change, amend, alter, terminate, or cease
using its Trade Styles, or use additional Trade Styles, except upon giving
not less than ten (10) days prior written notice to the Secured Party and
taking or causing to be taken all such action at Pledgor's expense as may
be reasonably requested by the Secured Party (including the furnishing of
additional financing statements) to enable the Secured Party to perfect or
maintain the perfection of the
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security interest of the Secured Party in Accounts, General Intangibles,
Contract Rights and related Collateral.
(F) Safekeeping of Inventory. Pledgor shall be responsible for the
safekeeping of its Inventory, and in no event shall Secured Party or any
Lender have any responsibility for:
(i) Any loss or damage to Inventory or destruction thereof
occurring or arising in any manner or fashion from any cause other
than as a result of gross negligence, bad faith or willful
misconduct of the Agent or any Lender;
(ii) Any diminution in the value of Inventory; or
(iii) Any act or default of any carrier, warehouseman, bailee
or forwarding agency thereof or other Person in any way dealing with
or handling Inventory.
(G) Records and Schedules of Inventory. Pledgor shall keep correct
and accurate records on a perpetual basis, itemizing and describing the
kind, type, location, quality and quantity of Inventory owned by it, if
any, from time to time, and such Pledgor's cost therefor and selling price
thereof, and at the reasonable request of the Secured Party shall furnish
to the Secured Party, a current Schedule of Inventory ("Schedule of
Inventory"). Pledgor shall conduct a physical inventory, of which Secured
Party shall be given prior written notice and shall have the right to be
present, no less than annually, and shall furnish to Secured Party such
other documents and reports as Secured Party shall reasonably request with
respect to the Inventory, including, without limitation, invoices relating
to Pledgor's purchase of Inventory.
(H) Evidence of Ownership of Equipment. Pledgor, promptly on request
therefor by the Secured Party, shall deliver to the Secured Party any and
all evidence of ownership of any of the Equipment (including without
limitation certificates of title and applications for title).
(I) Records and Schedules of Equipment. Pledgor shall maintain
accurate, itemized records describing in reasonable detail its Equipment
and shall furnish the Secured Party upon reasonable request with a current
schedule containing the foregoing information ("Schedule of Equipment").
(J) Administration of Collateral. So long as no Event of Default
shall have occurred and be continuing, Pledgor may (to the extent not
inconsistent with the provisions of the Loan Documents or the ESOP Loan
Documents) (i) sell,
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transfer or dispose of any asset owned by it or (ii) collect or compromise
Accounts and General Intangibles in the ordinary course of business in any
lawful manner.
(K) Voting Rights, Consensual Rights, Dividends and Distributions.
A. So long as no Event of Default shall have occurred and be continuing:
1. the Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Collateral or
any part thereof for any purpose not inconsistent with the terms of
this Security Agreement, the Credit Agreement, the other Loan
Documents or the other ESOP Loan Documents;
2. the Pledgor shall be entitled to receive and retain any and
all cash distributions or dividends paid on the Collateral which
they are otherwise entitled to receive, notwithstanding the
assignment and transfer of the Collateral and the grant of security
interest in Section 2 of this Security Agreement (provided that any
cash distributions or dividends received upon the occurrence and
during the continuance of a Default shall remain segregated from all
other funds of the Pledgor and deposited with the Secured Party),
but any and all stock dividends, liquidating dividends,
distributions in property, returns of capital or other distributions
made on or in respect of any of the Collateral, whether resulting
from a subdivision, combination or reclassification of the
outstanding capital stock of any issuer of the Collateral or
received in exchange for the Collateral or any part thereof or as a
result of any merger, consolidation, acquisition or other exchange
of assets to which any issuer of any Collateral may be a party or
otherwise, and any and all cash and other property received in
exchange for any of the Collateral shall be and become part of the
Collateral hereunder and, if received by the Pledgor, shall
forthwith be delivered to the Secured Party, to the extent the
Collateral for which it was exchanged was held or required to be
held by the Secured Party; and
3. the Secured Party shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and other
instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting, consensual and other
rights which the Pledgor are entitled to exercise pursuant to
subparagraph (1) above and to receive such distributions and
dividends which it is authorized to receive and retain pursuant to
subparagraph (2) above.
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B. Upon the occurrence and during the continuance of an Event of
Default:
1. subject, with respect to the Secured Obligations relating
to the Company's obligations under the Company Guaranty to Section
2.08 of the Company Guaranty, all rights of the Pledgor to exercise
the voting and other consensual rights which it would otherwise be
entitled to exercise pursuant to Section 6(K)A.l and to receive and
retain the distributions and dividends which it would otherwise be
authorized to receive and retain pursuant to Section 6(K)A.2, shall
become vested in the Secured Party, which shall thereupon have the
sole right to exercise such voting and other consensual rights and
to receive and hold as Collateral such distributions and dividends
(whether or not the relevant Collateral shall have been transferred
into the name of the Secured Party or any of its nominees, the
Pledgor hereby irrevocably appointing and constituting the Secured
Party as proxy and attorney-in-fact of Pledgor, which appointment is
coupled with an interest and is irrevocable, with full power of
substitution, to act as if the Secured Party were the outright owner
thereof); and
2. all distributions and dividends which are received by the
Pledgor contrary to the provisions of Section 6(K)A.2 or Section
6(K)B.1 shall be received in trust for the benefit of the Secured
Party, shall be segregated from other funds of Pledgor and shall be
paid over to the Secured Party forthwith as Collateral in the same
form as so received (with any necessary endorsement).
7. Warranties Regarding Collateral. Pledgor warrants and represents that
it is and will continue to be the owner of the Collateral, now owned and upon
the acquisition of the same, free and clear of all encumbrances and security
interests other than the security interest in favor of Secured Party hereunder
and Permitted Liens, and that it will defend the Collateral and the Secured
Party's security interest therein and any products and proceeds thereof against
all claims and demands of all Persons at any time claiming the same or any
interest therein adverse to the Secured Party or any Lender.
8. Account Warranties and Representations. With respect to its Accounts,
Pledgor warrants and represents to the Secured Party and the Lenders that they
may rely on all statements or representations made by Pledgor on or with respect
to any Schedule of Accounts prepared and delivered by Pledgor and, unless
otherwise indicated in writing by Pledgor, that:
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(A) All Account Records and Account Documents are located and shall
be kept only at Pledgor's chief executive offices located at the locations
described in Schedule 6.04 delivered to the Agent pursuant to the Credit
Agreement and Schedule 4.22 delivered to the Bank pursuant to the Company
Guaranty;
(B) They are genuine, are in all material respects what they purport
to be, are not evidenced by a judgment instrument or document or, if
evidenced by an instrument or document, are only evidenced by one original
instrument or document, which has been delivered to the Secured Party;
(C) They cover the bona fide rendition of services, or the bona fide
sales and deliveries of Inventory usually dealt in by Pledgor, in the
ordinary course of business;
(D) Each Account is actually and absolutely owing to Pledgor in the
face value thereof, is valid and enforceable against the applicable
Account Debtor, and is not subject to any setoffs, discounts, allowances,
claims, counterclaims, disputes or doubtful collectibility except (i) as
is customary for Accounts of the type represented by such Account
(including the nature of the Account Debtor) of the Pledgor in the
ordinary course of Pledgor's business and consistent with past practices,
and (ii) as is reflected by reserves and reductions in the stated value of
such Account, computed in a manner consistent with the Company's policies
and practices in preparing the financial statements described in Sections
7.01 and 8.01 of the Credit Agreement and Sections 3.01(f) and 4.01 of the
Company Guaranty, included in such financial statements, in the Schedule
of Accounts and in any report or certificate including financial
information regarding such Account furnished to the Secured Party pursuant
to the Loan Documents or the ESOP Loan Documents.
(E) The goods or services giving rise thereto are not, and were not
at the time of the sale or performance thereof, subject to any lien,
claim, encumbrance or security interest, except those of the Secured Party
and those removed or terminated prior to the date hereof;
(F) They have not been pledged to any Person other than to Secured
Party under this Security Agreement and will be owned by Pledgor free and
clear of any liens, claims or encumbrances except Permitted Liens; and
(G) Secured Party's security interest therein will not be subject to
any offset, deduction, counterclaim, lien or other adverse condition,
other than Permitted Liens or as is consistent with Section 8(D) above.
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9. Inventory Warranties and Representations. With respect to Inventory,
Pledgor warrants and represents to the Secured Party and the Lenders that they
may rely on all statements or representations made by Pledgor on or with respect
to any Inventory and, unless otherwise indicated in writing by Pledgor, that
(A) Except for the relocation of Inventory from time to time in the
ordinary course of business not aggregating more than $100,000 at any one
time in any location other than those set forth in Schedules 6.03 and 6.04
delivered pursuant to the Credit Agreement or Schedules 4.22 and 4.23
delivered pursuant to the Company Guaranty, the Pledgor shall not locate
or relocate inventory to any location other than those set forth in
Section 8(A) above or Schedules 6.03 and 6.04 delivered pursuant to the
Credit Agreement or Schedules 4.22 and 4.23 delivered pursuant to the
Company Guaranty without giving the Secured Party not less than thirty
(30) days prior written notice and taking or causing to be taken at its
expense all steps as may be reasonably requested by the Secured Party
(including the furnishing of additional financing statements) to enable
the Secured Party to perfect or continue the perfection of its security
interest in such property.
(B) No Inventory is or will be subject to any lien, claim,
encumbrance or security interest whatsoever, except for the security
interest of Secured Party hereunder and Permitted Liens;
(C) No Inventory having an aggregate value in excess of $100,000 is
now, and shall not at any time or times hereafter be, stored with a
bailee, warehouseman, or similar party without Secured Party's prior
written consent and, if Secured Party gives such consent, Pledgor will
concurrently therewith cause any such bailee, warehouseman, or similar
party to issue and deliver to Secured Party in form and substance
acceptable to Secured Party, warehouse receipts therefor in Secured
Party's name; and
(D) No Inventory is under consignment to any Person.
10. Equipment Warranties and Representations. With respect to Equipment,
Pledgor warrants and represents to the Secured Party and each Lender that:
(A) Except for the relocation of Equipment from time to time in the
ordinary course of business not aggregating more than $100,000 at any one
time in any location other than those set forth in Schedules 6.03 and 6.04
of the Credit Agreement and Schedules 4.22 and 4.23 of the Company
Guaranty, the Pledgor shall not locate or relocate Equipment to any
location other than those set forth in Schedules 6.03
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<PAGE>
and 6.04 of the Credit Agreement and Schedules 4.22 and 4.23 of the
Company Guaranty without giving the Secured Party not less than thirty
(30) days prior written notice and taking or causing to be taken at their
expense all steps as may be reasonably requested by the Secured Party
(including the furnishing of additional financing statements) to enable
the Secured Party to perfect or continue the perfection of its security
interest in such property; and
(B) Pledgor has and at all times will have good and marketable title
to and ownership of the Equipment free and clear of any lien, claim,
encumbrance, or security interest whatsoever, except for (i) the security
interest of Secured Party created hereunder and (ii) Permitted Liens.
11. Casualty and Liability Insurance Required. (A) Pledgor will keep the
Collateral continuously insured as may be expressly required by the Agreements.
(B) Each insurance policy obtained in satisfaction of the
requirements of Section 11(A) hereof:
(i) shall be by such insurer (or insurers) as shall be
financially responsible and qualified to do business in the
applicable jurisdictions;
(ii) shall be in such form and have such provisions
(including, without limitation, the loss payable clause, the waiver
of subrogation clause, the deductible amount, if any, and the
standard mortgagee endorsement clause), as are generally considered
standard provisions for the type of insurance involved and are
acceptable in all respects to Secured Party;
(iii) shall prohibit cancellation or substantial modification,
termination or lapse in coverage by the insurer without at least 30
days' prior written notice to Secured Party;
(iv) shall provide that the interest of Secured Party shall
not be impaired or invalidated by any act or neglect of Pledgor nor
by the occupation of the premises wherein such Collateral is located
for purposes more hazardous than are permitted by said policy;
(v) without limiting the generality of the foregoing, all
insurance policies covering loss or damage to the Collateral shall
name Secured Party as mortgagee, loss payee and a party insured
thereunder and any loss thereunder shall be paid directly to Secured
Party.
(C) Prior to expiration of any such policy, Pledgor shall furnish
Secured Party with evidence reasonably satisfactory to
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<PAGE>
Secured Party that the policy or certificate has been renewed or replaced
or is no longer required by this Security Agreement.
(D) Pledgor hereby irrevocably makes, constitutes and appoints
Secured Party (and all officers, employees or agents designated by Secured
Party), effective upon the occurrence of an Event of Default which has not
been waived or cured, as Pledgor's true and lawful attorney (and agent-in-
fact) for the purpose of making, settling and adjusting claims under such
policies of insurance, endorsing the name of Pledgor on any check, draft,
instrument or other item or payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect to
such policies of insurance.
(E) In the event Pledgor shall fail to maintain, or cause to be
maintained, the full insurance coverage required hereunder or shall fail
to keep any Collateral in good repair and good operating condition, the
Secured Party may (but shall be under no obligation to), without waiving
or releasing any Secured Obligation or Event of Default, after giving
notice to the Pledgor, contract for the required policies of insurance and
pay the premiums on the same or make any required repairs, renewals and
replacements; and all sums so disbursed by Secured Party, including
reasonable attorneys' fees, court costs, expenses and other charges
related thereto, shall be payable on demand by Pledgor to Secured Party
and shall be additional Secured Obligations secured by the Collateral.
(F) In case of any material damage to or destruction of all or any
part of the Collateral, Pledgor shall give prompt notice thereof to
Secured Party. Each such notice shall describe generally the nature and
extent of such damage, destruction, taking, loss, proceeding or
negotiations.
12. Rights and Remedies Upon Default. Subject, with respect to the Secured
Obligations relating to the Company's obligations under the Company Guaranty, to
Section 2.08 of the Company Guaranty, upon and after an Event of Default which
has not been waived or cured, the Secured Party shall have the following rights
and remedies, all of which may be exercised with or without notice to Pledgor:
(A) All of the rights and remedies of a secured party under the
Uniform Commercial Code of the state where such rights and remedies are
asserted, or under other applicable law, all of which rights and remedies
shall be cumulative, and none of which shall be exclusive, to the extent
permitted by law, in addition to any other rights and remedies contained
in this Security Agreement, the Agreements, or any of the other Loan
Documents or ESOP Loan Documents;
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<PAGE>
(B) The right to foreclose the liens and security instruments
created under this Security Agreement or any of the other Loan Documents
or ESOP Loan Documents by any available judicial procedure or without
judicial process;
(C) The right to (i) enter upon the premises of Pledgor through
self-help and without judicial process, without first obtaining a final
judgment or giving Pledgor notice and opportunity for a hearing on the
validity of Secured Party's claim and without any obligation to pay rent
to Pledgor, or any other place or places where any Collateral is located
and kept, and remove the Collateral therefrom to the premises of Secured
Party or any agent of Secured Party, for such time as Secured Party may
desire, in order to effectively collect or liquidate the Collateral,
and/or (ii) require Pledgor to assemble the Collateral and make it
available to Secured Party at a place to be designated by Secured Party in
its sole discretion;
(D) The right (to the extent permissible by law with respect to
Governmental Receivables) to (i) demand payment of the Accounts; (ii)
enforce payment of the Accounts and General Intangibles and enforce all
Contract Rights, by legal proceedings or otherwise; (iii) exercise all or
any of Pledgor's rights and remedies with respect to the collection of the
Accounts and General Intangibles and in respect of Contract Rights; (iv)
settle, adjust, compromise, extend or renew the Accounts; (v) settle,
adjust or compromise any legal proceedings brought to collect the Accounts
or General Intangibles or to enforce Contract Rights; (vi) sell or assign
the Accounts, General Intangibles, Contract Rights or other Collateral
upon such terms, for such amounts and at such time or times as Secured
Party deems advisable; (vii) discharge and release the Accounts; (viii)
take control, in any manner, of any item of payment or proceeds; (ix)
prepare, file and sign Pledgor's name on a Proof of Claim in bankruptcy or
similar document against any account obligor; (x) prepare, file and sign
Pledgor's name on any notice of lien, assignment or satisfaction of lien
or similar document in connection with the Accounts; (xi) endorse the name
of Pledgor upon any chattel paper, document, instrument, invoice, freight
bill, bill of lading or similar document or agreement relating to the
Accounts or Inventory; (xii) use Pledgor's stationery for verifications of
the Accounts and notices thereof to account obligors; (xiii) use the
information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts, General
Intangibles, Equipment, Contract Rights or Inventory to which Pledgor has
access; and (xiv) do all acts and things and execute all documents
necessary, in Secured Party's sole discretion, to collect the Accounts and
General Intangibles;
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<PAGE>
(E) The right to sell, assign, lease or to otherwise dispose of all
or any Collateral in its then condition, or after any further
manufacturing or processing thereof, at public or private sale or sales,
with such notice as may be required by law, in lots or in bulk, for cash
or on credit, with or without representations and warranties, all as
Secured Party, in its sole discretion, may deem advisable (except, in the
case of Government Receivables, to the extent such sales or other
disposition are prohibited by applicable law). Secured Party shall have
the right to conduct such sales on Pledgor's premises or elsewhere and
shall have the right to use Pledgor's premises without charge for such
sales for such time or times as Secured Party may see fit. Secured Party
may, if it deems it reasonable, postpone or adjourn any sale of the
Collateral from time to time by an announcement at the time and place of
such postponed or adjourned sale, without being required to give a new
notice of sale. Pledgor agrees that Secured Party has no obligation to
preserve rights to the Collateral against prior parties or to marshall any
Collateral for the benefit of any Person. Secured Party is hereby granted
a license or other right to use, without charge, Pledgor's labels,
patents, copyrights, rights of use of any name, trade secrets, tradenames,
trademarks and advertising matter, or any property of a similar nature, as
it pertains to the Collateral, in completing production of, advertising
for sale and selling any Collateral and Pledgor's rights under any license
and any franchise agreement shall inure to Secured Party's benefit. If any
of the Collateral shall require repairs, maintenance, preparation or the
like, or is in process or other unfinished state, Secured Party shall have
the right, but shall not be obligated to perform such repairs,
maintenance, preparation, processing or completion of manufacturing for
the purpose of putting the same in such saleable form as Secured Party
shall deem appropriate, but Secured Party shall have the right to sell or
dispose of the Collateral without such processing. In addition, Pledgor
agrees that in the event notice is necessary under applicable law, written
notice mailed to Pledgor in the manner specified in either of the
Agreements ten (10) days prior to the date of public sale of any of the
Collateral or prior to the date after which any private sale or other
disposition of the Collateral will be made shall constitute commercially
reasonable notice to Pledgor. Secured Party or any Lender may purchase all
or any part of the Collateral at public or, if permitted by law, private
sale, free from any right of redemption which is hereby expressly waived
by Pledgor and, in lieu of actual payment of such purchase price, may set
off the amount of such price against the Secured Obligations. The net cash
proceeds resulting from the collection, liquidation, sale, lease or other
disposition of the Collateral shall be applied first to the reasonable
expenses (including all reasonable attorneys'
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<PAGE>
fees) of retaking, holding, storing, processing and preparing for sale,
selling, collecting, liquidating and the like (collectively, the
"Administration Expenses"), and then to the satisfaction of all Secured
Obligations, application as to particular Secured Obligations or against
principal or interest to be in subject to the terms of Section 13 hereof
and of the Agreements. Pledgor shall be liable to Secured Party and the
Lenders and shall pay to the Secured Party on demand any deficiency which
may remain after such sale, disposition, collection or liquidation of the
Collateral. Pledgor recognize that the Secured Party may be unable to
effect a public sale of securities constituting Collateral by reason of
certain prohibitions contained in the Securities Act of 1933, as amended
(the "Securities Act"), and applicable state securities or Blue Sky laws,
and as a consequence may be compelled to resort to one or more private
sales to a restricted group of purchasers who will be obliged to agree,
among other things, to acquire such Collateral for their own account, for
investment and not with a view to the distribution or resale thereof.
Pledgor agrees and acknowledges that private sales so made may be at
prices and upon terms less favorable to Pledgor than if such Collateral
were sold at public sales and that the Secured Party has no obligation to
delay the sale of any of the Collateral for the period of time necessary
to permit the issuer of such Collateral to register or otherwise qualify
them, even if such issuer would agree to register or otherwise qualify
such Collateral for public sale under the Securities Act and applicable
state securities or Blue Sky laws. Pledgor further agrees, to the extent
permitted by applicable law, that the use of private sales made under the
foregoing circumstances to dispose of the Collateral shall be deemed to be
dispositions in a commercially reasonable manner;
(F) The rights and remedies provided to Secured Party or any Lender
under this Security Agreement or any of the other Loan Documents or ESOP
Loan Documents.
13. Anti-Marshalling Provisions. The right is hereby given by Pledgor to
Secured Party and the Lenders to make releases (whether in whole or in part) of
all or any part of the Collateral agreeable to Secured Party and the Lenders
without notice to, or the consent, approval or agreement of other parties and
interests, including junior lienors, which releases shall not impair in any
manner the validity of or priority of the liens and security interest in the
remaining Collateral conferred under such documents, nor release Pledgor from
personal liability for the indebtedness hereby secured. Notwithstanding the
existence of any other security interest in the Collateral held by Secured Party
or any Lender, Secured Party and the Lenders shall have the right to determine
the order in which any or all of the Collateral shall be subjected to the
remedies provided in this
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Security Agreement. The proceeds realized upon the exercise of the remedies
provided herein shall be applied as provided herein, in the Pledgor Guaranty and
in the Agreements. Pledgor hereby waives any and all right to require the
marshalling of assets in connection with the exercise of any of the remedies
permitted by applicable law or provided herein.
14. Appointment of Secured Party as Pledgor's Lawful Attorney. Upon and
after an Event of Default which has not been waived or cured, Pledgor
irrevocably designates, makes, constitutes and appoints Secured Party (and all
Persons designated by Lender) as Pledgor's true and lawful attorney (and agent-
in-fact). To the extent permitted by law, all acts of Secured Party or its
designee lawfully taken pursuant to Section 13 are hereby ratified and confirmed
and Secured Party or its designee shall not be liable for any acts of omission
or commission nor for any error of judgment or mistake of fact or law which does
not constitute bad faith, willful misconduct or gross negligence. This power,
being coupled with an interest, is irrevocable by Pledgor until all Secured
Obligations are finally paid in full.
15. Rights and Remedies Cumulative; Non-Waiver; Etc. The enumeration of
Secured Party's and Lenders' rights and remedies set forth in this Security
Agreement is not intended to be exhaustive and the exercise by the Secured Party
or any Lender of any right or remedy shall not preclude the exercise of any
other rights or remedies, all of which shall be cumulative, and shall be in
addition to any other right or remedy given hereunder, or under any other
agreement between Pledgor and Secured Party or any Lender or which may now or
hereafter exist in law or in equity or by suit or otherwise. No delay or failure
to take action on the part of Lender in exercising any right, power or privilege
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or privilege preclude other or further exercise thereof or
the exercise of any other right, power or privilege or be construed to be a
waiver of any Event of Default. No waiver by a party hereunder shall be
effective unless it is in writing and signed by the party making such waiver,
and then only to the extent specifically stated in such writing. No course of
dealing between Pledgor and the Secured Party or any Lender or their respective
agents or employees shall be effective to change, modify or discharge any
provision of this Security Agreement or to constitute a waiver of any Event of
Default.
16. Waivers. In addition to the other waivers contained herein and in any
other agreement between Pledgor and Secured Party or any Lender, Pledgor hereby
expressly waives, to the extent permitted by law: presentment for payment,
demand, protest, notice of demand, notice of protest, notice of default or
dishonor, notice of payments and nonpayments and all other notices and consents
that Secured Party may release, compromise,
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settle, extend or renew any commercial paper, instruments or guaranties at any
time held by Secured Party or any Lender on which Pledgor may in any way be
liable and notice of any action taken by Secured Party or any Lender unless
expressly required by this Security Agreement or by law.
17. Notice. Except as otherwise provided herein, all notices, requests and
demands to or upon a party hereto shall be effective as provided in the Pledgor
Guaranty.
18. Applicable Law. This Security Agreement shall be governed in all
respects by, and construed in accordance with, the internal laws of the State of
Florida without reference to choice of laws principles.
19. References to Credit Agreement Definitions. In the event that the
Credit Agreement shall no longer be in effect at any time while the Pledgor
Guaranty shall continue in effect or there shall otherwise continue to remain
outstanding Secured Obligations, all references to the Credit Agreement,
including terms defined by reference to their respective definitions contained
in the Credit Agreement, shall be deemed to refer to the Credit Agreement as in
effect as of the date hereof, with such amendments thereto to which the Secured
Party shall have given its express consent in accordance with the Loan Documents
and the ESOP Loan Documents.
20. Entire Agreement. This Security Agreement, together with the Credit
Agreement and other Loan Documents and ESOP Loan Documents, constitute and
express the entire understanding between the parties hereto with respect to the
subject matter hereof, and supersede all prior agreements and understandings,
inducements, commitments or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof. Neither this Security Agreement nor any portion or provision hereof may
be changed, altered, waived, modified, supplemented, discharged, canceled,
terminated, or amended orally or in any manner other than (i) as to the Agent,
as provided in the Credit Agreement and (ii) as to NationsBank, by the express
written consent of NationsBank in each instance.
21. Section Headings. The Section headings in this Security Agreement are
for convenience of reference only; they form no part of this Security Agreement
and shall not affect its interpretation.
22. Severability. The provisions of this Security Agreement are
independent of and separable from each other. If any provision hereof shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect the validity or enforceability of any other provision
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hereof, but this Security Agreement shall be construed as if such invalid or
unenforceable provision had never been contained herein.
23. Successors and Assigns. This Security Agreement shall be binding upon
the successors and assigns of Pledgor and shall inure to the benefit of and be
enforceable by the Secured Party and their successors and assigns; provided,
however, the obligations of Pledgor hereunder may not be assigned or delegated
to any other Person without the prior written consent of the Secured Party.
24. Agency. Notwithstanding the foregoing references to the Secured Party,
Pledgor acknowledges and agrees that so long as NationsBank shall be the sole
Lender under the Credit Agreement, the term "Agent" shall mean NationsBank as
Lender. When and if there shall be more than one Lender party to the Credit
Agreement, then the term "Agent" shall refer to the Agent under the Credit
Agreement pursuant to the provisions of Article XI of the Credit Agreement, to
which reference is hereby made.
25. Termination. In the event that all of the Secured Obligations shall be
fully, finally and indefeasibly paid and satisfied in full (subject to
provisions of the Agreements that expressly survive), the Agreements shall be
terminated and there shall be no Outstanding Letters of Credit, the Secured
Party shall, at the request and at the expense of the Pledgor, terminate the
security interest and powers of attorney herein conferred and, in furtherance
thereof, execute such Uniform Commercial Code termination statements and such
other documents in form and substance reasonably satisfactory to the Secured
Party to release and terminate the Lien hereof of record. Notwithstanding the
foregoing provisions of this Section 25, in the event that any payment made or
deemed made to the Secured Party or any Lender in payment of any Secured
Obligation shall be rescinded or declared to be or become void, voidable or
otherwise recoverable from the Secured Party or such Lender for any reason
whatsoever, the Lien in favor of the Secured Party created hereunder shall be
and become reinstituted in respect of such Secured Obligations until the same
shall be thereafter fully and finally paid, satisfied and discharged.
[Remainder of page intentionally left blank]
20
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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed by authority duly given as of the day and year first above
written.
WITNESS: VITAS HEALTHCARE CORPORATION OF
PENNSYLVANIA
/s/ Terry L. Scaggs By: /s/Mark W. Ohlendorf
- ------------------------------- --------------------------------
/s/ Meganne Cusato Mark W. Ohlendorf
- ------------------------------- Vice President
SECURED PARTY:
WITNESS: NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION, as Agent
/s/ Terry L. Scaggs By: /s/Allison S. Freeland
- ------------------------------- --------------------------------
/s/ Meganne Cusato Allison S. Freeland
- ------------------------------- Vice President
WITNESS: NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION
/s/ Terry L. Scaggs By: /s/Allison S. Freeland
- ------------------------------- --------------------------------
/s/ Meganne Cusato Allison S. Freeland
- ------------------------------- Vice President
21
<PAGE>
Vitas Healthcare Corporation of Pennsylvania
PLEDGE AND SECURITY AGREEMENT
INDEX TO EXHIBITS AND SCHEDULES*
1. Exhibit A Existing Liens on the Collateral
2. Schedule 6(E) Trade Styles
VITAS AGREES TO PROVIDE A COPY OF THE EXHIBIT AND SCHEDULE LISTED ABOVE TO THE
COMMISSION UPON REQUEST.
- ----------------------
* The inclusion of any information on any one of these Exhibits and Schedules is
not, and shall not be deemed to be, a representation that such information must
be set forth on such Exhibit or Schedule or any supplement thereto or otherwise
in the agreement to which such Exhibit or Schedule relates. Information provided
in any one Exhibit or Schedule shall be deemed to be incorporated into each
Exhibit and Schedule, as applicable.
Execution: February 10, 1995
<PAGE>
EXHIBIT 10.55
GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT, dated as of February 17, 1995 (the
"Guaranty"), is made by VITAS HEALTHCARE CORPORATION OF CALIFORNIA, a Delaware
corporation (the "Guarantor"), to the parties named in Section 1 hereof. Except
as otherwise defined herein, terms used herein defined in the Credit Agreement
referred to below shall be used herein as so defined.
WITNESSETH
WHEREAS, (i) pursuant to Revolving Credit and Reimbursement Agreement
dated as of August 11, 1994 (the "Prior Credit Agreement") among Vitas
Healthcare Corporation (the "Company"), NationsBank of Florida, National
Association ("NationsBank") and NationsBank as agent, NationsBank made available
to the Company a revolving credit facility in the aggregate principal amount of
up to $15,000,000, including within such revolving credit facility the issuance
of letters of credit for the account of the Company and (ii) pursuant to a
Guaranty and Contingent Purchase Agreement of even date with the Prior Credit
Agreement between the Company and NationsBank (the "Prior Guaranty" and,
together with the Prior Credit Agreement, the "Prior Agreements"), and a Loan
Agreement (as the same may be amended, modified or restated from time to time,
the "ESOP Loan Agreement") of even date with the Prior Credit Agreement between
NationsBank and the Vitas Healthcare Corporation Employee Stock Ownership Trust
(the "Trust" and, together with the Company, the "Borrowers"), NationsBank
extended a term loan of $2,386,670 to the Trust to refinance certain
indebtedness owing from the Trust to the Company; and
WHEREAS, the Company and the Guarantor, a Subsidiary of the Company, have
entered into an Asset Purchase Agreement with the Sellers (as defined in the
Credit Agreement) dated as of December 27, 1994 (the "Asset Purchase Agreement")
pursuant to which the Guarantor has agreed to purchase substantially all of the
operating assets of the CHC Entities (as defined in the Credit Agreement)
pursuant to the terms and subject to the conditions set forth therein and, in
connection therewith, the Company has requested that the Prior Credit Agreement
be amended and restated to increase the revolving credit facility from
$15,000,000 to $20,000,000, to provide for a $25,000,000 term loan facility, and
to make certain other modifications, and that the Prior Guaranty be amended and
restated to reflect the agreement of the parties; and
WHEREAS, at the request of the Company and to effect the modifications
referred to above, (i) the Company, the Agent and the Lenders are entering into
an Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement
of even date herewith (as the same may be modified, amended or restated from
time to time, the "Credit Agreement" and, together with the ESOP Loan Agreement,
the
<PAGE>
"Agreements"), and (ii) the Company and NationsBank are entering into an Amended
and Restated Guaranty and Contingent Purchase Agreement of even date herewith
(as the same may be modified, amended or restated from time to time, the
"Company Guaranty"); and
WHEREAS, the Lenders are unwilling to amend and increase the revolving
credit facility or make such term loan pursuant to the Credit Agreement, and
NationsBank is unwilling to amend the Prior Agreements as reflected in the
Agreements to permit the consummation of the CHC Transaction, unless the
Guarantor enters into this Guaranty; and
WHEREAS, the Guarantor will be provided with advances from the Company or
other working capital made available directly or indirectly by the Lenders under
the Credit Agreement, and has thereby materially benefitted or will materially
benefit from the Loans made to the Borrowers pursuant to the Credit Agreement
and the ESOP Loan Agreement;
NOW, THEREFORE, in consideration of the premises, the Guarantor hereby
agrees as follows:
1. Guaranty and Surety. The Guarantor does hereby absolutely and
unconditionally for the benefit of (i) the Agent and the Lenders under the
Credit Agreement and (ii) NationsBank as lender under the ESOP Loan Agreement
(collectively, the "Beneficiaries"), guarantee and become surety for the full
and timely payment when due (whether by acceleration or otherwise) (including
amounts which, but for the operation of the automatic stay under Section 362(a)
of the Bankruptcy Code (or any successor statute), would become due) of:
A. All obligations as defined in the Credit Agreement;
and
B. All obligations and liabilities of the Trust under the ESOP Loan
Agreement and the other ESOP Loan Documents, including without limitation
its obligations to pay interest, principal, fees, expenses and
indemnification amounts when and as the same shall become due whether at
the stated maturity thereof, by acceleration or otherwise (the "ESOP
obligations").
in each came whether direct or indirect, joint or several, absolute or
contingent, liquidated or unliquidated, now or hereafter existing, extended,
renewed, replaced, refinanced or restructured, whether or not from time to time
decreased or extinguished and later increased, created or incurred (all
indebtedness, obligations and liabilities of the Borrowers described in this
Section 1 are collectively referred to as the "Guarantied obligations");
provided, however, that the liability of the Guarantor with respect to the
Guarantied obligations shall not exceed at any time the
2
<PAGE>
Maximum Amount (as hereinafter defined). The "Maximum Amount" means the greater
of (X) the aggregate amount of all advances to the Guarantor made directly or
indirectly with the proceeds of Loans (as defined in the Credit Agreement) or
(Y) 95% of (a) the fair salable value of the assets of such Guarantor as of the
date hereof minus (b) the total liabilities of the Guarantor (including
contingent liabilities, but excluding liabilities of the Guarantor under this
Guaranty and the other Loan Documents and ESOP Loan Documents executed by the
Guarantor) as of the date hereof; provided further, however, that if the
calculation of the Maximum Amount in the manner provided above as of the date
payment is required of the Guarantor pursuant to this Guaranty would result in a
greater positive number, then the Maximum Amount shall be deemed to be such
greater positive number.
2. Guaranty Of Payment. This is a guaranty of payment and not merely of
collection. In the event of any default by the original obligor in payment or
otherwise on any of the Guarantied Obligations, the Guarantor will pay all or
any portion of the Guarantied Obligations due or thereafter becoming due,
whether by acceleration or otherwise, without offset of any kind whatsoever,
without any Beneficiary first being required to make demand upon the original
obligor or pursue any of its rights against the original obligor, or against any
other Person, including other guarantors (whether or not party to this
Guaranty); and without being required to liquidate or to realize on any
collateral security. In any right of action accruing to any Beneficiary, such
Beneficiary may elect to proceed against (a) the Guarantor together with the
original obligor or obligors; (b) the Guarantor and the original obligor or
obligors individually; or (c) the Guarantor only without having first commenced
any action against the original obligor or obligors.
3. Right to Deal with Guarantied Obligations. Subject to the terms and
conditions of the Credit Agreement, any Beneficiary, without notice to
Guarantor, may deal with any Guarantied Obligations and any collateral security
therefor in such manner as it may deem advisable and may renew or extend the
Guarantied Obligations or any part thereof; accept partial payment, or settle,
release, compound, or compromise the same; demand additional collateral security
therefor, and substitute or release the same; and may compromise or settle with
or release and discharge from liability any other guarantor of any Guarantied
Obligation, or any other Person liable to such Beneficiary for all or any
portion of the obligations of any original obligor; all without impairing the
liability of the Guarantor hereunder.
4. Other Waivers. Guarantor hereby unconditionally waives with respect to
this Guaranty: (a) notice of acceptance of this Guaranty by any Beneficiary and
any notice of the incurring by either or both of the Borrowers of any Guarantied
Obligation; (b) presentment for payment, protest, notice of protest and notice
of dishonor to any party including either of the Borrowers or the
3
<PAGE>
Guarantor; (c) any disability of the original obligor or obligors or defense
available to the original obligor or obligors, including absence or cessation of
any original obligor's liability for any reason whatsoever; (d) any defense or
circumstances which might otherwise constitute a legal or equitable discharge of
a guarantor or surety except final and irrevocable payment in full of the
Guaranteed Obligations; and (e) all rights under any state or federal statute
dealing with or affecting the rights of creditors.
5. Subordination. Until the Guarantied Obligations are paid in full and no
Beneficiary is under any further obligation to lend or extend funds or credit
which would constitute Guarantied Obligations, Guarantor hereby unconditionally
subordinates all present and future debts, liabilities or obligations of the
Borrower to such Guarantor to the Guarantied Obligations, and all amounts due
under such debts, liabilities, or obligations shall, upon the occurrence and
during the continuance of an Event of Default, be collected and paid over
forthwith to the Beneficiaries on account of the Guarantied Obligations and,
pending such payment, shall be held by the Guarantor as agent and bailee of the
Beneficiaries separate and apart from all other funds, property and accounts of
the Guarantor. Guarantor, at the reasonable request of any Beneficiary, shall
execute such further documents in favor of such Beneficiary to further evidence
and support the purpose of this Section 5. Until (i) all of the Guarantied
Obligations and all of the Guarantor's obligations hereunder shall have been
paid and satisfied in full and (ii) the lapse or expiration of any time period
in which any payment in respect of the Guarantied Obligations or hereunder is
subject to avoidance as a preferential or similar transfer under any applicable
bankruptcy, insolvency or similar law without any such claim for avoidance
having been made, Guarantor hereby irrevocably waives and releases any right or
rights of subrogation, contribution or similar claims against either of the
Borrowers or any other guarantor of any of the Guarantied Obligations existing
at law, by contract or otherwise.
6. Representations and Warranties. Guarantor represents and warrants to
the Beneficiaries that: (a) no other agreement, representation or special
condition exists between the Guarantor and any Beneficiary regarding the
liability of the Guarantor under this Guaranty; nor does any understanding exist
between the Guarantor and any Beneficiary that the obligations of the Guarantor
under this Guaranty are or will be other than as set out herein; and (b) as of
the date hereof, the Guarantor has no defense whatsoever to any action or
proceeding that may be brought to enforce this Guaranty. Furthermore, the
Guarantor affirms to the Beneficiaries that each of the representations and
warranties contained in the Credit Agreement or the Company Guaranty and made by
either of the Borrowers with respect to the Guarantor is true and correct.
7. No Waiver by Beneficiaries. No failure or delay on the part of any
Beneficiary in exercising any right, power or privilege
4
<PAGE>
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. Failure by any Beneficiary to insist upon strict performance hereof
shall not constitute a relinquishment of its right to demand strict performance
at another time. Receipt by any Beneficiary of any payment by any person on any
Guarantied Obligation, with knowledge of a default on any Guarantied Obligation
or of a breach of this Guaranty, or both, shall not be construed as a waiver of
the default or breach.
8. CONTINUING GUARANTY; TERMINATION. THIS GUARANTY IS A CONTINUING
GUARANTY AND SHALL CONTINUE IN FULL FORCE AND EFFECT UNTIL SUCH TIME AS ALL
GUARANTIED OBLIGATIONS SHALL HAVE BEEN INDEFEASIBLY PAID IN FULL (OTHER THAN
GUARANTIED OBLIGATIONS IN THE NATURE OF CONTINUING INDEMNITIES OR EXPENSE
REIMBURSEMENT OBLIGATIONS NOT YET DUE AND PAYABLE) AND NO BENEFICIARY SHALL BE
UNDER ANY FURTHER OBLIGATION TO LEND OR TO ADVANCE FUNDS OR ISSUE LETTERS OF
CREDIT TO THE ACCOUNT OF THE BORROWERS OR EITHER OF THEM CONSTITUTING GUARANTIED
OBLIGATIONS.
9. Benefits of Agreement. This Guaranty is freely assignable and
transferable by the Beneficiaries to any permitted assignee and transferee of
any Guarantied Obligation; however, the duties and obligations of the Guarantor
may not be delegated or transferred by the Guarantor without the written consent
of all Beneficiaries. The rights and privileges of the Beneficiaries shall inure
to the benefit of their respective successors and assigns, and the duties and
obligations of the Guarantors shall bind their respective successors and
assigns.
10. Expenses; Indemnity. The Guarantor will upon demand pay to each
Beneficiary the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, which
it may reasonably incur in connection with enforcement of this Guaranty or the
failure by the Guarantor to perform or observe any of the provisions hereof. The
Guarantor agrees to indemnify and hold harmless each Beneficiary from and
against any and all claims, demands, losses, judgments and liabilities
(including liabilities for penalties) of whatsoever kind or nature, growing out
of or resulting from this Guaranty or the exercise by any Beneficiary of any
right or remedy granted to it hereunder or under the other Loan Documents or
ESOP Loan Documents, other than such items arising out of the bad faith, gross
negligence or willful misconduct on the part of such Beneficiary. If and to the
extent that the obligations of the Guarantor under this Section 10 are
unenforceable for any reason, the Guarantor hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.
11. Amendments, Waivers and Consents. No amendment or waiver of any
provision of this Guaranty or consent to any departure by
5
<PAGE>
the Guarantor herefrom shall in any event be effective unless the same shall be
in writing and signed (i) as to the Obligations, by the Guarantor and the Agent
(which execution by Agent shall be evidence that Agent has received the consent
thereto of the Lenders required to effect such amendment or waiver) and (ii) as
to the ESOP Obligations, the Guarantor and NationsBank, and then such amendment,
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, that no such amendment, waiver or
consent shall (a) deprive any Beneficiary of the benefits generally of this
Guaranty without the written consent of such Beneficiary, or (b) alter the
provisions of this Section 11 without the written consent of all of the
Beneficiaries.
12. Addresses for Notices. All notices and other communications provided
for hereunder shall be given in the manner set forth in Section 12.02 of the
Credit Agreement.
13. Interpretation; Partial Invalidity. Whenever possible each provision
of this Guaranty shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Guaranty shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Guaranty.
14. Miscellaneous; Remedies Cumulative. Unless the context of this
Guaranty otherwise clearly requires, references to the plural include the
singular, the singular the plural and the part the whole and "or" has the
inclusive meaning represented by the phrase "and/or." The section headings used
herein are for convenience of reference only and shall not define, limit or
extend the provisions of this Guaranty. All remedies hereunder are cumulative
and are not exclusive of any other rights and remedies of the Beneficiaries
provided by law or under the Credit Agreement, the other Loan Documents, or
other applicable agreements or instruments. The making of the Loans to the
Borrowers pursuant to the Credit Agreement and the ESOP Loan Agreement shall be
presumed conclusively to have been made or extended, respectively, in reliance
upon the obligations of the Guarantor incurred pursuant to this Guaranty.
15. Pari Passu Obligations. The Guarantor, and by their acceptance of the
benefits hereof each of the Beneficiaries, acknowledge that, in the event the
Maximum Amount payable hereunder shall be less than aggregate amount of the
Obligations and the ESOP Obligations payable by the Guarantor hereunder, the
Obligations and the ESOP Obligations shall rank pari passu with respect to the
application of proceeds of payments hereunder to such Obligations and ESOP
Obligations and, in accordance therewith, agree that such amounts, including
without limitation proceeds of collateral securing the Guarantor's obligations
hereunder, after payment of all expenses in connection with the administration
and liquidation
6
<PAGE>
of such collateral, shall be applied ratably to Obligations and ESOP Obligations
in accordance with the respective amounts thereof as of the date of any
application.
16. Governing Law. This Guaranty shall in all respects be governed by the
law of the State of Florida. Guarantor and the Beneficiaries each hereby (i)
submits to the jurisdiction and venue of the state and federal courts of Florida
for the purposes of resolving disputes hereunder or under any of the other Loan
Documents to which it is a party or for the purpose of collection and (ii)
waives trial by jury in connection with any such litigation.
17. Repayment or Recovery. If claim is ever made upon any Beneficiary for
repayment or recovery of any amount or amounts received in payment or on account
of any of the Guarantied Obligations and any of the Beneficiaries repays all or
part of said amount by reason of (a) any judgment, decree or order of any court
or administrative body having jurisdiction over such payee or any of its
property, or (b) any settlement or compromise of any such claim effected by such
Beneficiary with any such claimant (including the original obligor), then and in
such event the Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon it, notwithstanding any
revocation hereof or the cancellation of any Note or other instrument evidencing
any Guarantied Obligation or any security therefor, and the Guarantor shall be
and remain liable to the aforesaid Beneficiary for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by any such Beneficiary.
18. Set-Off. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of an Event of Default (as defined in
either of the Agreements), Guarantor agrees that each Beneficiary shall have a
lien for all the liabilities of the Guarantor upon all deposits or deposit
accounts, of any kind (other than deposits identified as being held for third
parties), or any interest in any deposits or deposit accounts thereof, now or
hereafter pledged, mortgaged, transferred or assigned to such Beneficiary or
otherwise in the possession or control of such Beneficiary (other than for
safekeeping) for any purpose for the account or benefit of the Guarantor and
including any balance of any deposit account or of any credit of the Guarantor
with such Beneficiary, whether now existing or hereafter established, hereby
authorizing each Beneficiary at any time or times, upon the occurrence and
during the continuance of an Event of Default, with or without prior notice (but
with notice with reasonable promptness after such set-off) to apply such
balances or any part thereof to such of the liabilities of the Guarantor to such
Beneficiary then past due and in such amounts as they may elect, and whether or
not the collateral or the responsibility of other Persons primarily, secondarily
or otherwise liable may be
7
<PAGE>
deemed adequate. For the purposes of this Section 18, all remittances and
property shall be deemed to be in the possession of such Beneficiary as soon as
the same may be put in transit to it by mail or carrier or by other bailee.
19. Security. As security for the payment and performance by the Guarantor
of its obligations hereunder, the Guarantor has delivered to the Beneficiaries a
Pledge and Security Agreement of even date herewith, granting to the
Beneficiaries a security interest in certain property of the Guarantor therein
specified.
20. References to Credit Agreement Definitions. In the event that the
Credit Agreement shall no longer be in effect at any time while this Guaranty
shall continue in effect or there shall otherwise continue to remain outstanding
Guarantied Obligations, all references to the Credit Agreement, including terms
defined by reference to their respective definitions contained in the Credit
Agreement, shall be deemed to refer to the Credit Agreement as in effect as of
the date hereof, with such amendments thereto to which the remaining
Beneficiaries shall have given express consent in accordance with the Loan
Documents and the ESOP Loan Documents.
21. Agency. Notwithstanding the foregoing references to the Beneficiaries,
Guarantor acknowledges and agrees that so long as NationsBank shall be the sole
Lender under the Credit Agreement, the term "Agent" shall mean NationsBank as
Lender. When and if there shall be more than one Lender party to the Credit
Agreement, then the term "Agent" shall refer to the Agent under the Credit
Agreement pursuant to the provisions of Article XI of the Credit Agreement, to
which reference is hereby made.
8
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officers hereunto duly authorized as of the date
first above written.
WITNESS: VITAS HEALTHCARE CORPORATION OF
CALIFORNIA
/s/ Terry L. Scaggs By: /s/Mark W. Ohlendorf
- ------------------------------- --------------------------------
/s/ Meganne Cusato Mark W. Ohlendorf
- ------------------------------- Vice President
Address: 100 South Biscayne Boulevard
Miami, Florida 33131
Attention: Mark W. Ohlendorf
Telephone No. (305) 350-5922
Telefacsimile No. (305) 374-4765
9
<PAGE>
EXHIBIT 10.56
AMENDED AND RESTATED GUARANTY AND SURETYSHIP AGREEMENT
THIS AMENDED AND RESTATED GUARANTY AND SURETYSHIP AGREEMENT, dated as
of February 17, 1995 (the "Guaranty"), is made by VITAS HEALTHCARE CORPORATION
OF FLORIDA, a Florida corporation (the "Guarantor"), to the parties named in
Section 1 hereof. Except as otherwise defined herein, terms used herein defined
in the Credit Agreement referred to below shall be used herein as so defined.
W I T N E S S E T H
WHEREAS, (i) pursuant to Revolving Credit and Reimbursement Agreement
dated as of August 11, 1994 (the "Prior Credit Agreement") among Vitas
Healthcare Corporation (the "Company"), NationsBank of Florida, National
Association ("NationsBank") and NationsBank as agent, NationsBank made available
to the Company a revolving credit facility in the aggregate principal amount of
up to $15,000,000, including within such revolving credit facility the issuance
of letters of credit for the account of the Company and (ii) pursuant to a
Guaranty and Contingent Purchase Agreement of even date with the Prior Credit
Agreement between the Company and NationsBank (the "Prior Guaranty" and,
together with the Prior Credit Agreement, the "Prior Agreements"), and a Loan
Agreement (as the same may be amended, modified or restated from time to time,
the "ESOP Loan Agreement") of even date with the Prior Credit Agreement between
NationsBank and the Vitas Healthcare Corporation Employee Stock Ownership Trust
(the "Trust" and, together with the Company, the "Borrowers"), NationsBank
extended a term loan of $2,386,670 to the Trust to refinance certain
indebtedness owing from the Trust to the Company; and
WHEREAS, in connection with the execution and delivery of the Prior
Agreements, the Guarantor entered into a Guaranty and Suretyship Agreement of
even date with the Prior Credit Agreement (the "Prior Subsidiary Guaranty")
guaranteeing the payment and performance of the obligations and liabilities of
the Borrowers under the Prior Credit Agreement and the ESOP Loan Documents; and
WHEREAS, the Company and Vitas Healthcare Corporation of California, a
Subsidiary of the Company ("Vitas California"), have entered into an Asset
Purchase Agreement with the Sellers (as defined in the Credit Agreement) dated
as of December 27, 1994 (the "Asset Purchase Agreement") pursuant to which Vitas
California has agreed to purchase substantially all of the operating assets of
the CHC Entities (as defined in the Credit Agreement) pursuant to the terms and
subject to the conditions set forth therein and, in connection therewith, the
Company has requested that the Prior Credit Agreement be amended and restated to
increase the revolving credit facility from $15,000,000 to $20,000,000, to
provide for a $25,000,000 term loan facility, and to make certain other
<PAGE>
modifications, and that the Prior Guaranty be amended and restated to reflect
the agreement of the parties; and
WHEREAS, at the request of the Company and to effect the modifications
referred to above, (i) the Company, the Agent and the Lenders are entering into
an Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement
of even date herewith (as the same may be modified, amended or restated from
time to time, the "Credit Agreement" and, together with the ESOP Loan Agreement,
the "Agreements"), and (ii) the Company and NationsBank are entering into an
Amended and Restated Guaranty and Contingent Purchase Agreement of even date
herewith (as the same may be modified, amended or restated from time to time,
the "Company Guaranty"); and
WHEREAS, the Lenders are unwilling to amend and increase the revolving
credit facility or make such term loan pursuant to the Credit Agreement, and
NationsBank is unwilling to amend the Prior Agreements as reflected in the
Agreements to permit the consummation of the CHC Transaction, unless the
Guarantor amends and restates its Prior Subsidiary Guaranty by entering into
this Guaranty; and
WHEREAS, the Guarantor is a Subsidiary of the Company and has been or may
be provided with advances from the Company or other working capital made
available directly or indirectly by the Lenders under the Credit Agreement, and
has thereby materially benefitted or will materially benefit from the Loans made
to the Borrowers pursuant to the Credit Agreement and the ESOP Loan Agreement;
NOW, THEREFORE, in consideration of the premises, the Guarantor hereby
agrees as follows:
1. Guaranty and Surety. The Guarantor does hereby absolutely and
unconditionally for the benefit of (i) the Agent and the Lenders under the
Credit Agreement and (ii) NationsBank as lender under the ESOP Loan Agreement
(collectively, the "Beneficiaries"), guarantee and become surety for the full
and timely payment when due (whether by acceleration or otherwise) (including
amounts which, but for the operation of the automatic stay under Section 362(a)
of the Bankruptcy Code (or any successor statute), would become due) of:
A. All Obligations as defined in the Credit Agreement; and
B. All obligations and liabilities of the Trust under the ESOP Loan
Agreement and the other ESOP Loan Documents, including without limitation
its obligations to pay interest, principal, fees, expenses and
indemnification amounts when and as the same shall become due whether at
the stated maturity
2
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thereof, by acceleration or otherwise (the "ESOP Obligations").
in each case whether direct or indirect, joint or several, absolute or
contingent, liquidated or unliquidated, now or hereafter existing, extended,
renewed, replaced, refinanced or restructured, whether or not from time to time
decreased or extinguished and later increased, created or incurred (all
indebtedness, obligations and liabilities of the Borrowers described in this
Section 1 are collectively referred to as the "Guarantied Obligations");
provided, however, that the liability of the Guarantor with respect to the
Guarantied Obligations shall not exceed at any time the Maximum Amount (as
hereinafter defined). The "Maximum Amount" means the greater of (X) the
aggregate amount of all advances to the Guarantor made directly or indirectly
with the proceeds of Loans (as defined in the Credit Agreement) or (Y) 95% of
(a) the fair salable value of the assets of such Guarantor as of the date hereof
minus (b) the total liabilities of the Guarantor (including contingent
liabilities, but excluding liabilities of the Guarantor under this Guaranty and
the other Loan Documents and ESOP Loan Documents executed by the Guarantor) as
of the date hereof; provided further, however, that if the calculation of the
Maximum Amount in the manner provided above as of the date payment is required
of the Guarantor pursuant to this Guaranty would result in a greater positive
number, then the Maximum Amount shall be deemed to be such greater positive
number.
2. Guaranty of Payment. This is a guaranty of payment and not merely of
collection. In the event of any default by the original obligor in payment or
otherwise on any of the Guarantied Obligations, the Guarantor will pay all or
any portion of the Guarantied Obligations due or thereafter becoming due,
whether by acceleration or otherwise, without offset of any kind whatsoever,
without any Beneficiary first being required to make demand upon the original
obligor or pursue any of its rights against the original obligor, or against any
other Person, including other guarantors (whether or not party to this
Guaranty); and without being required to liquidate or to realize on any
collateral security. In any right of action accruing to any Beneficiary, such
Beneficiary may elect to proceed against (a) the Guarantor together with the
original obligor or obligors; (b) the Guarantor and the original obligor or
obligors individually; or (c) the Guarantor only without having first commenced
any action against the original obligor or obligors.
3. Right to Deal with Guarantied Obligations. Subject to the terms and
conditions of the Credit Agreement, any Beneficiary, without notice to
Guarantor, may deal with any Guarantied Obligations and any collateral security
therefor in such manner as it may deem advisable and may renew or extend the
Guarantied Obligations or any part thereof; accept partial payment, or settle,
release, compound, or compromise the same; demand additional collateral security
therefor, and substitute or release the same;
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and may compromise or settle with or release and discharge from liability any
other guarantor of any Guarantied Obligation, or any other Person liable to such
Beneficiary for all or any portion of the obligations of any original obligor;
all without impairing the liability of the Guarantor hereunder.
4. Other Waivers. Guarantor hereby unconditionally waives with respect to
this Guaranty: (a) notice of acceptance of this Guaranty by any Beneficiary and
any notice of the incurring by either or both of the Borrowers of any Guarantied
Obligation; (b) presentment for payment, protest, notice of protest and notice
of dishonor to any party including either of the Borrowers or the Guarantor; (c)
any disability of the original obligor or obligors or defense available to the
original obligor or obligors, including absence or cessation of any original
obligor's liability for any reason whatsoever; (d) any defense or circumstances
which might otherwise constitute a legal or equitable discharge of a guarantor
or surety except final and irrevocable payment in full of the Guaranteed
Obligations; and (e) all rights under any state or federal statute dealing with
or affecting the rights of creditors.
5. Subordination. Until the Guarantied Obligations are paid in full and no
Beneficiary is under any further obligation to lend or extend funds or credit
which would constitute Guarantied Obligations, Guarantor hereby unconditionally
subordinates all present and future debts, liabilities or obligations of the
Borrower to such Guarantor to the Guarantied Obligations, and all amounts due
under such debts, liabilities, or obligations shall, upon the occurrence and
during the continuance of an Event of Default, be collected and paid over
forthwith to the Beneficiaries on account of the Guarantied Obligations and,
pending such payment, shall be held by the Guarantor as agent and bailee of the
Beneficiaries separate and apart from all other funds, property and accounts of
the Guarantor. Guarantor, at the reasonable request of any Beneficiary, shall
execute such further documents in favor of such Beneficiary to further evidence
and support the purpose of this Section 5. Until (i) all of the Guarantied
Obligations and all of the Guarantor's obligations hereunder shall have been
paid and satisfied in full and (ii) the lapse or expiration of any time period
in which any payment in respect of the Guarantied Obligations or hereunder is
subject to avoidance as a preferential or similar transfer under any applicable
bankruptcy, insolvency or similar law without any such claim for avoidance
having been made, Guarantor hereby irrevocably waives and releases any right or
rights of subrogation, contribution or similar claims against either of the
Borrowers or any other guarantor of any of the Guarantied Obligations existing
at law, by contract or otherwise.
6. Representations and Warranties. Guarantor represents and warrants to
the Beneficiaries that: (a) no other agreement, representation or special
condition exists between the Guarantor and any Beneficiary regarding the
liability of the Guarantor under this Guaranty; nor does any understanding exist
between the
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Guarantor and any Beneficiary that the obligations of the Guarantor under this
Guaranty are or will be other than as set out herein; and (b) as of the date
hereof, the Guarantor has no defense whatsoever to any action or proceeding that
may be brought to enforce this Guaranty. Furthermore, the Guarantor affirms to
the Beneficiaries that each of the representations and warranties contained in
the Credit Agreement or the Company Guaranty and made by either of the Borrowers
with respect to the Guarantor is true and correct.
7. No Waiver by Beneficiaries. No failure or delay on the part of any
Beneficiary 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. Failure by any Beneficiary
to insist upon strict performance hereof shall not constitute a relinquishment
of its right to demand strict performance at another time. Receipt by any
Beneficiary of any payment by any person on any Guarantied Obligation, with
knowledge of a default on any Guarantied Obligation or of a breach of this
Guaranty, or both, shall not be construed as a waiver of the default or breach.
8. CONTINUING GUARANTY; TERMINATION. THIS GUARANTY IS A CONTINUING
GUARANTY AND SHALL CONTINUE IN FULL FORCE AND EFFECT UNTIL SUCH TIME AS ALL
GUARANTIED OBLIGATIONS SHALL HAVE BEEN INDEFEASIBLY PAID IN FULL (OTHER THAN
GUARANTIED OBLIGATIONS IN THE NATURE OF CONTINUING INDEMNITIES OR EXPENSE
REIMBURSEMENT OBLIGATIONS NOT YET DUE AND PAYABLE) AND NO BENEFICIARY SHALL BE
UNDER ANY FURTHER OBLIGATION TO LEND OR TO ADVANCE FUNDS OR ISSUE LETTERS OF
CREDIT TO THE ACCOUNT OF THE BORROWERS OR EITHER OF THEM CONSTITUTING GUARANTIED
OBLIGATIONS.
9. Benefit of Agreement. This Guaranty is freely assignable and
transferable by the Beneficiaries to any permitted assignee and transferee of
any Guarantied Obligation; however, the duties and obligations of the Guarantor
may not be delegated or transferred by the Guarantor without the written consent
of all Beneficiaries. The rights and privileges of the Beneficiaries shall inure
to the benefit of their respective successors and assigns, and the duties and
obligations of the Guarantors shall bind their respective successors and
assigns.
10. Expenses; Indemnity. The Guarantor will upon demand pay to each
Beneficiary the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, which
it may reasonably incur in connection with enforcement of this Guaranty or the
failure by the Guarantor to perform or observe any of the provisions hereof. The
Guarantor agrees to indemnify and hold harmless each Beneficiary from and
against any and all claims, demands, losses, judgments and liabilities
(including liabilities for penalties) of whatsoever kind or nature, growing out
of or resulting from this Guaranty or
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the exercise by any Beneficiary of any right or remedy granted to it hereunder
or under the other Loan Documents or ESOP Loan Documents, other than such items
arising out of the bad faith, gross negligence or willful misconduct on the part
of such Beneficiary. If and to the extent that the obligations of the Guarantor
under this Section 10 are unenforceable for any reason, the Guarantor hereby
agrees to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
11. Amendments, Waivers and Consents. No amendment or waiver of any
provision of this Guaranty or consent to any departure by the Guarantor herefrom
shall in any event be effective unless the same shall be in writing and signed
(i) as to the Obligations, by the Guarantor and the Agent (which execution by
Agent shall be evidence that Agent has received the consent thereto of the
Lenders required to effect such amendment or waiver) and (ii) as to the ESOP
Obligations, the Guarantor and NationsBank, and then such amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, that no such amendment, waiver or consent
shall (a) deprive any Beneficiary of the benefits generally of this Guaranty
without the written consent of such Beneficiary, or (b) alter the provisions of
this Section 11 without the written consent of all of the Beneficiaries.
12. Addresses for Notices. All notices and other communications provided
for hereunder shall be given in the manner set forth in Section 12.02 of the
Credit Agreement.
13. Interpretation; Partial Invalidity. Whenever possible each provision
of this Guaranty shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Guaranty shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Guaranty.
14. Miscellaneous: Remedies Cumulative. Unless the context of this
Guaranty otherwise clearly requires, references to the plural include the
singular, the singular the plural and the part the whole and "or" has the
inclusive meaning represented by the phrase "and/or." The section headings used
herein are for convenience of reference only and shall not define, limit or
extend the provisions of this Guaranty. All remedies hereunder are cumulative
and are not exclusive of any other rights and remedies of the Beneficiaries
provided by law or under the Credit Agreement, the other Loan Documents, or
other applicable agreements or instruments. The making of the Loans to the
Borrowers pursuant to the Credit Agreement and the ESOP Loan Agreement shall be
presumed conclusively to have been made or extended, respectively, in reliance
upon the obligations of the Guarantor incurred pursuant to this Guaranty.
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15. Pari Passu Obligation. The Guarantor, and by their acceptance of the
benefits hereof each of the Beneficiaries, acknowledge that, in the event the
Maximum Amount payable hereunder shall be less than aggregate amount of the
Obligations and the ESOP Obligations payable by the Guarantor hereunder, the
Obligations and the ESOP Obligations shall rank pari passu with respect to the
application of proceeds of payments hereunder to such Obligations and ESOP
Obligations and, in accordance therewith, agree that such amounts, including
without limitation proceeds of collateral securing the Guarantor's obligations
hereunder, after payment of all expenses in connection with the administration
and liquidation of such collateral, shall be applied ratably to Obligations and
ESOP Obligations in accordance with the respective amounts thereof as of the
date of any application.
16. Governing Law. This Guaranty shall in all respects be governed by the
law of the State of Florida. Guarantor and the Beneficiaries each hereby (i)
submits to the jurisdiction and venue of the state and federal courts of Florida
for the purposes of resolving disputes hereunder or under any of the other Loan
Documents to which it is a party or for the purpose of collection and (ii)
waives trial by jury in connection with any such litigation.
17. Repayment or Recovery. If claim is ever made upon any Beneficiary for
repayment or recovery of any amount or amounts received in payment or on account
of any of the Guarantied Obligations and any of the Beneficiaries repays all or
part of said amount by reason of (a) any judgment, decree or order of any court
or administrative body having jurisdiction over such payee or any of its
property, or (b) any settlement or compromise of any such claim effected by such
Beneficiary with any such claimant (including the original obligor), then and in
such event the Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon it, notwithstanding any
revocation hereof or the cancellation of any Note or other instrument evidencing
any Guarantied Obligation or any security therefor, and the Guarantor shall be
and remain liable to the aforesaid Beneficiary for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by any such Beneficiary.
18. Set-Off. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of an Event of Default (as defined in
either of the Agreements), Guarantor agrees that each Beneficiary shall have a
lien for all the liabilities of the Guarantor upon all deposits or deposit
accounts, of any kind (other than deposits identified as being held for third
parties), or any interest in any deposits or deposit accounts thereof, now or
hereafter pledged, mortgaged, transferred or assigned to such Beneficiary or
otherwise in the possession or control of such Beneficiary (other than for
safekeeping) for any
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purpose for the account or benefit of the Guarantor and including any balance of
any deposit account or of any credit of the Guarantor with such Beneficiary,
whether now existing or hereafter established, hereby authorizing each
Beneficiary at any time or times, upon the occurrence and during the continuance
of an Event of Default, with or without prior notice (but with notice with
reasonable promptness after such set-off) to apply such balances or any part
thereof to such of the liabilities of the Guarantor to such Beneficiary then
past due and in such amounts as they may elect, and whether or not the
collateral or the responsibility of other Persons primarily, secondarily or
otherwise liable may be deemed adequate. For the purposes of this Section 18,
all remittances and property shall be deemed to be in the possession of such
Beneficiary as soon as the same may be put in transit to it by mail or carrier
or by other bailee.
19. Security. As security for the payment and performance by the Guarantor
of its obligations hereunder, the Guarantor has delivered to the Beneficiaries
an Amended and Restated Pledge and Security Agreement of even date herewith,
granting to the Beneficiaries a security interest in certain property of the
Guarantor therein specified.
20. References to Credit Agreement Definitions. In the event that the
Credit Agreement shall no longer be in effect at any time while this Guaranty
shall continue in effect or there shall otherwise continue to remain outstanding
Guarantied Obligations, all references to the Credit Agreement, including terms
defined by reference to their respective definitions contained in the Credit
Agreement, shall be deemed to refer to the Credit Agreement as in effect as of
the date hereof, with such amendments thereto to which the remaining
Beneficiaries shall have given express consent in accordance with the Loan
Documents and the ESOP Loan Documents.
21. Agency. Notwithstanding the foregoing references to the Beneficiaries,
Guarantor acknowledges and agrees that so long as NationsBank shall be the sole
Lender under the Credit Agreement, the term "Agent" shall mean NationsBank as
Lender. When and if there shall be more than one Lender party to the Credit
Agreement, then the term "Agent" shall refer to the Agent under the Credit
Agreement pursuant to the provisions of Article XI of the Credit Agreement, to
which reference is hereby made.
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officers hereunto duly authorized as of the date
first above written.
WITNESS: VITAS HEALTHCARE CORPORATION OF
FLORIDA
/s/ Terry L. Scaggs
- --------------------------- By: /s/ Mark W. Ohlendorf
-----------------------------
/s/ Meganne Cusato Name: Mark W. Ohlendorf
- --------------------------- Title: Vice President
Address: 100 South Biscayne Boulevard
Miami, Florida 33131
Attention: Mark W. Ohlendorf
Telephone No. (305) 350-5922
Telefacsimile No. (305) 374-4765
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EXHIBIT 10.57
AMENDED AND RESTATED GUARANTY AND SURETYSHIP AGREEMENT
THIS AMENDED AND RESTATED GUARANTY AND SURETYSHIP AGREEMENT, dated as of
February 17, 1995 (the "Guaranty"), is made by VITAS HEALTHCARE CORPORATION OF
OHIO, a Delaware corporation (the "Guarantor"), to the parties named in Section
1 hereof. Except as otherwise defined herein, terms used herein defined in the
Credit Agreement referred to below shall be used herein as so defined.
W I T N E S S E T H:
WHEREAS, (i) pursuant to Revolving Credit and Reimbursement Agreement
dated as of August 11, 1994 (the "Prior Credit Agreement") among Vitas
Healthcare Corporation (the "Company"), NationsBank of Florida, National
Association ("NationsBank") and NationsBank as agent, NationsBank made available
to the Company a revolving credit facility in the aggregate principal amount of
up to $15,000,000, including within such revolving credit facility the issuance
of letters of credit for the account of the Company and (ii) pursuant to a
Guaranty and Contingent Purchase Agreement of even date with the Prior Credit
Agreement between the Company and NationsBank (the "Prior Guaranty" and,
together with the Prior Credit Agreement, the "Prior Agreements"), and a Loan
Agreement (as the same may be amended, modified or restated from time to time,
the "ESOP Loan Agreement") of even date with the Prior Credit Agreement between
NationsBank and the Vitas Healthcare Corporation Employee Stock Ownership Trust
(the "Trust" and, together with the Company, the "Borrowers"), NationsBank
extended a term loan of $2,386,670 to the Trust to refinance certain
indebtedness owing from the Trust to the Company; and
WHEREAS, in connection with the execution and delivery of the Prior
Agreements, the Guarantor entered into a Guaranty and Suretyship Agreement of
even date with the Prior Credit Agreement (the "Prior Subsidiary Guaranty")
guaranteeing the payment and performance of the obligations and liabilities of
the Borrowers under the Prior Credit Agreement and the ESOP Loan Documents; and
WHEREAS, the Company and Vitas Healthcare Corporation of California, a
Subsidiary of the Company ("Vitas California"), have entered into an Asset
Purchase Agreement with the Sellers (as defined in the Credit Agreement) dated
as of December 27, 1994 (the "Asset Purchase Agreement") pursuant to which Vitas
California has agreed to purchase substantially all of the operating assets of
the CHC Entities (as defined in the Credit Agreement) pursuant to the terms and
subject to the conditions set forth therein and, in connection therewith, the
Company has requested that the Prior Credit Agreement be amended and restated to
increase the revolving credit facility from $15,000,000 to $20,000,000, to
provide for a $25,000,000 term loan facility, and to make certain other
<PAGE>
modifications, and that the Prior Guaranty be amended and restated to reflect
the agreement of the parties; and
WHEREAS, at the request of the Company and to effect the modifications
referred to above, (i) the Company, the Agent and the Lenders are entering into
an Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement
of even date herewith (as the same may be modified, amended or restated from
time to time, the "Credit Agreement" and, together with the ESOP Loan Agreement,
the "Agreements"), and (ii) the Company and NationsBank are entering into an
Amended and Restated Guaranty and Contingent Purchase Agreement of even date
herewith (as the same may be modified, amended or restated from time to time,
the "Company Guaranty"); and
WHEREAS, the Lenders are unwilling to amend and increase the revolving
credit facility or make such term loan pursuant to the Credit Agreement, and
NationsBank is unwilling to amend the Prior Agreements as reflected in the
Agreements to permit the consummation of the CHC Transaction, unless the
Guarantor amends and restates its Prior Subsidiary Guaranty by entering into
this Guaranty; and
WHEREAS, the Guarantor is a Subsidiary of the Company and has been or may
be provided with advances from the Company or other working capital made
available directly or indirectly by the Lenders under the Credit Agreement, and
has thereby materially benefitted or will materially benefit from the Loans made
to the Borrowers pursuant to the Credit Agreement and the ESOP Loan Agreement;
NOW, THEREFORE, in consideration of the premises, the Guarantor hereby
agrees as follows:
1. Guaranty and Surety. The Guarantor does hereby absolutely and
unconditionally for the benefit of (i) the Agent and the Lenders under the
Credit Agreement and (ii) NationsBank as lender under the ESOP Loan Agreement
(collectively, the "Beneficiaries"), guarantee and become surety for the full
and timely payment when due (whether by acceleration or otherwise) (including
amounts which, but for the operation of the automatic stay under Section 362(a)
of the Bankruptcy Code (or any successor statute), would become due) of:
A. All Obligations as defined in the Credit Agreement; and
B. All obligations and liabilities of the Trust under the ESOP Loan
Agreement and the other ESOP Loan Documents, including without limitation
its obligations to pay interest, principal, fees, expenses and
indemnification amounts when and as the same shall become due whether at
the stated maturity
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thereof, by acceleration or otherwise (the "ESOP Obligations").
in each case whether direct or indirect, joint or several, absolute or
contingent, liquidated or unliquidated, now or hereafter existing, extended,
renewed, replaced, refinanced or restructured, whether or not from time to time
decreased or extinguished and later increased, created or incurred (all
indebtedness, obligations and liabilities of the Borrowers described in this
Section 1 are collectively referred to as the "Guarantied Obligations");
provided, however, that the liability of the Guarantor with respect to the
Guarantied Obligations shall not exceed at any time the Maximum Amount (as
hereinafter defined). The "Maximum Amount" means the greater of (X) the
aggregate amount of all advances to the Guarantor made directly or indirectly
with the proceeds of Loans (as defined in the Credit Agreement) or (Y) 95% of
(a) the fair salable value of the assets of such Guarantor as of the date hereof
minus (b) the total liabilities of the Guarantor (including contingent
liabilities, but excluding liabilities of the Guarantor under this Guaranty and
the other Loan Documents and ESOP Loan Documents executed by the Guarantor) as
of the date hereof; provided further, however, that if the calculation of the
Maximum Amount in the manner provided above as of the date payment is required
of the Guarantor pursuant to this Guaranty would result in a greater positive
number, then the Maximum Amount shall be deemed to be such greater positive
number.
2. Guaranty of Payment. This is a guaranty of payment and not merely of
collection. In the event of any default by the original obligor in payment or
otherwise on any of the Guarantied Obligations, the Guarantor will pay all or
any portion of the Guarantied Obligations due or thereafter becoming due,
whether by acceleration or otherwise, without offset of any kind whatsoever,
without any Beneficiary first being required to make demand upon the original
obligor or pursue any of its rights against the original obligor, or against any
other Person, including other guarantors (whether or not party to this
Guaranty); and without being required to liquidate or to realize on any
collateral security. In any right of action accruing to any Beneficiary, such
Beneficiary may elect to proceed against (a) the Guarantor together with the
original obligor or obligors; (b) the Guarantor and the original obligor or
obligors individually; or (c) the Guarantor only without having first commenced
any action against the original obligor or obligors.
3. Right to Deal with Guarantied Obligations. Subject to the terms and
conditions of the Credit Agreement, any Beneficiary, without notice to
Guarantor, may deal with any Guarantied Obligations and any collateral security
therefor in such manner as it may deem advisable and may renew or extend the
Guarantied Obligations or any part thereof; accept partial payment, or settle,
release, compound, or compromise the same; demand additional collateral security
therefor, and substitute or release the same;
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and may compromise or settle with or release and discharge from liability any
other guarantor of any Guarantied Obligation, or any other Person liable to such
Beneficiary for all or any portion of the obligations of any original obligor;
all without impairing the liability of the Guarantor hereunder.
4. Other Waivers. Guarantor hereby unconditionally waives with respect to
this Guaranty: (a) notice of acceptance of this Guaranty by any Beneficiary and
any notice of the incurring by either or both of the Borrowers of any Guarantied
Obligation; (b) presentment for payment, protest, notice of protest and notice
of dishonor to any party including either of the Borrowers or the Guarantor; (c)
any disability of the original obligor or obligors or defense available to the
original obligor or obligors, including absence or cessation of any original
obligor's liability for any reason whatsoever; (d) any defense or circumstances
which might otherwise constitute a legal or equitable discharge of a guarantor
or surety except final and irrevocable payment in full of the Guaranteed
Obligations; and (e) all rights under any state or federal statute dealing with
or affecting the rights of creditors.
5. Subordination. Until the Guarantied Obligations are paid in full and no
Beneficiary is under any further obligation to lend or extend funds or credit
which would constitute Guarantied Obligations, Guarantor hereby unconditionally
subordinates all present and future debts, liabilities or obligations of the
Borrower to such Guarantor to the Guarantied Obligations, and all amounts due
under such debts, liabilities, or obligations shall, upon the occurrence and
during the continuance of an Event of Default, be collected and paid over
forthwith to the Beneficiaries on account of the Guarantied Obligations and,
pending such payment, shall be held by the Guarantor as agent and bailee of the
Beneficiaries separate and apart from all other funds, property and accounts of
the Guarantor. Guarantor, at the reasonable request of any Beneficiary, shall
execute such further documents in favor of such Beneficiary to further evidence
and support the purpose of this Section 5. Until (i) all of the Guarantied
Obligations and all of the Guarantor's obligations hereunder shall have been
paid and satisfied in full and (ii) the lapse or expiration of any time period
in which any payment in respect of the Guarantied Obligations or hereunder is
subject to avoidance as a preferential or similar transfer under any applicable
bankruptcy, insolvency or similar law without any such claim for avoidance
having been made, Guarantor hereby irrevocably waives and releases any right or
rights of subrogation, contribution or similar claims against either of the
Borrowers or any other guarantor of any of the Guarantied Obligations existing
at law, by contract or otherwise.
6. Representations and Warranties. Guarantor represents and warrants to
the Beneficiaries that: (a) no other agreement, representation or special
condition exists between the Guarantor and any Beneficiary regarding the
liability of the Guarantor under this Guaranty; nor does any understanding exist
between the
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Guarantor and any Beneficiary that the obligations of the Guarantor under this
Guaranty are or will be other than as set out herein; and (b) as of the date
hereof, the Guarantor has no defense whatsoever to any action or proceeding that
may be brought to enforce this Guaranty. Furthermore, the Guarantor affirms to
the Beneficiaries that each of the representations and warranties contained in
the Credit Agreement or the Company Guaranty and made by either of the Borrowers
with respect to the Guarantor is true and correct.
7. No Waiver by Beneficiaries. No failure or delay on the part of any
Beneficiary 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. Failure by any Beneficiary
to insist upon strict performance hereof shall not constitute a relinquishment
of its right to demand strict performance at another time. Receipt by any
Beneficiary of any payment by any person on any Guarantied Obligation, with
knowledge of a default on any Guarantied Obligation or of a breach of this
Guaranty, or both, shall not be construed as a waiver of the default or breach.
8. CONTINUING GUARANTY; TERMINATION. THIS GUARANTY IS A CONTINUING
GUARANTY AND SHALL CONTINUE IN FULL FORCE AND EFFECT UNTIL SUCH TIME AS ALL
GUARANTIED OBLIGATIONS SHALL HAVE BEEN INDEFEASIBLY PAID IN FULL (OTHER THAN
GUARANTIED OBLIGATIONS IN THE NATURE OF CONTINUING INDEMNITIES OR EXPENSE
REIMBURSEMENT OBLIGATIONS NOT YET DUE AND PAYABLE) AND NO BENEFICIARY SHALL BE
UNDER ANY FURTHER OBLIGATION TO LEND OR TO ADVANCE FUNDS OR ISSUE LETTERS OF
CREDIT TO THE ACCOUNT OF THE BORROWERS OR EITHER OF THEM CONSTITUTING GUARANTIED
OBLIGATIONS.
9. Benefits of Agreement. This Guaranty is freely assignable and
transferable by the Beneficiaries to any permitted assignee and transferee of
any Guarantied Obligation; however, the duties and obligations of the Guarantor
may not be delegated or transferred by the Guarantor without the written consent
of all Beneficiaries. The rights and privileges of the Beneficiaries shall inure
to the benefit of their respective successors and assigns, and the duties and
obligations of the Guarantors shall bind their respective successors and
assigns.
10. Expenses; Indemnity. The Guarantor will upon demand pay to each
Beneficiary the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, which
it may reasonably incur in connection with enforcement of this Guaranty or the
failure by the Guarantor to perform or observe any of the provisions hereof. The
Guarantor agrees to indemnify and hold harmless each Beneficiary from and
against any and all claims, demands, losses, judgments and liabilities
(including liabilities for penalties) of whatsoever kind or nature, growing out
of or resulting from this Guaranty or
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the exercise by any Beneficiary of any right or remedy granted to it hereunder
or under the other Loan Documents or ESOP Loan Documents, other than such items
arising out of the bad faith, gross negligence or willful misconduct on the part
of such Beneficiary. If and to the extent that the obligations of the Guarantor
under this Section 10 are unenforceable for any reason, the Guarantor hereby
agrees to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
11. Amendments, Waivers and Consents. No amendment or waiver of any
provision of this Guaranty or consent to any departure by the Guarantor herefrom
shall in any event be effective unless the same shall be in writing and signed
(i) as to the Obligations, by the Guarantor and the Agent (which execution by
Agent shall be evidence that Agent has received the consent thereto of the
Lenders required to effect such amendment or waiver) and (ii) as to the ESOP
Obligations, the Guarantor and NationsBank, and then such amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, that no such amendment, waiver or consent
shall (a) deprive any Beneficiary of the benefits generally of this Guaranty
without the written consent of such Beneficiary, or (b) alter the provisions of
this Section 11 without the written consent of all of the Beneficiaries.
12. Addresses for Notices. All notices and other communications provided
for hereunder shall be given in the manner set forth in Section 12.02 of the
Credit Agreement.
13. Interpretation; Partial Invalidity. Whenever possible each provision
of this Guaranty shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Guaranty shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Guaranty.
14. Miscellaneous; Remedies Cumulative. Unless the context of this
Guaranty otherwise clearly requires, references to the plural include the
singular, the singular the plural and the part the whole and "or" has the
inclusive meaning represented by the phrase "and/or." The section headings used
herein are for convenience of reference only and shall not define, limit or
extend the provisions of this Guaranty. All remedies hereunder are cumulative
and are not exclusive of any other rights and remedies of the Beneficiaries
provided by law or under the Credit Agreement, the other Loan Documents, or
other applicable agreements or instruments. The making of the Loans to the
Borrowers pursuant to the Credit Agreement and the ESOP Loan Agreement shall be
presumed conclusively to have been made or extended, respectively, in reliance
upon the obligations of the Guarantor incurred pursuant to this Guaranty.
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<PAGE>
15. Pari Passu Obligations. The Guarantor, and by their acceptance of the
benefits hereof each of the Beneficiaries, acknowledge that, in the event the
Maximum Amount payable hereunder shall be less than aggregate amount of the
Obligations and the ESOP Obligations payable by the Guarantor hereunder, the
Obligations and the ESOP Obligations shall rank pari passu with respect to the
application of proceeds of payments hereunder to such Obligations and ESOP
Obligations and, in accordance therewith, agree that such amounts, including
without limitation proceeds of collateral securing the Guarantor's obligations
hereunder, after payment of all expenses in connection with the administration
and liquidation of such collateral, shall be applied ratably to Obligations and
ESOP Obligations in accordance with the respective amounts thereof as of the
date of any application.
16. Governing Law. This Guaranty shall in all respects be governed by the
law of the State of Florida. Guarantor and the Beneficiaries each hereby (i)
submits to the jurisdiction and venue of the state and federal courts of Florida
for the purposes of resolving disputes hereunder or under any of the other Loan
Documents to which it is a party or for the purpose of collection and (ii)
waives trial by jury in connection with any such litigation.
17. Repayment or Recovery. If claim is ever made upon any Beneficiary for
repayment or recovery of any amount or amounts received in payment or on account
of any of the Guarantied Obligations and any of the Beneficiaries repays all or
part of said amount by reason of (a) any judgment, decree or order of any court
or administrative body having jurisdiction over such payee or any of its
property, or (b) any settlement or compromise of any such claim effected by such
Beneficiary with any such claimant (including the original obligor), then and in
such event the Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon it, notwithstanding any
revocation hereof or the cancellation of any Note or other instrument evidencing
any Guarantied Obligation or any security therefor, and the Guarantor shall be
and remain liable to the aforesaid Beneficiary for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by any such Beneficiary.
18. Set-Off. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of an Event of Default (as defined in
either of the Agreements), Guarantor agrees that each Beneficiary shall have a
lien for all the liabilities of the Guarantor upon all deposits or deposit
accounts, of any kind (other than deposits identified as being held for third
parties), or any interest in any deposits or deposit accounts thereof, now or
hereafter pledged, mortgaged, transferred or assigned to such Beneficiary or
otherwise in the possession or control of such Beneficiary (other than for
safekeeping) for any
7
<PAGE>
purpose for the account or benefit of the Guarantor and including any balance of
any deposit account or of any credit of the Guarantor with such Beneficiary,
whether now existing or hereafter established, hereby authorizing each
Beneficiary at any time or times, upon the occurrence and during the continuance
of an Event of Default, with or without prior notice (but with notice with
reasonable promptness after such set-off) to apply such balances or any part
thereof to such of the liabilities of the Guarantor to such Beneficiary then
past due and in such amounts as they may elect, and whether or not the
collateral or the responsibility of other Persons primarily, secondarily or
otherwise liable may be deemed adequate. For the purposes of this Section 18,
all remittances and property shall be deemed to be in the possession of such
Beneficiary as soon as the same may be put in transit to it by mail or carrier
or by other bailee.
19. Security. As security for the payment and performance by the Guarantor
of its obligations hereunder, the Guarantor has delivered to the Beneficiaries
an Amended and Restated Pledge and Security Agreement of even date herewith,
granting to the Beneficiaries a security interest in certain property of the
Guarantor therein specified.
20. References to Credit Agreement Definitions. In the event that the
Credit Agreement shall no longer be in effect at any time while this Guaranty
shall continue in effect or there shall otherwise continue to remain outstanding
Guarantied Obligations, all references to the Credit Agreement, including terms
defined by reference to their respective definitions contained in the Credit
Agreement, shall be deemed to refer to the Credit Agreement as in effect as of
the date hereof, with such amendments thereto to which the remaining
Beneficiaries shall have given express consent in accordance with the Loan
Documents and the ESOP Loan Documents.
21. Agency. Notwithstanding the foregoing references to the Beneficiaries,
Guarantor acknowledges and agrees that so long as NationsBank shall be the sole
Lender under the Credit Agreement, the term "Agent" shall mean NationsBank as
Lender. When and if there shall be more than one Lender party to the Credit
Agreement, then the term "Agent" shall refer to the Agent under the Credit
Agreement pursuant to the provisions of Article XI of the Credit Agreement, to
which reference is hereby made.
8
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officers hereunto duly authorized as of the date
first above written.
WITNESS: VITAS HEALTHCARE CORPORATION OF
OHIO
/s/ Terry L. Scaggs By: /s/ Mark W. Ohlendorf
- -------------------------------- -------------------------------------
Name: Mark W. Ohlendorf
/s/ Meganne Cusato Title: Vice President
- --------------------------------
Address: 100 South Biscayne Boulevard
Miami, Florida 33131
Attention: Mark W. Ohlendorf
Telephone No. (305) 350-5922
Telefacsimile No. (305) 374-4765
9
<PAGE>
EXHIBIT 10.58
AMENDED AND RESTATED GUARANTY AND SURETYSHIP AGREEMENT
THIS AMENDED AND RESTATED GUARANTY AND SURETYSHIP AGREEMENT, dated as of
February 17, 1995 (the "Guaranty"), is made by VITAS HEALTHCARE CORPORATION OF
PENNSYLVANIA, a Delaware corporation (the "Guarantor"), to the parties named in
Section 1 hereof. Except as otherwise defined herein, terms used herein defined
in the Credit Agreement referred to below shall be used herein as so defined.
W I T N E S S E T H :
WHEREAS, (i) pursuant to Revolving Credit and Reimbursement Agreement
dated as of August 11, 1994 (the "Prior Credit Agreement") among Vitas
Healthcare Corporation (the "Company"), NationsBank of Florida, National
Association ("NationsBank") and NationsBank as agent, NationsBank made available
to the Company a revolving credit facility in the aggregate principal amount of
up to $15,000,000, including within such revolving credit facility the issuance
of letters of credit for the account of the Company and (ii) pursuant to a
Guaranty and Contingent Purchase Agreement of even date with the Prior Credit
Agreement between the Company and NationsBank (the "Prior Guaranty" and,
together with the Prior Credit Agreement, the "Prior Agreements"), and a Loan
Agreement (as the same may be amended, modified or restated from time to time,
the "ESOP Loan Agreement") of even date with the Prior Credit Agreement between
NationsBank and the Vitas Healthcare Corporation Employee Stock Ownership Trust
(the "Trust" and, together with the Company, the "Borrowers"), NationsBank
extended a term loan of $2,386,670 to the Trust to refinance certain
indebtedness owing from the Trust to the Company; and
WHEREAS, in connection with the execution and delivery of the Prior
Agreements, the Guarantor entered into a Guaranty and Suretyship Agreement of
even date with the Prior Credit Agreement (the "Prior Subsidiary Guaranty")
guaranteeing the payment and performance of the obligations and liabilities of
the Borrowers under the Prior Credit Agreement and the ESOP Loan Documents; and
WHEREAS, the Company and Vitas Healthcare Corporation of California, a
Subsidiary of the Company ("Vitas California"), have entered into an Asset
Purchase Agreement with the Sellers (as defined in the Credit Agreement) dated
as of December 27, 1994 (the "Asset Purchase Agreement") pursuant to which Vitas
California has agreed to purchase substantially all of the operating assets of
the CHC Entities (as defined in the Credit Agreement) pursuant to the terms and
subject to the conditions set forth therein and, in connection therewith, the
Company has requested that the Prior Credit Agreement be amended and restated to
increase the revolving credit facility from $15,000,000 to $20,000,000, to
provide for a $25,000,000 term loan facility, and to make certain other
<PAGE>
modifications, and that the Prior Guaranty be amended and restated to reflect
the agreement of the parties; and
WHEREAS, at the request of the Company and to effect the modifications
referred to above, (i) the Company, the Agent and the Lenders are entering into
an Amended and Restated Revolving Credit, Term Loan and Reimbursement Agreement
of even date herewith (as the same may be modified, amended or restated from
time to time, the "Credit Agreement" and, together with the ESOP Loan Agreement,
the "Agreements"), and (ii) the Company and NationsBank are entering into an
Amended and Restated Guaranty and Contingent Purchase Agreement of even date
herewith (as the same may be modified, amended or restated from time to time,
the "Company Guaranty") and
WHEREAS, the Lenders are unwilling to amend and increase the revolving
credit facility or make such term loan pursuant to the Credit Agreement, and
NationsBank is unwilling to amend the Prior Agreements as reflected in the
Agreements to permit the consummation of the CHC Transaction, unless the
Guarantor amends and restates its Prior Subsidiary Guaranty by entering into
this Guaranty; and
WHEREAS, the Guarantor is a Subsidiary of the Company and has been or may
be provided with advances from the Company or other working capital made
available directly or indirectly by the Lenders under the Credit Agreement, and
has thereby materially benefitted or will materially benefit from the Loans made
to the Borrowers pursuant to the Credit Agreement and the ESOP Loan Agreement;
NOW, THEREFORE, in consideration of the premises, the Guarantor hereby
agrees as follows:
1. Guaranty and surety. The Guarantor does hereby absolutely and
unconditionally for the benefit of (i) the Agent and the Lenders under the
Credit Agreement and (ii) NationsBank as lender under the ESOP Loan Agreement
(collectively, the "Beneficiaries"), guarantee and become surety for the full
and timely payment when due (whether by acceleration or otherwise) (including
amounts which, but for the operation of the automatic stay under Section 362 (a)
of the Bankruptcy Code (or any successor statute), would become due) of:
A. All Obligations as defined in the Credit Agreement;
and
B. All obligations and liabilities of the Trust under the ESOP
Loan Agreement and the other ESOP Loan Documents, including without
limitation its obligations to pay interest, principal, fees, expenses and
indemnification amounts when and as the same shall become due whether at
the stated maturity
2
<PAGE>
thereof, by acceleration or otherwise (the "ESOP obligations").
in each case whether direct or indirect, joint or several, absolute or
contingent, liquidated or unliquidated, now or hereafter existing, extended,
renewed, replaced, refinanced or restructured, whether or not from time to time
decreased or extinguished and later increased, created or incurred (all
indebtedness, obligations and liabilities of the Borrowers described in this
Section 1 are collectively referred to as the "Guarantied Obligations");
provided, however, that the liability of the Guarantor with respect to the
Guarantied Obligations shall not exceed at any time the Maximum Amount (as
hereinafter defined). The "Maximum Amount" means the greater of (X) the
aggregate amount of all advances to the Guarantor made directly or indirectly
with the proceeds of Loans (as defined in the Credit Agreement) or (Y) 95% of
(a) the fair salable value of the assets of such Guarantor as of the date hereof
minus (b) the total liabilities of the Guarantor (including contingent
liabilities, but excluding liabilities of the Guarantor under this Guaranty and
the other Loan Documents and ESOP Loan Documents executed by the Guarantor) as
of the date hereof; provided further, however, that if the calculation of the
Maximum Amount in the manner provided above as of the date payment is required
of the Guarantor pursuant to this Guaranty would result in a greater positive
number, then the Maximum Amount shall be deemed to be such greater positive
number.
2. Guaranty Of Payment. This is a guaranty of payment and not merely of
collection. In the event of any default by the original obligor in payment or
otherwise on any of the Guarantied obligations, the Guarantor will pay all or
any portion of the Guarantied Obligations due or thereafter becoming due,
whether by acceleration or otherwise, without offset of any kind whatsoever,
without any Beneficiary first being required to make demand upon the original
obligor or pursue any of its rights against the original obligor, or against any
other Person, including other guarantors (whether or not party to this
Guaranty); and without being required to liquidate or to realize on any
collateral security. In any right of action accruing to any Beneficiary, such
Beneficiary may elect to proceed against (a) the Guarantor together with the
original obligor or obligors; (b) the Guarantor and the original obligor or
obligors individually; or (c) the Guarantor only without having first commenced
any action against the original obligor or obligors.
3. Right to Deal with Guarantied Obligations. Subject to the terms and
conditions of the Credit Agreement, any Beneficiary, without notice to
Guarantor, may deal with any Guarantied Obligations and any collateral security
therefor in such manner as it may deem advisable and may renew or extend the
Guarantied Obligations or any part thereof; accept partial payment, or settle,
release, compound, or compromise the same; demand additional collateral security
therefor, and substitute or release the same;
3
<PAGE>
and may compromise or settle with or release and discharge from liability any
other guarantor of any Guarantied Obligation, or any other Person liable to such
Beneficiary for all or any portion of the obligations of any original obligor;
all without impairing the liability of the Guarantor hereunder.
4. Other Waivers. Guarantor hereby unconditionally waives with respect to
this Guaranty: (a) notice of acceptance of this Guaranty by any Beneficiary and
any notice of the incurring by either or both of the Borrowers of any Guarantied
Obligation; (b) presentment for payment, protest, notice of protest and notice
of dishonor to any party including either of the Borrowers or the Guarantor; (c)
any disability of the original obligor or obligors or defense available to the
original obligor or obligors, including absence or cessation of any original
obligor's liability for any reason whatsoever; (d) any defense or circumstances
which might otherwise constitute a legal or equitable discharge of a guarantor
or surety except final and irrevocable payment in full of the Guarantied
Obligations; and (e) all rights under any state or federal statute dealing with
or affecting the rights of creditors.
5. Subordination. Until the Guarantied Obligations are paid in full and no
Beneficiary is under any further obligation to lend or extend funds or credit
which would constitute Guarantied Obligations, Guarantor hereby unconditionally
subordinates all present and future debts, liabilities or obligations of the
Borrower to such Guarantor to the Guarantied Obligations, and all amounts due
under such debts, liabilities, or obligations shall, upon the occurrence and
during the continuance of an Event of Default, be collected and paid over
forthwith to the Beneficiaries on account of the Guarantied Obligations and,
pending such payment, shall be held by the Guarantor as agent and bailee of the
Beneficiaries separate and apart from all other funds, property and accounts of
the Guarantor. Guarantor, at the reasonable request of any Beneficiary, shall
execute such further documents in favor of such Beneficiary to further evidence
and support the purpose of this Section 5. Until (i) all of the Guarantied
Obligations and all of the Guarantor's obligations hereunder shall have been
paid and satisfied in full and (ii) the lapse or expiration of any time period
in which any payment in respect of the Guarantied Obligations or hereunder is
subject to avoidance as a preferential or similar transfer under any applicable
bankruptcy, insolvency or similar law without any such claim for avoidance
having been made, Guarantor hereby irrevocably waives and releases any right or
rights of subrogation, contribution or similar claims against either of the
Borrowers or any other guarantor of any of the Guarantied Obligations existing
at law, by contract or otherwise.
6. Representations and Warranties. Guarantor represents and warrants to
the Beneficiaries that: (a) no other agreement, representation or special
condition exists between the Guarantor and any Beneficiary regarding the
liability of the Guarantor under this Guaranty; nor does any understanding exist
between the
4
<PAGE>
Guarantor and any Beneficiary that the obligations of the Guarantor under this
Guaranty are or will be other than as set out herein; and (b) as of the date
hereof, the Guarantor has no defense whatsoever to any action or proceeding that
may be brought to enforce this Guaranty. Furthermore, the Guarantor affirms to
the Beneficiaries that each of the representations and warranties contained in
the Credit Agreement or the Company Guaranty and made by either of the Borrowers
with respect to the Guarantor is true and correct.
7. No Waiver by Beneficiaries. No failure or delay on the part of any
Beneficiary 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. Failure by any Beneficiary
to insist upon strict performance hereof shall not constitute a relinquishment
of its right to demand strict performance at another time. Receipt by any
Beneficiary of any payment by any person on any Guarantied Obligation, with
knowledge of a default on any Guarantied Obligation or of a breach of this
Guaranty, or both, shall not be construed as a waiver of the default or breach.
8. CONTINUING GUARANTY; TERMINATION. THIS GUARANTY IS A CONTINUING
GUARANTY AND SHALL CONTINUE IN FULL FORCE AND EFFECT UNTIL SUCH TIME AS ALL
GUARANTIED OBLIGATIONS SHALL HAVE BEEN INDEFEASIBLY PAID IN FULL (OTHER THAN
GUARANTIED OBLIGATIONS IN THE NATURE OF CONTINUING INDEMNITIES OR EXPENSE
REIMBURSEMENT OBLIGATIONS NOT YET DUE AND PAYABLE) AND NO BENEFICIARY SHALL BE
UNDER ANY FURTHER OBLIGATION TO LEND OR TO ADVANCE FUNDS OR ISSUE LETTERS OF
CREDIT TO THE ACCOUNT OF THE BORROWERS OR EITHER OF THEM CONSTITUTING GUARANTIED
OBLIGATIONS.
9. Benefits of Agreement. This Guaranty is freely assignable and
transferable by the Beneficiaries to any permitted assignee and transferee of
any Guarantied Obligation; however, the duties and obligations of the Guarantor
may not be delegated or transferred by the Guarantor without the written consent
of all Beneficiaries. The rights and privileges of the Beneficiaries shall inure
to the benefit of their respective successors and assigns, and the duties and
obligations of the Guarantors shall bind their respective successors and
assigns.
10. Expenses; Indemnity. The Guarantor will upon demand pay to each
Beneficiary the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, which
it may reasonably incur in connection with enforcement of this Guaranty or the
failure by the Guarantor to perform or observe any of the provisions hereof. The
Guarantor agrees to indemnify and hold harmless each Beneficiary from and
against any and all claims, demands, losses, judgments and liabilities
(including liabilities for penalties) of whatsoever kind or nature, growing out
of or resulting from this Guaranty or
5
<PAGE>
the exercise by any Beneficiary of any right or remedy granted to it hereunder
or under the other Loan Documents or ESOP Loan Documents, other than such items
arising out of the bad faith, gross negligence or willful misconduct on the part
of such Beneficiary. If and to the extent that the obligations of the Guarantor
under this Section 10 are unenforceable for any reason, the Guarantor hereby
agrees to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
11. Amendments, Waivers and Consents. No amendment or waiver of any
provision of this Guaranty or consent to any departure by the Guarantor herefrom
shall in any event be effective unless the same shall be in writing and signed
(i) as to the Obligations, by the Guarantor and the Agent (which execution by
Agent shall be evidence that Agent has received the consent thereto of the
Lenders required to effect such amendment or waiver) and (ii) as to the ESOP
Obligations the Guarantor and NationsBank, and then such amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, that no such amendment, waiver or consent
shall (a) deprive any Beneficiary of the benefits generally of this Guaranty
without the written consent of such Beneficiary, or (b) alter the provisions of
this Section 11 without the written consent of all of the Beneficiaries.
12. Addresses for Notices. All notices and other communications provided
for hereunder shall be given in the manner set forth in Section 12.02 of the
Credit Agreement.
13. Interpretation; Partial Invalidity. Whenever possible each provision
of this Guaranty shall be interpreted in such manner as to be effective and,
valid under applicable law, but if any provision of this Guaranty shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Guaranty.
14. Miscellaneous; Remedies Cumulative. Unless the context of this
Guaranty otherwise clearly requires, references to the plural include the
singular, the singular the plural and the part the whole and "or" has the
inclusive meaning represented by the phrase "and/or." The section headings used
herein are for convenience of reference only and shall not define, limit or
extend the provisions of this Guaranty. All remedies hereunder are cumulative
and are not exclusive of any other rights and remedies of the Beneficiaries
provided by law or under the Credit Agreement, the other Loan Documents, or
other applicable agreements or instruments. The making of the Loans to the
Borrowers pursuant to the Credit Agreement and the ESOP Loan Agreement shall be
presumed conclusively to have been made or extended, respectively, in reliance
upon the obligations of the Guarantor incurred pursuant to this Guaranty.
6
<PAGE>
15. Pari Passu Obligations. The Guarantor, and by their acceptance of the
benefits hereof each of the Beneficiaries, acknowledge that, in the event the
Maximum Amount payable hereunder shall be less than aggregate amount of the
Obligations and the ESOP Obligations payable by the Guarantor hereunder, the
Obligations and the ESOP Obligations shall rank pari passu with respect to the
application of proceeds of payments hereunder to such Obligations and ESOP
obligations and, in accordance therewith, agree that such amounts, including
without limitation proceeds of collateral securing the Guarantor's obligations
hereunder, after payment of all expenses in connection with the administration
and liquidation of such collateral, shall be applied ratably to Obligations and
ESOP Obligations in accordance with the respective amounts thereof as of the
date of any application.
16. Governing Law. This Guaranty shall in all respects be governed by the
law of the State of Florida. Guarantor and the Beneficiaries each hereby (i)
submits to the jurisdiction and venue of the state and federal courts of Florida
for the purposes of resolving disputes hereunder or under any of the other Loan
Documents to which it is a party or for the purpose of collection and (ii)
waives trial by jury in connection with any such litigation.
17. Repayment or Recovery. If claim is ever made upon any Beneficiary for
repayment or recovery of any amount or amounts received in payment or on account
of any of the Guarantied Obligations and any of the Beneficiaries repays all or
part of said amount by reason of (a) any judgment, decree or order of any court
or administrative body having jurisdiction over such payee or any of its
property, or (b) any settlement or compromise of any such claim effected by such
Beneficiary with any such claimant (including the original obligor), then and in
such event the Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon it, notwithstanding any
revocation hereof or the cancellation of any Note or other instrument evidencing
any Guarantied Obligation or any security therefor, and the Guarantor shall be
and remain liable to the aforesaid Beneficiary for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by any such Beneficiary.
18. Set-Off. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of an Event of Default (as defined in
either of the Agreements), Guarantor agrees that each Beneficiary shall have a
lien for all the liabilities of the Guarantor upon all deposits or deposit
accounts, of any kind (other than deposits identified as being held for third
parties), or any interest in any deposits or deposit accounts thereof, now or
hereafter pledged, mortgaged, transferred or assigned to such Beneficiary or
otherwise in the possession or control of such Beneficiary (other than for
safekeeping) for any
7
<PAGE>
purpose for the account or benefit of the Guarantor and including any balance of
any deposit account or of any credit of the Guarantor with such Beneficiary,
whether now existing or hereafter established, hereby authorizing each
Beneficiary at any time or times, upon the occurrence and during the continuance
of an Event of Default, with or without prior notice (but with notice with
reasonable promptness after such set-off) to apply such balances or any part
thereof to such of the liabilities of the Guarantor to such Beneficiary then
past due and in such amounts as they may elect, and whether or not the
collateral or the responsibility of other Persons primarily, secondarily or
otherwise liable may be deemed adequate. For the purposes of this Section 18,
all remittances and property shall be deemed to be in the possession of such
Beneficiary as soon as the same may be put in transit to it by mail or carrier
or by other bailee.
19. Security. As security for the payment and performance by the Guarantor
of its obligations hereunder, the Guarantor has delivered to the Beneficiaries
an Amended and Restated Pledge and Security Agreement of even date herewith,
granting to the Beneficiaries a security interest in certain property of the
Guarantor therein specified.
20. References to Credit Agreement Definitions. In the event that the
Credit Agreement shall no longer be in effect at any time while this Guaranty
shall continue in effect or there shall otherwise continue to remain outstanding
Guarantied Obligations, all references to the Credit Agreement, including terms
defined by reference to their respective definitions contained in the Credit
Agreement, shall be deemed to refer to the Credit Agreement as in effect as of
the date hereof, with such amendments thereto to which the remaining
Beneficiaries shall have given express consent in accordance with the Loan
Documents and the ESOP Loan Documents.
21. Agency. Notwithstanding the foregoing references to the Beneficiaries,
Guarantor acknowledges and agrees that so long as NationsBank shall be the sole
Lender under the Credit Agreement, the term "Agent" shall mean NationsBank as
Lender. When and if there shall be more than one Lender party to the Credit
Agreement, then the term "Agent" shall refer to the Agent under the Credit
Agreement pursuant to the provisions of Article XI of the Credit Agreement, to
which reference is hereby made.
8
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officers hereunto duly authorized as of the date
first above written.
WITNESS: VITAS HEALTHCARE CORPORATION OF
PENNSYLVANIA
/s/ Terry L. Scaggs By: /s/ Mark W. Ohlendorf
- --------------------------------- ---------------------------------
Name: Mark W. Ohlendorf
/s/ Meganne Cusato Title: Vice President
- ---------------------------------
Address: 100 South Biscayne Boulevard
Miami, Florida 33131
Attention: Mark W. Ohlendorf
Telephone No. (305) 350-5922
Telefacsimile No. (305) 374-4765
9
<PAGE>
EXHIBIT 10.60
================================================================================
AMENDED AND RESTATED GUARANTY AND CONTINGENT PURCHASE AGREEMENT
Dated as of February 17, 1995
between
VITAS HEALTHCARE CORPORATION
and
NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION
relating to
$2,386,670 Term Loan to the
Vitas Healthcare Corporation Employee Stock Ownership Trust
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms ..................................... 3
SECTION 1.02. General ................................................... 19
ARTICLE II
GUARANTY AND CONTINGENT PURCHASE
SECTION 2.01. The Guaranty .............................................. 21
SECTION 2.02. Guaranty Unconditional .................................... 21
SECTION 2.03. Operation of Guaranty ..................................... 21
SECTION 2.04. Obligation of Guarantor Absolute .......................... 22
SECTION 2.05. Waiver of Notice .......................................... 22
SECTION 2.06. Postponement of Subrogation ............................... 23
SECTION 2.07. Security .................................................. 23
SECTION 2.08. Purchase of ESOP Loan Documents ........................... 24
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties ............................ 26
ARTICLE IV
AFFIRMATIVE COVENANTS
SECTION 4.01. Financial Reports, Etc. ................................... 35
SECTION 4.02. Maintain Properties ....................................... 37
SECTION 4.03. Existence, Qualification, Etc. ............................ 37
SECTION 4.04. Regulations and Taxes ..................................... 37
SECTION 4.05. Insurance ................................................. 37
SECTION 4.06. True Books ................................................ 38
SECTION 4.07. Perform Covenants ......................................... 38
SECTION 4.08. Right of Inspection ....................................... 38
SECTION 4.09. Observe all Laws .......................................... 38
SECTION 4.10. Governmental Licenses ..................................... 38
SECTION 4.11. Covenants Extending to Subsidiaries ....................... 38
SECTION 4.12. Officer's Knowledge of Default ............................ 38
SECTION 4.13. Suits or Other Proceedings ................................ 39
SECTION 4.14. Notice of Discharge of Hazardous Material or
Environmental Complaint ................................. 39
SECTION 4.15. Environmental Compliance .................................. 39
SECTION 4.16. Indemnification ........................................... 39
SECTION 4.17. Further Assurances ........................................ 39
SECTION 4.18. ERISA Requirement ......................................... 40
SECTION 4.19. Continued Operations ...................................... 40
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SECTION 4.20. Use of Proceeds ........................................... 40
SECTION 4.21. Trade Names ............................................... 40
SECTION 4.22. Property Location ......................................... 41
SECTION 4.23. Chief Executive Offices ................................... 41
SECTION 4.24. New Obligated Subsidiaries ................................ 41
SECTION 4.25. Sufficient Contributions .................................. 43
ARTICLE V
NEGATIVE COVENANTS
SECTION 5.01. Consolidated Shareholders' Equity ......................... 44
SECTION 5.02. Current Ratio ............................................. 44
SECTION 5.03. Consolidated Interest Coverage Ratio ...................... 44
SECTION 5.04. Consolidated Leverage Ratio ............................... 44
SECTION 5.05. Consolidated Fixed Charge Ratio ........................... 45
SECTION 5.06. Indebtedness .............................................. 45
SECTION 5.07. Liens ..................................................... 46
SECTION 5.08. Transfer of Assets ........................................ 47
SECTION 5.09. Investments; Acquisitions ................................. 47
SECTION 5.10. Dividends or Distributions ................................ 48
SECTION 5.11. Merger or Consolidation ................................... 49
SECTION 5.12. Change in Control ......................................... 49
SECTION 5.13. Transactions with Affiliates .............................. 49
SECTION 5.14. ERISA ..................................................... 50
SECTION 5.15. Fiscal Year ............................................... 50
SECTION 5.16. Dissolution, etc. ......................................... 51
SECTION 5.17. Rate Hedging Obligations .................................. 51
SECTION 5.18. Subordinated Obligations .................................. 51
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.01. Events of Default ........................................ 52
SECTION 6.02. Rights Upon an Event of Default .......................... 55
SECTION 6.03. No Remedy Exclusive ...................................... 55
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendments, Etc. .......................................... 56
SECTION 7.02. Notices, Etc. ............................................. 56
SECTION 7.03. No Waiver ................................................. 57
SECTION 7.04. Right of Set-off .......................................... 57
SECTION 7.05. Costs, Expenses and Taxes ................................. 57
SECTION 7.06. Binding Effect ............................................ 58
SECTION 7.07. Severability .............................................. 58
SECTION 7.08. Governing Law ............................................. 58
SECTION 7.09. Headings .................................................. 58
SECTION 7.10. Prior Agreements Superseded ............................... 58
SECTION 7.11. Counterparts .............................................. 58
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SECTION 7.12. Consents ................................................. 58
SECTION 7.13. Supplements to Schedules ................................. 59
EXHIBIT A Notice of Appointment (or Revocation)
of Authorized Representative ............................... 62
EXHIBIT B Compliance Certificate ..................................... 63
EXHIBIT C Form of Subsidiary Guaranty ................................ 70
EXHIBIT D Form of Subsidiary Security Agreement ...................... 71
Schedule 3.01(d) Subsidiaries and Investments
Schedule 3.01(f) Contingent and Other Obligations
Schedule 3.01(g) Existing Liens on the Collateral
Schedule 3.01(h) Taxes
Schedule 3.01(j) Litigation
Schedule 3.01(m) Exceptions Regarding Patents
Schedule 3.01(o) Consents and Notices
Schedule 3.01(r) Hazardous Materials
Schedule 3.01(t) Pending Administrative Matters
Schedule 4.05 Existing Insurance
Schedule 4.21 Trade Names
Schedule 4.22 Locations of Equipment and Inventory
Schedule 5.06 Indebtedness
Vitas agrees to provide a copy of this exhibit to the Commission upon request.
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AMENDED AND RESTATED GUARANTY AND CONTINGENT PURCHASE AGREEMENT (the
"Guaranty"), dated as of February 17, 1995, by and between VITAS HEALTHCARE
CORPORATION, a Delaware corporation (the "Guarantor"), and NATIONSBANK OF
FLORIDA, NATIONAL ASSOCIATION, a national banking association (the "Bank").
PRELIMINARY STATEMENTS:
(1) The Vitas Healthcare Corporation Employee Stock Ownership Trust, a
trust organized and existing under the Federal law and laws of the State of
Delaware (the "Borrower") formed pursuant to the Vitas Healthcare Corporation
Employee Stock Ownership Plan originally effective as of October 1, 1989 , as
amended to date (the "Plan"), entered into a Loan Agreement dated as of August
11, 1994 (as the same may be amended, modified or supplemented as therein
permitted, the "Agreement") with the Bank pursuant to which the Bank made a term
loan to the Borrower in the initial principal amount of $2,386,670 (the "Loan")
to refinance a securities acquisition loan to the Trust by the Guarantor in the
original principal amount of $2,864,000 made on or about December 17, 1991 (the
"Prior Loan").
(2) In connection with the making of the Loan, the Guarantor, as sponsor
of the Plan and lender of the Prior Loan, executed and delivered a Guaranty and
Contingent Purchase Agreement of even date with the Agreement (the "Prior
Guaranty") thereby (i) guaranteeing the payment and performance by the Borrower
of its obligations under the Agreement and other loan documents executed by the
Borrower in connection therewith and (ii) agreeing, upon the occurrence of
certain events, to purchase at the election of the Bank all of the right, title
and interest of the Bank (other than rights under the Security Agreement, as
defined below) in, to and under the Agreement and such other loan documents.
(3) The Guarantor and Vitas Healthcare Corporation of California, a
Subsidiary of the Guarantor ("Vitas California"), have entered into an Asset
Purchase Agreement with the Sellers (as hereinafter defined) dated as of
December 27, 1994 (the "Asset Purchase Agreement") pursuant to which Vitas
California has agreed to purchase substantially all of the operating assets of
the CHC Entities (as hereinafter defined) pursuant to the terms and subject to
the conditions set forth therein, and, in connection therewith the Guarantor has
requested the Bank to consent to such acquisition.
(4) The Bank is unwilling to consent to the acquisition transaction
described above unless the Prior Guaranty is amended and restated as herein
provided.
(5) The Guarantor has and will continue to materially and directly benefit
from the making and continuation of the Loan to Borrower and will materially
benefit from the consummation of the acquisition transaction described above,
and, therefore, to provide an inducement to the Bank to consent thereto, the
Guarantor is willing to enter into this Guaranty.
<PAGE>
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, including the covenants, terms and conditions
hereinafter appearing and in order to induce the Lender to make the Loan, the
parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Guaranty, in addition
to the terms defined above, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Accounts" of any Person means all accounts, accounts receivable,
contract rights, general intangibles, notes, bills, acceptances, choses in
action, chattel paper, instruments, documents, and other forms of
obligations at any time owing to such Person, the proceeds thereof and all
of such Person's rights with respect to any goods represented thereby,
whether or not delivered, goods returned by customers and all rights as an
unpaid vendor or lienor, including rights of stoppage in transit and of
recovering possession by proceedings including replevin and reclamation,
together with all customer lists, books and records, ledger and account
cards, computer tapes, software, disks, printouts and records, whether now
in existence or hereafter created, relating to Accounts.
"Affiliate" means a Person, other than a Subsidiary, (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with the Guarantor; (ii) which
is the beneficial owner (as defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) of 10% or more of any class of the
outstanding voting stock of the Guarantor; (iii) 10% or more of any class
of the outstanding voting stock (or in the case of a Person which is not a
corporation, 10% or more of the equity interest) of which is beneficially
owned or held by the Guarantor. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership of
voting stock, by contract or otherwise; provided, however, that when the
Guarantor registers any security issued by it pursuant to the Securities
Act of 1933, as amended, the figure 10% used throughout this definition
shall automatically be changed to 5%.
"Authorized Representative" means any of the President, chief
executive officer or chief financial officer of the Guarantor or, with
respect to financial matters, the Treasurer, any Assistant Treasurer or
chief financial officer of the Guarantor or any other person expressly
designated by the Board of Directors of the Guarantor (or the appropriate
committee thereof) as an Authorized Representative of the
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Guarantor, as set forth from time to time in a certificate in the form
attached hereto as Exhibit A.
"Board" means the Board of Governors of the Federal Reserve System
(or any successor body).
"Business Day" means any day which is not a Saturday, Sunday or a
day on which banks in the States of North Carolina or Florida are
authorized or obligated by law, executive order or governmental decree to
be closed.
"Capital Expenditures" means, for any period, the sum of (without
duplication) (i) all expenditures (whether paid in cash or accrued as
liabilities) by the Guarantor or any Subsidiary during that period that
are for items that would be classified as "property, plant or equipment"
or comparable items on the consolidated balance sheet of the Guarantor,
plus (ii) with respect to any Capital Lease entered into by the Guarantor
or its Subsidiaries during such period, the present Value of the lease
payments due under such Capital Lease over the term of such Capital Lease
applying a discount rate equal to the interest rate provided in such lease
(or in the absence of a stated interest rate that rate used in the
preparation of the financial statements described in Section 4.01(a)
hereof), excluding, however, the amount of any Capital Expenditures paid
for with proceeds of casualty insurance.
"Capital Leases" means all leases which have been or should be
capitalized in accordance with Generally Accepted Accounting Principles as
in effect from time to time including Statement No. 13 of the Financial
Accounting Standards Board and any successor thereof.
"CHC Entities" means, collectively, Community and the following
limited partnerships, of each of which Community is the sole general
partner as of the Closing Date: Community Hospice Care of Orange County,
Ltd. L.P., Community Hospice Care of San Diego Limited Partnership,
Community Hospice Care - Coastal Cities Limited Partnership, Community
Hospice Care - Inland Cities Limited Partnership, Community Hospice Care -
San Gabriel Valley Limited Partnership, Community Hospice Care - Valley
Cities, L. P., and Community Hospice Care - Los Angeles Cities, L.P.
"CHC Transaction" means the acquisition by Vitas California of
substantially all of the operating assets of the CHC Entities in
accordance with the terms of the Asset Purchase Agreement.
"CHC Transaction Documents" means, collectively, the Asset Purchase
Agreement, the Seller Notes, the Subordination Agreements, and the Bill of
Sale, Assumption Agreement, guaranty, Will Agreement, Joint Account
Agreement, Non-
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Competition Agreement and Will Non-Competition Agreement referred to in
the Asset Purchase Agreement (including in each case all exhibits and
schedules thereto).
"Closing Date" means the date of this Guaranty.
"Code" means the Internal Revenue Code of 1986, as amended, any
successor provision or provisions and any regulations promulgated
thereunder.
"Collateral" means, collectively, all collateral or security at any
time granted to the Bank in its capacity as lender under the Agreement and
as agent for the lenders under the Revolving Credit Agreement by the
Borrower, the Guarantor, the Subsidiaries or any other Person pursuant to
the Security Documents.
"Community" means Community Hospice Care, Inc., a California
corporation.
"Consistent Basis" in reference to the application of Generally
Accepted Accounting Principles means the accounting principles observed in
the period referred to are comparable in all material respects to those
applied in the preparation of the audited financial statements of the
Guarantor referred to in Section 3.0l(f)(i) hereof, subject to Section
1.02 hereof.
"Consolidated Current Assets" means cash and all other assets of the
Guarantor and its Subsidiaries which are expected to be realized in cash,
sold in the ordinary course of business, or consumed within one year or
which would be classified as a current asset, all determined in accordance
with Generally Accepted Accounting Principles applied on a Consistent
Basis.
"Consolidated Current Liabilities" means all liabilities of the
Guarantor and its Subsidiaries which by their terms are payable within one
year (including all Indebtedness payable on demand or maturing not more
than one year from the date of computation and the current portion of
Indebtedness having a maturity date in excess of one year, but excluding
in all cases the Revolving Credit Debit Balance, the Term Loan and the
Seller Notes (each as defined in the Revolving Credit Agreement)), all
determined in accordance with Generally Accepted Accounting Principles
applied on a Consistent Basis.
"Consolidated EBITDAR" means, with respect to the Guarantor and its
Subsidiaries for any period of computation thereof, the sum of, without
duplication, (i) Consolidated Net Income, plus (ii) Consolidated Interest
Expense accrued during such period, plus (iii) taxes on income accrued
during such period, plus (iv) amortization accrued during such period,
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plus (v) any depreciation during such period, plus (vi) all contributions
made or accrued by the Guarantor during such period related to the ESOP,
plus (vii) Consolidated Rentals, all determined on a consolidated basis in
accordance with Generally Accepted Accounting Principles applied on a
Consistent Basis.
"Consolidated Fixed Charge Ratio" means, with respect to the
Guarantor and its Subsidiaries for the Four-Quarter Period ending on the
date of computation thereof, the ratio of (a) Consolidated EBITDAR minus
Capital Expenditures (other than (i) Capital Expenditures of up to
$2,300,000 in the aggregate incurred in connection with the operation of
the business acquired in the CHC Transaction and (ii) Capital Expenditures
incurred under Capital Leases) to (b) Consolidated Fixed Charges.
"Consolidated Fixed Charges" means, with respect to the Guarantor
and its Subsidiaries, for any period of computation thereof, the sum of,
without duplication, (i) Consolidated Interest Expense accrued during such
period, (ii) dividends and distributions (other than dividends payable
solely in capital stock of the Guarantor) paid during such period,
including Preferred Stock Redemptions, but excluding redemptions of
Preferred Stock effected in connection with and funded with proceeds of
the Borrower's offering of Qualified Equity Securities, (iii) required
principal payments of Consolidated Funded Indebtedness required to be paid
during such period (but excluding any principal payments that might be
required under the Revolving Credit Agreement), and (iv) Consolidated
Rentals.
"Consolidated Funded Indebtedness" means Indebtedness for Money
Borrowed of the Guarantor and its Subsidiaries and the ESOP Debt.
"Consolidated Indebtedness" means all Indebtedness of the Guarantor
and its Subsidiaries, all determined on a consolidated basis and including
the ESOP Debt.
"Consolidated Interest Coverage Ratio" means, with respect to the
Guarantor and its Subsidiaries for the Four-Quarter Period ending on the
date of computation thereof, the ratio of (a) Consolidated Net Income plus
to the extent deducted in determining Consolidated Net Income (i) taxes
based on income accrued during such period, (ii) Consolidated Interest
Expense, plus (iii) all contributions made or accrued by the Guarantor
during such period related to the ESOP to (b) Consolidated Interest
Expense.
"Consolidated Interest Expense" means, with respect to any period of
computation thereof, the gross interest expense of the Guarantor and its
Subsidiaries accrued during such
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period and including interest expense payable in respect of the ESOP Debt,
including without limitation (i) the amortization of debt discounts, (ii)
the amortization of all fees (including, without limitation, fees payable
in respect of a Swap Agreement) payable in connection with the incurrence
of Indebtedness to the extent included in interest expense and (iii) the
portion of any liabilities incurred in connection with Capital Leases
allocable to interest expense, all determined on a consolidated basis in
accordance with Generally Accepted Accounting Principles applied on a
Consistent Basis.
"Consolidated Leverage Ratio" means the ratio of Consolidated Funded
Indebtedness to Consolidated Total Capital.
"Consolidated Net Income" means, for any period of computation
thereof, the gross revenues from operations of the Guarantor and its
Subsidiaries (including payments received by the Guarantor and its
Subsidiaries of (i) interest income, and (ii) dividends and distributions
made in the ordinary course of their businesses by Persons in which
investment is permitted pursuant to Section 5.09 and not related to an
extraordinary event) less all operating and non-operating expenses of the
Guarantor and its Subsidiaries including taxes on income (excluding,
however, up to $800,000 of expenses incurred in connection with
preparation of a proposed public offering of the Guarantor's capital stock
that was not pursued due to market conditions) all determined on a
consolidated basis in accordance with Generally Accepted Accounting
Principles applied on a Consistent Basis; but excluding as income: (i) net
gains on the sale, conversion or other disposition of capital assets, (ii)
net gains on the acquisition, retirement, sale or other disposition of
capital stock and other securities of the Guarantor or its Subsidiaries,
(iii) net gains on the collection of proceeds of life insurance policies,
(iv) any write-up of any asset, and (v) any other net gain or credit of an
extraordinary nature as determined in accordance with Generally Accepted
Accounting Principles applied on a Consistent Basis.
"Consolidated Rentals" means and includes with respect to any period
of determination thereof, the aggregate amount of all fixed payments
(including as such all payments which the lessee is obligated to make to
the lessor on termination of the lease or surrender of the leased
property) payable by the Guarantor or any of its Subsidiaries, as lessee
or sublessee under any lease of real property, or with respect to
inpatient facilities, any lease of real or personal property, and shall
include any amounts required to be paid by the Guarantor or any of its
Subsidiaries (whether or not designated as rents or additional rents) on
account of maintenance, repairs, insurance, taxes and similar charges.
7
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"Consolidated Shareholders' Equity" means, at any time as of which
the amount thereof is to be determined, the sum of the following in
respect of the Guarantor and its Subsidiaries (determined on a
consolidated basis and excluding intercompany items among the Borrower and
its Subsidiaries and any upward adjustment after the Closing Date due to
revaluation of assets): (i) the amount of issued and outstanding capital
stock, plus (ii) the amount of additional paid-in capital and retained
income (or, in the case of a deficit, minus the amount of such deficit),
minus, without duplication, (iii) the amount of any deferred compensation
or other contra-equity account in respect of the ESOP Debt), in each case
as determined in accordance with Generally Accepted Accounting Principles
applied on a Consistent Basis, except that regardless of the treatment
thereof under Generally Accepted Accounting Principles, the Preferred
Stock and Qualified Equity Securities shall be considered part of
Consolidated Shareholders' Equity for purposes of this Guaranty.
"Consolidated Total Capital" means the sum of Consolidated Funded
Indebtedness and Consolidated Shareholders' Equity.
"Contingent Obligation" of any Person means all contingent
liabilities required (or which, upon the creation or incurring thereof,
would be required) to be included in the consolidated financial statements
(including footnotes) of such Person in accordance with Generally Accepted
Accounting Principles applied on a Consistent Basis, including Statement
No. 5 of the Financial Accounting Standards Board, and any obligation of
such Person guaranteeing or in effect guaranteeing any Indebtedness,
dividend or other obligation of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, including obligations of
such Person however incurred:
(1) to purchase such Indebtedness or other obligation or any
property or assets constituting security therefor;
(2) to advance or supply funds in any manner (i) for the
purchase or payment of such Indebtedness or other obligation, or
(ii) to maintain a minimum working capital, net worth or other
balance sheet condition or any income statement condition of the
primary obligor;
(3) to grant or convey any lien, security interest, pledge,
charge or other encumbrance on any property or assets of such Person
to secure payment of such Indebtedness or other obligation;
(4) to lease property or to purchase securities or other
property or services primarily for the purpose of
8
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assuring the owner or holder of such Indebtedness or obligation of
the ability of the primary obligor to make payment of such
Indebtedness or other obligation; or
(5) otherwise to assure the owner of the Indebtedness or such
obligation of the primary obligor against loss in respect thereof.
with respect to Contingent Obligations, such liabilities shall be computed
at the amount which, in light of all the facts and circumstances existing
at the time, represent the present value of the amount which can
reasonably be expected to become an actual or matured liability.
"Cost of Acquisition" means the sum of the purchase price, as
reflected in any definitive agreement to acquire all or any portion of the
stock or all or any portion of the assets of any Person plus, without
duplication, any Indebtedness assumed by the Guarantor or its Subsidiaries
in connection with such acquisition.
"Default" shall mean an Event of Default or an event that with
notice or lapse of time or both would become an Event of Default.
"Default Rate" shall mean the Prime Rate plus two percent (2%) per
annum.
"Eligible Securities" means the following obligations and any other
obligations previously approved in writing by the Bank:
(a) Government Securities;
(b) the following debt securities of the following agencies or
instrumentalities of the United States of America if at all times
the full faith and credit of the United States of America is pledged
to the full and timely payment of all interest and principal
thereof:
(i) all direct or fully guaranteed obligations of the
United States Treasury; and
(ii) mortgage-backed securities and participation
certificates guaranteed by the Government National Mortgage
Association or any successor thereto;
(c) the following obligations of the following agencies or
instrumentalities of the United States of America:
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(i) participation certificates and debt obligations of
the Federal Home Loan Mortgage Corporation or any successor
thereto;
(ii) consolidated debt obligations, and obligations
secured by a letter of credit, of any of the Federal Home Loan
Banks; and
(iii) debt obligations and mortgage-backed securities of
the Federal National Mortgage Association or any successor
thereto which have not had the interest portion thereof
severed therefrom;
(d) obligations of any corporation organized under the laws of
any state of the United States of America or under the laws of any
other nation, payable in the United States of America, expressed to
mature not later than one year following the date of purchase
thereof and rated in an investment grade rating category by S&P and
Moody's;
(e) interest bearing demand or time deposits issued by the
Bank or certificates of deposit maturing within one year from the
date of acquisition issued by a bank or trust company organized
under the laws of the United States or of any state thereof having
capital surplus and undivided profits aggregating at least
$400,000,000 and being rated A-3 or better by S&P or A or better by
Moody's;
(f) Repurchase Agreements;
(g) Pre-Refunded Municipal Obligations;
(h) shares of mutual funds which invest in obligations
described in paragraphs (a) through (g) above, the shares of which
mutual funds are at all times rated "AAA" by S&P;
(i) asset-backed remarketed certificates of participation
representing a fractional undivided interest in the assets of a
trust, which certificates are rated at least "A-l" by S&P and "P-l"
by Moody's; and
(j) any other obligation or security, the investment in which
is consistent with the Guarantor's written investment policies, a
copy of which has been delivered by the Guarantor to the Bank.
Obligations which are in book-entry form must be held in a
book-entry custody account with any Federal Reserve Bank or with a
clearing corporation or chain of clearing corporations which has an
account with any Federal Reserve Bank.
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"Environmental Laws" means, collectively, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, the Superfund Amendments and Reauthorization Act of 1986, the
Resource Conservation and Recovery Act, the Toxic Substances Control Act,
as amended, the Clean Air Act, as amended, the Clean Water Act, as
amended, any other "Superfund" or "Superlien" law or any other federal, or
applicable state or local statute, law, ordinance, code, rule, regulation,
order or decree regulating, relating to, or imposing liability or
standards of conduct concerning, any hazardous, toxic or dangerous waste,
substance or material.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder, all as the same shall be
in effect at such time.
"ESOP Debt" means, as of any date of computation thereof, the
aggregate principal amount of the indebtedness outstanding under the ESOP
Loan Documents.
"ESOP Loan Documents" means the Agreement and all promissory notes,
pledge agreements and other documents, instruments and agreements now or
hereafter delivered to the Bank evidencing or relating to the indebtedness
incurred pursuant to the Agreement, as any of such documents may have been
or hereafter be amended, modified or supplemented as therein and herein
permitted.
"Event of Default" shall have the meaning assigned to such term in
Article VI hereof.
"Fiscal Year" means the 12 month period of the Guarantor ending on
September 30 of each calendar year and commencing on October 1 of each
calendar year, subject to change pursuant to Section 5.15 hereof.
"Four-Quarter Period" means a period of four full consecutive
quarterly periods, taken together as one accounting period.
"Generally Accepted Accounting Principles" means generally accepted
accounting principles in effect in the United States of America as applied
by nationally recognized accounting firms.
"Government Receivables" means Accounts of the Guarantor or any
Subsidiary as to which the United States of America or any State or agency
or instrumentality thereof (including, without limitation, any agent,
fiscal intermediary or carrier acting on behalf or under the direction of
the United States of America or any State or agency or instrumentality
thereof) is the account obligor.
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"Government Securities" means direct obligations of, or obligations
the timely payment of principal and interest on which are fully and
unconditionally guaranteed by, the United States of America.
"Governmental Authority" shall mean any Federal, state, municipal,
national or other governmental department, commission, board, bureau,
agency or instrumentality or political subdivision thereof or any entity
or officer exercising executive, legislative or judicial, regulatory or
administrative functions of or pertaining to any government or any court,
in each case whether of a state, territory or possession of the United
States, the United States, a foreign governmental entity or the District
of Columbia.
"Hazardous Material" means and includes any hazardous, toxic or
dangerous waste, substance or material, the generation, handling, storage,
disposal, treatment or emission of which is subject to any Environmental
Law.
"Indebtedness" means with respect to any Person, without
duplication, all Indebtedness for Money Borrowed, all indebtedness of such
Person for the acquisition of property, all indebtedness secured by any
Lien on the property of such Person whether or not such indebtedness is
assumed (but if not assumed, then the amount of such indebtedness shall be
the lower of the amount thereof or the book value of such property), all
liability of such Person by way of endorsements (other than for collection
or deposit in the ordinary course of business), all Contingent
Obligations; but excluding all accounts payable in the ordinary course of
business so long as payment therefor is due within one year; provided that
in no event shall the term Indebtedness include shareholders' capital,
surplus and retained earnings, minority interest in Subsidiaries, lease
obligations (other than pursuant to Capital Leases), the Preferred Stock,
obligations to pay dividends on or to redeem the Preferred Stock,
Qualified Equity Securities, reserves for deferred income taxes and
investment credits, other deferred credits and reserves, including,
without limitation, unearned Medicare prospective payments, and deferred
compensation obligations (except that deferred compensation obligations
relating to the ESOP Debt shall constitute Indebtedness).
"Indebtedness for Money Borrowed" means all indebtedness in respect
of money borrowed, including without limitation all Capital Leases and the
deferred purchase price of any property or asset, evidenced by a
promissory note, bond or similar written obligation for the payment of
money (including, but not limited to, conditional sales or similar title
retention agreements) and shall include the ESOP Debt.
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"Individual Sellers" means, collectively, Connie A. Black, a
resident of the State of California, and Dennis Rezendes, a resident of
the State of Colorado, each a signatory to the Asset Purchase Agreement.
"Lien" means any interest in property securing any obligation owed
to, or a claim by, a Person other than the owner of the property, whether
such interest is based on the common law, statute or contract, and
including but not limited to the lien or security interest arising from a
mortgage, encumbrance, pledge, security agreement, conditional sale or
trust receipt or a lease, consignment or bailment for security purposes.
For the purposes of this Guaranty, the Guarantor and its Subsidiaries
shall be deemed to be the owners of any property which any of them have
acquired or hold subject to a conditional sale agreement, financing lease,
or other arrangement pursuant to which title to the property has been
retained by or vested in some other Person for security purposes.
"Moody's" means Moody's Investors Service, Inc., a Delaware
corporation, or any successor thereto.
"Multi-employer Plan" means an employee pension benefit plan covered
by Title IV of ERISA and in respect of which the Guarantor or any
Subsidiary is an "employer" as described in Section 4001(b) of ERISA,
which is also a multi-employer plan as defined in Section 4001(a)(3) of
ERISA.
"Obligated Subsidiary" means, collectively, (i) Vitas California,
Vitas Healthcare Corporation of Florida, a Florida corporation, Vitas
Healthcare Corporation of Ohio, a Delaware corporation, Vitas Healthcare
Corporation of Pennsylvania, a Delaware corporation, (ii) every other
Subsidiary of the Guarantor, existing as of the Closing Date, and every
Strategic Investment Subsidiary, which (x) in any calendar month shall
have operating revenues of $50,000 or more and (y) shall have executed and
delivered a Guaranty pursuant to Section 4.24 hereof, and (iii) every
other Subsidiary (excluding Strategic Investment Subsidiaries) of the
Guarantor hereafter organized or acquired which shall have executed and
delivered a Guaranty pursuant to Section 4.24 hereof.
"New Guaranty Event" shall have the meaning therefor provided in
Section 4.24.
"9% Preferred Stock" means the 9.0% Cumulative Nonconvertible
Preferred Stock, par value $1.00 per share, issued by the Guarantor, of
which 270,000 shares are issued and outstanding as of the Closing Date.
"Permitted Acquisition" means the acquisition by Guarantor or any
Subsidiary of any Person or the assets of any
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Person, which satisfies the following: (i) such Person is or the assets of
such Person are used in the same or similar line of business as that
engaged in by Guarantor, (ii) the Person acquired does not oppose such
acquisition, (iii) such Person (to the extent a separate entity is
acquired or results) becomes a Subsidiary and is consolidated with
Guarantor for financial reporting purposes or the assets acquired from
such Person are owned by Guarantor or a Subsidiary, (iv) if the Cost of
Acquisition exceeds $2,500,000, the Bank shall have consented thereto, and
(v) no Default or Event of Default exists immediately after giving effect
to such acquisition.
"Permitted Liens" means those Liens described in subsections (i)
through (vii) of Section 5.07 hereof.
"Person" means an individual, partnership, corporation, trust,
unincorporated organization, association, joint venture or a government or
agency or political subdivision thereof.
"Pledge Agreement" shall mean the Pledge Agreement of even date with
the Agreement from the Borrower to the Bank, as amended, modified or
supplemented from time to time.
"Preferred Stock" means , collectively, the 9% Preferred Stock and
the Series B Preferred Stock.
"Preferred Stock Redemption" means (i) with respect to 9% Preferred
Stock, redemptions made by Guarantor pursuant to Section 3(b) of the
Certificate of Designation, Preferences and Other Rights of 9.0%
Cumulative Nonconvertible Preferred Stock of Guarantor, and (ii) with
respect to Series B Preferred Stock, redemptions made by Guarantor
pursuant to Sections 3(a) and 3(b) of the Certificate of Designation,
Preferences and Other Rights of the Series B Convertible Preferred Stock
of Guarantor.
"Pre-Refunded Municipal Obligations" means obligations of any state
of the United States of America or of any municipal corporation or other
public body organized under the laws of any such state which are rated,
based on the escrow, in the highest investment rating category by both S&P
and Moody's and which have been irrevocably called for redemption and
advance refunded through the deposit in escrow of Government Securities or
other debt securities which are (i) not callable at the option of the
issuer thereof prior to maturity, (ii) irrevocably pledged solely to the
payment of all principal and interest and other charges on such
obligations as the same becomes due and (iii) in a principal amount and
bear such rate or rates of interest as shall be sufficient to pay in full
all principal of, interest, and premium, if any, on such obligations as
the same becomes due as verified by a nationally recognized firm of
certified public accountants.
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"Prime Rate" shall mean that rate of interest announced from time to
time by the Bank to be its prime rate. The Prime Rate is not necessarily
the best or the lowest rate of interest offered by the Bank.
"Projection of Combined Entities" means the Vitas Healthcare
Corporation Analysis of Community Hospice Care, Inc. dated as of January
24, 1995;
"Purchase Event" means any Event of Default as defined in Article VI
hereof.
"Qualified Equity Securities" means either of the following types of
equity securities of the Guarantor sold in a public or private offering:
(i) common stock; or
(ii) preferred stock having no right to the payment of cash
dividends or other similar cash distributions and as to which the
Guarantor has no obligation to redeem, repurchase or otherwise
retire any of such securities during the period from the date of
issuance thereof until not earlier than 91 days following the full
payment and satisfaction of the obligations arising under this
Guaranty and termination of this Guaranty, the net proceeds of which
preferred stock are used to the extent necessary to redeem in whole
the Series A Preferred Stock;
provided that in either case such securities are issued substantially
simultaneously with or following either (x) the redemption in full of the
Series B Preferred Stock or (y) amendment of the Series B Preferred Stock
(and related Certificate of Designature, Preferences and Other Rights) in
form and substance reasonably acceptable to the Agent in order to
eliminate any obligation of the Guarantor to redeem, repurchase or
otherwise retire any of such securities until not earlier than 91 days
following the full payment and satisfaction of the obligations arising
under this Guaranty and termination of this Guaranty.
"Rate Hedging Obligations" means any and all obligations of the
Guarantor, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor), under
(a) any and all agreements, devices or arrangements designed to protect at
least one of the parties thereto from the fluctuations of interest rates,
exchange rates or forward rates applicable to such party's assets,
liabilities or exchange transactions, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements,
forward currency exchange
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agreements, interest rate cap or collar protection agreements, forward
rate currency or interest rate options, puts, warrants and those commonly
known as interest rate "swap" agreements; and (b) any and all
cancellations, buybacks, reversals, terminations or assignments of any of
the foregoing.
"Repurchase Agreement" means a repurchase agreement entered into
with any financial institution whose debt obligations or commercial paper
are rated "A" by either of S&P or Moody's or "A-1" by S&P or "P-1" by
Moody's.
"Required New Obligated Subsidiary" shall have the meaning therefor
provided in Section 4.24.
"Revolving Credit Agreement" means the Amended and Restated
Revolving Credit, Term Loan and Reimbursement Agreement of even date
herewith among the Guarantor, NationsBank of Florida, National
Association, as agent, and the lenders signatories thereto, as the same
may be amended, modified or supplemented as therein permitted.
"Revolving Credit Loan Documents" shall have the meaning ascribed to
the term "Loan Documents" provided in the Revolving Credit Agreement."
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, or any successor thereto.
"Security Agreement" means the Amended and Restated Pledge and
Security Agreement dated as of the date hereof by the Guarantor to the
Bank pursuant to which the Guarantor, inter alia, grants a security
interest in the Collateral (i) to the Agent (as defined in the Revolving
Credit Agreement) for the ratable benefit of the lenders as security for
the Obligations under the Revolving Credit Loan Documents and (ii) to the
Bank as security for the obligations of Guarantor hereunder, as the same
may be modified, amended or supplemented from time to time as herein and
therein permitted.
"Security Agreements" means, collectively, the Security Agreement
and the Subsidiary Security Agreements.
"Security Documents" means the Security Agreement, the Subsidiary
Security Agreements, the financing statements required to perfect a
security interest in the Collateral, the stock certificates evidencing the
Guarantor's equity interests in all Subsidiaries with duly executed stock
powers in blank affixed thereto ("Subsidiary Stock"), and such other
documents and instruments as the Agent may require to create or perfect a
security interest in the Collateral.
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"Series B Preferred Stock" means the Series B Convertible Preferred
Stock, par value $1.00 per share, issued by the Guarantor, of which
262,500 shares are issued and outstanding as of the Closing Date.
"Single Employer Plan" means any employee pension benefit plan
covered by Title IV of ERISA and in respect of which the Borrower or any
Subsidiary is an "employer" as described in Section 4001(b) of ERISA,
which is not a Multi-employer Plan.
"Solvent" means, when used with respect to any Person, that at the
time of determination:
(i) the fair value of its assets (both at fair valuation and
at present fair saleable value on an orderly basis) is in excess of
the total amount of its liabilities, including, without limitation,
Contingent Obligations; and
(ii) it is then able and expects to be able to pay its debts
as they mature; and
(iii) it has capital sufficient to carry on its business as
presently conducted.
"Strategic Investment" means an equity investment not constituting a
Permitted Acquisition by the Guarantor or any Subsidiary in, or any loan
or advance by the Guarantor or any Subsidiary to, a Person (i) not
constituting a Subsidiary at the time of such investment and (ii) who is
engaged in the same or similar line of business as the Guarantor, which
investment (a) is not opposed by the Person in whom such investment is
made, (b) is made pursuant to an interest or plan reflected in the minutes
of the board of directors (or appropriate committee thereof) of the
Guarantor or Subsidiary making such investment, either to acquire all or
substantially all of the stock or assets of such Person or to enter into a
joint venture, co-ownership or similar arrangement through such
investment, and (c) does not, and so far as can reasonably be foreseen
will not, give rise to or result in any Indebtedness (including any
Contingent Obligation) or other liability of, or claim against the assets
of, Guarantor or any Subsidiary (other than claims against the related
Strategic Investment itself), whether as a result of being a general
partner or joint venturer, an owner or operator of any facility or
property, or otherwise by operation of any contract, commitment, statute
or principle of law.
"Strategic Investment Subsidiary" means any Subsidiary used for the
primary purpose of making one or more Strategic Investments.
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"Subordination Agreements" means, collectively, the Subordination
Agreement-A and the Subordination Agreement-B, each of even date herewith
from the CHC Entities subordinating the Seller Notes and certain other
rights to payment under the Asset Purchase Agreement to the payment and
satisfaction of certain obligations, as the same may be amended, modified
or supplemented from time to time as therein permitted.
"Subordinated Obligations" has the meaning provided in the
Subordination Agreements.
"Subsidiary" means any corporation or other entity in which more
than 50% of its outstanding voting stock or more than 50% of all equity
interests is owned directly or indirectly by the Guarantor and/or by one
or more of the Guarantor's Subsidiaries.
"Subsidiary Guaranty" means (i) as to all Persons who executed and
delivered a "Subsidiary Guaranty" under and as defined in the Prior
Guaranty, each Amended and Restated Guaranty and Suretyship Agreement of
an Obligated Subsidiary of even date herewith, (ii) as to Vitas
California, the Guaranty and Suretyship Agreement of Vitas California of
even date herewith, and (iii) as to Persons delivering a Guaranty pursuant
to Section 4.24 hereof, each Guaranty and Suretyship Agreement dated as of
the date of delivery thereof, in favor of the Bank, as the same may be
amended, modified or supplemented.
"Subsidiary Security Agreement" means (i) as to all Persons who
executed and delivered a "Subsidiary Security Agreement" under and as
defined in the Prior Guaranty, the Amended and Restated Pledge and
Security Agreement of each Obligated Subsidiary dated as of the date
hereof as to an Obligated Subsidiary in existence as of the date hereof,
(ii) as to Vitas California, the Pledge and Security Agreement of Vitas
California of even date herewith, and (iii) as to Persons delivering a
Pledge and Security Agreement pursuant to Section 4.24 hereof, each Pledge
and Security Agreement dated the date of such delivery, by an Obligated
Subsidiary of the Guarantor to the Agent pursuant to which such Obligated
Subsidiary, inter alia, grants a security interest in Collateral (i) to
the Agent (as defined in the Revolving Credit Agreement) for the ratable
benefit of the lenders under the Revolving Credit Loan Documents, and (ii)
to the Bank, as security for the obligations of such Obligated Subsidiary
under its Subsidiary Guaranty, as the same may be modified, amended or
supplemented from time to time as herein and therein permitted.
"Successor Preferred Stock" means preferred stock of the Guarantor
(a) described in clause (ii) of the definition of "Qualified Equity
Securities" in this Section 1.01 issued in
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connection with (and the net proceeds of which issue are utilized to fund)
the redemption in full of the 9% Preferred Stock, or (b) (ii) having terms
which are approved by the Bank.
"Swap Agreement" means one or more agreements with respect to
Indebtedness evidenced by the promissory notes of the Guarantor
constituting Revolving Credit Loan Documents, between the Guarantor and
another Person, on terms mutually acceptable to such Guarantor and such
Person, which agreements create Rate Hedging Obligations.
"Will Agreement" has the meaning therefor provided in the Asset
Purchase Agreement.
"Will Entities" means, collectively, Vernon R. Will and WilCare
Corporation, a California corporation, signatories to the Will Agreement.
SECTION 1.02. General. All accounting terms not specifically defined
herein shall have the meanings assigned to such terms and shall be interpreted
in accordance with Generally Accepted Accounting Principles applied on a
Consistent Basis; provided, however, if any change in Generally Accepted
Accounting Principles or, if applicable, Regulation S-X promulgated pursuant to
the Securities Act of 1933, as amended, in effect on the date hereof shall
result in a change in any calculation (or the meaning or effect of any
calculation) required to determine compliance with any provision contained in
this Guaranty, the Guarantor and the Bank will amend such provision in a manner
to reflect such change such that the determination of compliance with such
provision shall yield the same result as would have obtained prior to such
change in Generally Accepted Accounting Principles or Regulation S-X. Until an
amendment is entered into covenants shall be calculated in accordance with
Generally Accepted Accounting Principles as in effect immediately preceding such
change.
All references in this instrument to designated "Articles", "Sections" and
other subdivisions are to the designated Articles, Sections and subdivisions of
this instrument as originally executed.
The terms "herein", "hereof" and "hereunder" and other words of similar
import refer to this Guaranty as a whole and not to any particular Article,
Section or other subdivision.
The terms "include," "including" and similar terms shall be construed as
if followed by the phrase "without being limited to."
All Article and Section captions herein are used for reference only and in
no way limit or describe the scope or intent of, or in any way affect, this
Guaranty.
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Words importing the singular number shall mean and include the plural
number and visa versa.
All recitals set forth in this Guaranty are hereby incorporated in the
operative provisions of this Guaranty.
No inference in favor of or against either party shall be drawn from the
fact that such party or its counsel has drafted any portion hereof.
In the event of any conflict or inconsistency between this Guaranty and
the Revolving Credit Agreement, the Revolving Credit Agreement shall govern and
control.
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ARTICLE II
GUARANTY AND CONTINGENT PURCHASE
SECTION 2.01. The Guaranty. Guarantor hereby unconditionally and
absolutely (i) guarantees to the Bank the full and prompt payment and
performance by Borrower of all its obligations under the ESOP Loan Documents,
including without limitation its obligations to pay interest, principal, fees,
expenses and indemnification amounts when and as the same shall become due
whether at the stated maturity thereof, by acceleration or otherwise, and (ii)
agrees to pay any and all reasonable expenses (including reasonable attorneys'
fees) incurred by the Bank in enforcing its rights under this Guaranty.
SECTION 2.02. Guaranty Unconditional. This Guaranty shall be a continuing,
absolute and unconditional guaranty and shall remain in full force and effect
until all of the obligations of Borrower under the ESOP Loan Documents shall
have been paid and satisfied in full and the ESOP Loan Documents terminated,
provided that the guarantee hereunder of indemnification obligations of Borrower
shall survive. The obligations of Guarantor hereunder shall arise absolutely and
unconditionally upon the making of the Loan to the Borrower.
SECTION 2.03. Operation of Guaranty. This is a guaranty of payment and not
of collection, and Guarantor expressly waives any right to require that any
action be brought against Borrower or to require that resort be had to any
security, whether held by or available to the Bank or to any other Person. If
Borrower shall default in payment of principal, interest, fees or any other
amount payable under the ESOP Loan Documents when and as the same shall become
due, whether at stated maturity, by acceleration, upon demand, or otherwise, or
upon the occurrence of any other Event of Default hereunder, Guarantor, upon
demand by the Bank or its successors or assigns, will promptly and fully make
such payments. Guarantor will pay all reasonable costs and expenses, including
reasonable attorneys' fees, paid or incurred by the Bank or its successors or
assigns, under this Guaranty. All payments by Guarantor shall be made in
immediately available freely transferable coin or currency of the United States
of America which on the respective dates of payment thereof is legal tender for
the payment of public and private debts. Each Event of Default under the ESOP
Loan Documents shall give rise to a separate cause of action hereunder, and
separate suits may be brought hereunder as each cause of action arises. The Bank
or its successors or assigns, in its sole discretion, shall have the right to
proceed first and directly against Guarantor and its successors and assigns. In
the event that any amount payable hereunder is not paid when due, then (without
limiting the rights of the Bank under Section 5.01 hereof) such amount shall
bear interest until paid in full at the lesser of the Default Rate or the
maximum rate permitted by applicable law.
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SECTION 2.04. Obligation of Guarantor Absolute. The obligations of
Guarantor hereunder shall not be impaired, modified, released or limited by any
occurrence or condition whatsoever, including without limitation (a) the release
of any co-guarantor or any compromise, settlement, release, waiver, renewal,
extension, indulgence or modification of or change in any of the obligations and
liabilities of Borrower contained in the ESOP Loan Documents, (b) any
impairment, modification, release or limitation of the liability of Borrower or
its estate in bankruptcy, or any other security for the ESOP Loan Documents
other than any such impairment of security resulting from the Agent's (as
defined in the Revolving Credit Agreement), the Bank's or any Lender's (as
defined in the Revolving Credit Agreement) actions or inactions, or any remedy
for the enforcement thereof, resulting from the operation of any present or
future provision of the Bankruptcy Code, or other statute or from the decision
of any court, (c) the assertion or exercise by the Bank or its successors or
assigns, of any rights or remedies under any of the ESOP Loan Documents or its
delay in or failure to assert or exercise any such rights or remedies, (d) any
lack of validity or enforceability of the ESOP Loan Documents or any other
agreement or instrument relating thereto; (e) any change in the time, manner or
place of payment of, or in any other term of, all or any of the obligations
under the ESOP Loan Documents, or any other amendment or waiver of or any
consent to departure from the ESOP Loan Documents; (f) any exchange, release or
non-perfection of any collateral, or any release or amendment or waiver of or
consent to departure from any other guaranty; (g) any delay in or limitation on
the full and timely payment or performance of obligations or liabilities under
the ESOP Loan Documents, whether arising before or after default, as a result of
the application of any applicable limitation on payment or performance by the
Trust described in Section 1.05 of the Agreement (a "Performance Limitation"),
or (h) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, a guarantor except, subject to the following
sentence of this paragraph, final and irrevocable payment in full of Borrower's
obligations to the Bank under the ESOP Loan Documents. This Guaranty shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment of any of the obligations of Borrower under the ESOP Loan Documents
or the Guarantor is rescinded or is otherwise returned by the Bank upon the
insolvency, bankruptcy or reorganization of Borrower or the Guarantor, or
otherwise, all as though such payment had not been made. Guarantor specifically
acknowledges that, notwithstanding the application of any Performance
Limitation, it guarantees hereby the full and timely payment and performance of
the obligations and liabilities of the Trust arising under the ESOP Loan
Documents as if no Performance Limitation were applicable thereto.
SECTION 2.05. Waiver of Notice. Guarantor unconditionally waives (a)
notice of any of the matters referred to in Section 2.04 hereof and (b) any
demand (except as specified in Section 2.03 hereof), proof or notice of
nonpayment under the ESOP Loan
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Documents, or of default by Borrower, in performing and keeping any other
covenant, condition or agreement required of it under the ESOP Loan Documents.
SECTION 2.06. Postponement of Subrogation. Until (i) all of the Borrower's
obligations under the ESOP Loan Documents and all of the Guarantor's obligations
hereunder shall have been paid and satisfied in full and (ii) the lapse or
expiration of any time period in which any payment under the ESOP Loan Documents
or hereunder is subject to avoidance as a preferential or similar transfer under
any applicable bankruptcy, insolvency or similar law without any such claim for
avoidance having been made, the Guarantor hereby waives any and all rights of
subrogation, contribution or similar claims against Borrower, whether arising by
statute, at law or in equity.
SECTION 2.07. Security. (a) As security for the obligations of Guarantor
to the Bank hereunder the Guarantor shall execute and deposit with the Bank on
the Closing Date the Security Agreement pursuant to which the Guarantor grants
to the Bank, inter alia, a security interest in the Collateral therein
described. Guarantor shall also cause each Person who shall be an Obligated
Subsidiary or be required to become an Obligated Subsidiary pursuant to Section
4.24 hereof, to execute and deliver to the Bank (i) a Subsidiary Guaranty in the
form of Exhibit C attached hereto, (ii) as security for the obligations of each
such Obligated Subsidiary under its Subsidiary Guaranty, a Subsidiary Security
Agreement in the form of Exhibit D attached hereto, and (iii) related Uniform
Commercial Code financing statements, and stock certificates evidencing the
Guarantor's equity interests in all Subsidiaries with duly executed stock powers
in blank affixed thereto (the "Subsidiary Stock") and such other documents and
instruments relating thereto as are described in Section 4.24 hereof. In
addition, the Guarantor shall deliver or cause to be delivered to the Bank on
the Closing Date certificates of the Guarantor's and Obligated Subsidiaries'
insurers, or, if the Bank shall request, original insurance policies, evidencing
compliance with the insurance requirements contained herein and in the Security
Documents, including without limitation provisions naming the Bank as loss payee
and additional insured under such policies.
(b) Notwithstanding the foregoing provisions of this Section 2.07, Section
4.24 or anything to the contrary contained in the Security Agreement or the
Subsidiary Guaranties, in the event that the Revolving Credit Agreement shall
for any reason terminate or be of no further force or of fact prior to the full,
final and irrevocable payment and satisfaction of the obligations of Guarantor
and the Obligated Subsidiaries arising hereunder, under the Subsidiary
Guaranties and under the other ESOP Loan Documents, upon delivery to and
acceptance by the Bank of (i) an irrevocable standby letter of credit supporting
payment of such obligations and issued by such bank and having such stated
amount, expiry date and terms and conditions as shall be in all respects
acceptable to the
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Bank, or (ii) in the discretion of the Bank and provided no Default or Event or
Default shall have occurred and be continuing, cash collateral in an amount
acceptable to the Bank, the Bank shall, at the request and expense of the
Guarantor, terminate the security interest and powers of attorney therein
conferred and, in furtherance thereof, execute such Uniform Commercial Code
termination statements and such other documents in form and substance reasonably
satisfactory to the Bank to release and terminate the Liens created thereunder
of record.
SECTION 2.08. Purchase of ESOP Loan Documents. Upon the occurrence of any
Purchase Event, the Bank may at its option require the Guarantor, and if not
required by the Bank, the Guarantor shall have the option, to purchase the
Purchase Interests (as herein defined) as provided in this Section 2.08. Upon
the occurrence of any Purchase Event, the Bank shall, prior to exercising any
other right, power or remedy available to it (other than the giving of notices,
declaration of default and acceleration of indebtedness), notify the Guarantor
of the occurrence of a Purchase Event and if the Bank elects, by such notice or
later notice to the Guarantor, demand that the Guarantor or its designee
purchase from the Bank all of the right, title and interest of the Bank in, to
and under the Agreement, the Pledge Agreement, the promissory note or notes of
the Borrower issued under the Agreement, and this Guaranty (collectively, the
"Purchase Interests"), but not any interest of the Bank under the Security
Agreements or the Subsidiary Guaranties on a date (the "Purchase Date")
specified in such notice, which shall be a Business Day not less than five (5)
nor more than thirty (30) days following the date of the notice. Within five (5)
Business Days of the receipt of notice of the Purchase Event, if the Bank shall
not have demanded that the Guarantor purchase the Purchase Interests, the
Guarantor may by notice to the Bank, effective upon receipt, elect to purchase
the Purchase Interests on a Purchase Date specified by the Guarantor and meeting
the requirements of the next preceding sentence for a Purchase Date selected by
the Bank. The Bank shall not be entitled to exercise any other right, power or
remedy available to it (other than the giving of notices, declarations of
default and acceleration of indebtedness) under the Security Agreements or the
ESOP Loan Documents, at law or in equity, (i) for a period of five (5) Business
Days after notice to the Guarantor of the occurrence a Purchase Event and (ii)
if either the Bank or the Guarantor shall have by notice to the other elected to
cause the purchase of the Purchase Interests under this Section 2.08, from the
date of notice of such election to and including the Purchase Date. The
Guarantor unconditionally, absolutely and irrevocably agrees that upon the
election of the Bank or the Guarantor to cause the purchase of the Purchase
Interests under this Section 2.08, it will purchase the Purchase Interests on
the Purchase Date without recourse at a price equal to the then outstanding
aggregate amount of all obligations and liabilities of the Borrower for
principal, interest, fees, expenses and indemnification amounts under the ESOP
Loan Documents, plus the reasonable out of pocket expenses
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<PAGE>
(including reasonable attorneys' fees and expenses) of the Bank incurred in
connection with such purchase or the occurrence of any Purchase Event giving
rise thereto. Upon receipt of the purchase price for the Purchase Interests in
immediately available funds, the Bank shall assign the Purchase Interests to the
Guarantor without representation, recourse or warranty. The costs of
preparation, execution and recordation of all documents or instruments of
assignment (including reasonable attorneys' fees and expenses) and all
documentary stamp, excise, intangibles, registration, recording or other fees,
taxes, duties or imposts (except for taxes on income) arising in connection with
the purchase of Purchase Interests shall be payable by the Guarantor (i) on the
Purchase Date to the extent incurred and calculated by such date and (ii)
thereafter on demand. If the Guarantor fails to satisfy in full its obligations
to the Bank under this Section 2.08 on the Purchase Date, the Bank may thereupon
exercise any or all rights, remedies and powers available to it hereunder, under
the other ESOP Loan Documents, the Security Agreements, or the Subsidiary
Guaranties, at law and in equity. Notwithstanding anything to the contrary
contained in this Section 2.08, in the event that there shall occur and not be
waived any Default or Event of Default under the Revolving Credit Agreement,
nothing herein contained shall prevent, impair or delay the right of the Agent
or any Lender (each as defined in the Revolving Credit Agreement) to exercise
any right, power or privilege contained in the Revolving Credit Loan Documents
or otherwise available at law, in equity or by statute to enforce or obtain
payment of the Obligations (as defined in the Revolving Credit Agreement).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties. The Guarantor represents and
warrants to the Bank as follows (which representations and warranties shall
survive the making of the Loan), after giving effect to the CHC Transaction:
(a) Organization and Authority.
(i) the Guarantor and each Subsidiary is a corporation duly
organized and validly existing under the laws of the jurisdiction of
its incorporation;
(ii) the Guarantor and each Subsidiary (x) has the requisite
power and authority to own its properties and assets and to carry on
its business as now being conducted and as contemplated in this
Guaranty, the Subsidiary Guaranties, the Security Agreements and the
CHC Transaction Documents, and (y) is qualified to do business in
every jurisdiction in which failure so to qualify would have a
material adverse effect on the business or operations of the
Guarantor or any Subsidiary;
(iii) the Guarantor has the power and authority to execute,
deliver and perform this Guaranty and each of the other ESOP Loan
Documents and CHC Transaction Documents to which the Guarantor is a
party;
(iv) each Obligated Subsidiary has the power and authority to
execute, deliver and perform the Subsidiary Guaranty, the Subsidiary
Security Agreement, the other Loan Documents and the CHC Transaction
Documents to which it is a party; and
(v) when executed and delivered, this Guaranty, each of the
other ESOP Loan Documents and the CHC Transaction Documents to which
the Guarantor or any Obligated Subsidiary is a party will be the
legal, valid and binding obligation or agreement, as the case may
be, of the Guarantor or such Obligated Subsidiary, enforceable
against the Guarantor or such Obligated Subsidiary in accordance
with its terms, subject to the effect of any applicable bankruptcy,
moratorium, insolvency, reorganization or other similar law
affecting the enforceability of creditors' rights generally and to
the effect of general principles of equity which may limit the
availability of equitable remedies (whether in a proceeding at law
or in equity);
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(b) Loan Documents and CHC Transaction Documents. The execution,
delivery and performance by the Guarantor and each Obligated Subsidiary of
each of the ESOP Loan Documents and each of the CHC Transaction Documents
to which the Guarantor or such Obligated Subsidiary is a party:
(i) have been duly authorized by all requisite corporate
action (including any required shareholder approval) of the
Guarantor or Obligated Subsidiary signatory thereto required for the
lawful execution, delivery and performance thereof;
(ii) do not violate any provisions of (1) applicable law, rule
or regulation, (2) any order of any court or other agency of
government binding on the Guarantor, or any Obligated Subsidiary of
Guarantor, or their respective properties, or (3) the charter
documents or by-laws of Guarantor or any Obligated Subsidiary;
(iii) will not be in conflict with, result in a breach of or
constitute an event of default, or an event which, with notice or
lapse of time, or both, would constitute an event of default, under
any indenture, agreement or other instrument to which Guarantor or
any Subsidiary is a party, or by which the properties or assets of
Guarantor or any Subsidiary of Guarantor are bound, the effect of
which would have any material adverse effect on the ability of the
Guarantor or any Obligated Subsidiary to observe the covenants and
agreements contained herein or in any other ESOP Loan Document or in
any of the CHC Transaction Documents, or on its ability to pay its
obligations hereunder or under the other ESOP Loan Documents;
(iv) will not result in the creation or imposition of any
Lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of Guarantor or any Subsidiary of Guarantor
except any Liens in favor of the Bank created by the ESOP Loan
Documents or in favor of the Agent and the Lenders (each as defined
in the Revolving Credit Agreement) under the Revolving Credit Loan
Documents.
(c) Solvency. Guarantor and each Obligated Subsidiary is Solvent
after giving effect to the transactions contemplated by this Guaranty, the
other ESOP Loan Documents, assuming, with respect to each Obligated
Subsidiary, that the Guarantor's past practice of making capital
contributions to such Obligated Subsidiary as necessary will continue;
provided that with respect to any date after the date hereof on which this
representation and warranty is deemed to be made or reaffirmed hereunder,
the Guarantor represents and warrants
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that as of such later date the Guarantor and the Obligated Subsidiaries,
taken as a whole, are Solvent.
(d) Subsidiaries and Stockholders. Guarantor has no Subsidiaries
other than those Persons listed as Subsidiaries in Schedule 3.01(d)
delivered to the Bank simultaneously with the execution of this Guaranty;
Schedule 3.01(d) states as of the date hereof the authorized and issued
capitalization of each Subsidiary listed thereon, the number of shares or
other equity interests of each class of capital stock or interest issued
and outstanding of each such Subsidiary and the number and/or percentage
of outstanding shares or other equity interest (including options,
warrants and other rights to acquire any interest) of each such class of
capital stock or equity interest owned by Guarantor or by any such
Subsidiary; the outstanding shares or other equity interests of each such
Subsidiary have been duly authorized and validly issued and are fully paid
and nonassessable; and Guarantor and each such Subsidiary own beneficially
and of record all the shares and other interests it is listed as owning in
Schedule 3.01(d), free and clear of any Lien other than the Lien arising
under the ESOP Loan Documents and applicable restrictions on transfer of
such securities in effect on the Closing Date or otherwise imposed by
applicable law.
(e) Ownership Interests. Guarantor owns no interest in any Person
other than the Persons listed in Schedule 3.01(d);
(f) Financial Condition. (i) The Guarantor has heretofore furnished
to the Bank an audited consolidated balance sheet of the Guarantor and its
Subsidiaries as of September 30, 1994 and the notes thereto and the
related consolidated statements of income, stockholders' equity and cash
flows for the Fiscal Year then ended as audited by Ernst & Young. Except
as set forth therein, such financial statements (including the notes
thereto) present fairly the financial condition of the Guarantor and its
Subsidiaries as of the end of such Fiscal Year and results of their
operations and the changes in their stockholders' equity for the Fiscal
Year then ended, all in conformity with Generally Accepted Accounting
Principles applied on a Consistent Basis;
(ii) since September 30, 1994, there has been no material adverse
change in the financial condition of the Guarantor and its Subsidiaries or
in the businesses, properties and operations of the Guarantor or any of
its Subsidiaries (for purposes of this clause (ii), a change in the
business, properties and operations of the Guarantor or any Subsidiary
shall not be deemed to be a material adverse change unless such change
reduces net income of the affected entity in an amount not less than an
amount equal to two and one-half percent (2 1/2%) of Consolidated Net
Income of the Guarantor and its Subsidiaries for the Four-Quarter Period
immediately
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preceding the occurrence of such change), nor have such businesses or
properties, taken as a whole, been materially adversely affected as a
result of any fire, explosion, earthquake, accident, strike, lockout,
combination of workers, flood, embargo or act of God; nor has any event
occurred the effect of which would have a material adverse effect on the
ability of the Guarantor or any Obligated Subsidiary to observe the
covenants and agreements contained herein or in any of the other ESOP Loan
Documents or in the CHC Transaction Documents, or on its ability to pay
its obligations hereunder or under the other ESOP Loan Documents;
(iii) except as set forth in the financial statements referred to in
Section 3.0l(f)(i) or in Schedule 3.01(f) or Schedule 3.01(j) delivered to
the Bank simultaneously with the execution of this Guaranty, neither
Guarantor nor any Subsidiary has incurred, other than in the ordinary
course of business, any material indebtedness, obligations, commitments or
other liability, contingent or otherwise, which remains outstanding or
unsatisfied;
(iv) the Projection of Combined Entities provided to the Bank was
prepared by the Guarantor in good faith and is based upon assumptions
which the Guarantor believes to have been reasonable as of the time of
preparation thereof and as of the Closing Date;
(g) Title to Properties. The Guarantor and its Subsidiaries have
title to all their respective real and personal properties, subject to no
transfer restrictions or Liens of any kind, except for (x) the transfer
restrictions and Liens described in Schedule 3.01(g)-Liens delivered to
the Bank simultaneously with the execution of this Guaranty, and (y)
Permitted Liens;
(h) Taxes. Except as set forth in Schedule 3.01(h) delivered to the
Bank simultaneously with the execution of this Guaranty, the Guarantor and
its Subsidiaries have filed or caused to be filed all federal, state and
local tax returns which are required to be filed by them and except for
taxes and assessments being contested in good faith and against which
reserves satisfactory to the Guarantor's independent certified public
accountants have been established, have paid or caused to be paid all
taxes as shown on said returns or on any assessment received by them, to
the extent that such taxes have become due;
(i) Other Agreements. Neither the Guarantor nor any Subsidiary is
(i) a party to any judgment, order, decree or any agreement or
instrument or subject to restrictions materially adversely affecting
the ability of the
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Guarantor or any Obligated Subsidiary to observe the covenants and
agreements contained herein or in the other ESOP Loan Documents or
in the CHC Transaction Documents, or to pay the obligations
hereunder or under the other ESOP Loan Documents; or
(ii) in default in the performance, observance or fulfillment
of any of the obligations, covenants or conditions contained in any
agreement or instrument to which the Guarantor or any Subsidiary is
a party, which default has, or if not remedied within any applicable
grace period would reasonably be likely to have, a material adverse
effect on the ability of the Guarantor or any Obligated Subsidiary
to observe the covenants and agreements contained herein or in the
other ESOP Loan Documents or the CHC Transaction Documents, or to
pay the obligations hereunder or under the other ESOP Loan
Documents;
(j) Litigation. Except as set forth in Schedule 3.0l(j) or Schedule
3.0l(t) delivered to the Bank simultaneously with the execution of this
Guaranty, other than proposed legislation or regulation or other
governmental proceedings affecting the healthcare or hospice industries
generally, there is no action, suit or proceeding at law or in equity or
by or before any governmental instrumentality or agency or arbitral body
pending against the Guarantor or affecting any Subsidiary or any
properties or rights of the Guarantor or any Subsidiary, or to the
knowledge of the Guarantor, pending against any of the Sellers or
affecting any properties or rights of any of the Sellers, which would
reasonably be expected to (i) materially adversely affect the financial
condition, business or operations of the Guarantor or any of its
Subsidiaries, or (ii) restrain, enjoin, impose burdensome conditions upon
or otherwise materially and adversely affect the consummation of the CHC
Transaction in accordance with the CHC Transaction Documents or the
exercise of rights and powers by the Bank under the ESOP Loan Documents
or, to the knowledge of the Guarantor, threatened in writing against the
Guarantor or any Subsidiary affecting the Guarantor or any Subsidiary or
any properties or rights of the Guarantor or any Subsidiary, or, to the
knowledge of the Guarantor, threatened in writing against any Seller
affecting any Seller or any properties or rights of any Seller, which
reasonably is expected to (i) materially adversely affect the financial
condition, business or operations of the Guarantor or any of its
Subsidiaries, or (ii) restrain, enjoin, impose burdensome conditions upon
or otherwise materially and adversely affect the consummation of the CHC
Transaction in accordance with the CHC Transaction Documents or the
exercise of rights and powers by the Bank under the ESOP Loan Documents;
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(k) Margin Stock. Neither the Guarantor nor any Subsidiary owns any
"margin stock" as such term is defined in Regulation U, as amended (12
C.F.R. Part 221), of the Board. The proceeds of the Loan will be used by
the Borrower only for the purposes set forth in the Preliminary Statements
of this Guaranty. None of such proceeds will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin stock or
for the purpose of reducing or retiring any Indebtedness which was
originally incurred to purchase or carry margin stock or for any other
purpose which might constitute any the Loan a "purpose credit" within the
meaning of said Regulation U or Regulation X (12 C.F.R. Part 224) of the
Board. Neither the Guarantor nor any agent acting in its behalf has taken
or will take any action which might cause this Guaranty or any of the ESOP
Loan Documents or instruments delivered pursuant hereto or thereto to
violate any regulation of the Board or to violate the Securities Exchange
Act of 1934, as amended, or the Securities Act of 1933, as amended, or any
state securities laws, in each case as in effect on the date hereof;
(l) Investment Company. Neither the Guarantor nor any Subsidiary is
an "investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended (15 U.S.C. (S)
80a-l, et seq.). The application of the proceeds of the Loan and repayment
thereof by the Borrower and the performance by the Guarantor of the
transactions contemplated by this Guaranty will not violate any provision
of said Act, or any rule, regulation or order issued by the Securities and
Exchange Commission thereunder, in each case as in effect on the date
hereof;
(m) Patents, Etc. Except as set forth in Schedule 3.01(m) delivered
to the Bank simultaneously with the execution of this Guaranty, the
Guarantor and its Subsidiaries own or have the right to use, under valid
license agreements or otherwise, all material patents, licenses,
franchises, trademarks, trademark rights, trade names, trade name rights,
trade secrets and copyrights necessary to the conduct of their businesses
as now conducted, without known conflict with any patent, license,
franchise, trademark, trade secrets and confidential commercial or
proprietary information, trade name, copyright, rights to trade secrets or
other proprietary rights of any other Person;
(n) No Untrue Statement. Neither this Guaranty nor any other ESOP
Loan Document or certificate or document executed and delivered by or on
behalf of the Borrower or the Guarantor in accordance with or pursuant to
any ESOP Loan Document contains any misrepresentation or untrue statement
of material fact or omits to state a material fact necessary, in light of
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the circumstance under which it was made, in order to make any such
representation or statement contained therein not misleading in any
material respect;
(o) No Consents. Etc. Except as set forth in Schedule 3.01(o) or
Schedule 3.01(g) delivered to the Bank simultaneously with the execution
of this Guaranty, neither the respective businesses or properties of the
Guarantor or any Subsidiary, nor any relationship between the Guarantor or
any Subsidiary and any other Person, nor any circumstance in connection
with the execution, delivery and performance (i) by the Guarantor or the
Borrower of the ESOP Loan Documents or (ii) by Vitas California or the
Guarantor of the CHC Transaction Documents and the transactions
contemplated hereby and thereby is such as to require a consent, approval
or authorization of, or filing, registration or qualification with, any
governmental or other authority or any other Person on the part of the
Borrower, the Guarantor or any Subsidiary as a condition to the execution,
delivery and performance of, or consummation of the transactions
contemplated by this Guaranty or the other ESOP Loan Documents or the CHC
Transaction Documents by the Guarantor or the Obligated Subsidiaries or if
so, such consent, approval, authorization, filing, registration or
qualification has been obtained or effected, as the case may be;
(p) ERISA.
(i) None of the employee benefit plans maintained at any time
by the Guarantor or any Subsidiary or the trusts created thereunder has
engaged in a prohibited transaction which could subject any such employee
benefit plan or trust to a material tax or penalty on prohibited
transactions imposed under Internal Revenue Code Section 4975 or ERISA;
(ii) None of the employee benefit plans maintained at any time
by the Guarantor or any Subsidiary which are employee pension benefit
plans and which are subject to Title IV of ERISA or the trusts created
thereunder has been terminated so as to result in a material liability of
the Guarantor under ERISA nor has any such employee benefit plan of the
Guarantor or any Subsidiary incurred any material liability to the Pension
Benefit Guaranty Corporation established pursuant to ERISA, other than for
required insurance premiums which have been paid or are not yet due and
payable; neither the Guarantor nor any Subsidiary has withdrawn from or
caused a partial withdrawal to occur with respect to any Multi-employer
Plan resulting in any assessed and unpaid withdrawal liability; the
Guarantor and the Subsidiaries have made or provided for all contributions
to all such employee pension benefit plans which they maintain and which
are required as of the end of the most recent fiscal year under each such
plan; neither the Guarantor nor any
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Subsidiary has incurred any accumulated funding deficiency with respect to
any such plan, whether or not waived; nor has there been any reportable
event, or other event or condition, which presents a material risk of
termination of any such employee benefit plan by such Pension Benefit
Guaranty Corporation;
(iii) The present value of all vested accrued benefits under
the employee pension benefit plans which are subject to Title IV of ERISA,
maintained by the Guarantor or any Subsidiary, did not, as of the most
recent valuation date for each such plan, exceed the then current value of
the assets of such employee benefit plans allocable to such benefits;
(iv) The consummation of the Loan pursuant to the ESOP Loan
Documents will not involve any prohibited transaction under ERISA which is
not subject to a statutory or administrative exemption;
(v) To the best of the Guarantor's knowledge, each employee
pension benefit plan subject to Title IV of ERISA, maintained by the
Guarantor or any Subsidiary, has been administered in accordance with its
terms in all material respects and is in compliance in all material
respects with all applicable requirements of ERISA and other applicable
laws, regulations and rules;
(vi) There has been no withdrawal liability incurred and
unpaid with respect to any Multi-employer Plan to which the Guarantor or
any Subsidiary is or was a contributor;
(vii) As used in this Agreement, the terms "employee benefit
plan," "employee pension benefit plan," "accumulated funding deficiency,"
"reportable event," and "accrued benefits" shall have the respective
meanings assigned to them in ERISA, and the term "prohibited transaction"
shall have the meaning assigned to it in Code Section 4975 and ERISA;
(viii) Neither the Guarantor nor any Subsidiary has any
liability not disclosed on any of the financial statements furnished to
the Lenders pursuant to Section 3.01(f) hereof, contingent or otherwise,
under any plan or program or the equivalent for unfunded post-retirement
benefits, including pension, medical and death benefits, which liability
would have a material adverse effect on the financial condition of the
Guarantor or any Subsidiary;
(q) No Default. As of the date hereof, and after giving effect to
the CHC Transaction, there does not exist any Default or Event of Default
hereunder;
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(r) Hazardous Materials. Except as set forth on Schedule 3.01(r),
the Guarantor and each Subsidiary is in compliance with all applicable
Environmental Laws in all material respects and neither the Guarantor nor
any Subsidiary has been notified of any action, suit, proceeding or
investigation which calls into question compliance by the Guarantor or any
Subsidiary with any Environmental Laws or which seeks to suspend, revoke
or terminate any license, permit or approval necessary for the generation,
handling, storage, treatment or disposal of any Hazardous Material;
(s) RICO. Neither the Guarantor nor any Subsidiary is engaged in or
has engaged in any course of conduct that could subject any of their
respective properties to any Lien, seizure or other forfeiture under any
criminal law, racketeer influenced and corrupt organizations law, civil or
criminal, or other similar laws;
(t) Employment Matters. Except as disclosed on Schedule 3.01(t)
delivered to the Bank simultaneously with the execution of this Guaranty,
the Guarantor and all Subsidiaries are in compliance in all material
respects with all applicable laws, rules and regulations pertaining to
labor or employment matters, including without limitation those pertaining
to wages, hours, occupational safety and taxation and there is neither
pending or to the knowledge of the Guarantor threatened any material
litigation, administrative proceeding nor, to the knowledge of the
Guarantor, any investigation, in respect of such matters.
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ARTICLE IV
AFFIRMATIVE COVENANTS
Until the obligations of the Borrower under the ESOP Loan Documents have
been paid and satisfied in full and until the Agreement has been terminated in
accordance with the terms thereof following such payment and satisfaction,
unless the Bank shall otherwise consent in writing, the Guarantor will and will,
where applicable, cause each Subsidiary to:
SECTION 4.01. Financial Reports, Etc. (a) as soon as practicable and in
any event within one hundred and five (105) days (or, at all times after the
Guarantor shall become subject to the financial reporting requirements of the
Securities Exchange Act of 1934, as amended, ninety (90) days) after the end of
each Fiscal Year of the Guarantor, deliver or cause to be delivered to the Bank
(i) a consolidated balance sheet of the Guarantor and its Subsidiaries, and the
notes thereto, and the related consolidated statements of income, stockholders'
equity and cash flows and the respective notes thereto, for such Fiscal Year,
setting forth comparative financial statements for the preceding Fiscal Year,
all prepared in accordance with Generally Accepted Accounting Principles applied
on a Consistent Basis and containing, with respect to the consolidated financial
reports, opinions of Ernst & Young, or other such independent certified public
accountants of nationally recognized standing selected by the Guarantor, which
are unqualified as to the scope of the audit performed and as to the "going
concern" status of the Guarantor; and (ii) a certificate of an Authorized
Representative demonstrating compliance with Sections 5.01, 5.02, 5.03, 5.04,
5.05, and 5.09(v) of this Guaranty, which certificate shall be in the form
attached hereto as Exhibit B (provided, however, that so long as the Revolving
Credit Agreement remains in effect, timely delivery of the certificate for the
corresponding period described in Section 8.01(a)(ii) of the Revolving Credit
Agreement shall satisfy the requirement of this clause (ii));
(b) as soon as practicable and in any event within thirty (30) days after
the end of each calendar month, other than the last month of each Fiscal Year
(except the last month of each fiscal quarter as to which forty-five (45) days
shall apply), deliver to the Bank (i) a consolidated balance sheet of the
Guarantor and its Subsidiaries as of the end of such reporting period, the
related consolidated statement of income and in the case of quarterly statements
a statement of cash flows for such reporting period and for the period from the
beginning of the Fiscal Year through the end of such reporting period,
accompanied by a certificate of an Authorized Representative to the effect that
such financial statements present fairly the financial position of the Guarantor
and its Subsidiaries as of the end of such reporting period and the results of
their operations and the changes in their financial position for such reporting
period, in conformity with the
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standards set forth in Section 3.01(f)(i) with respect to interim financials,
and (ii) a certificate of an Authorized Representative (which shall be required
to be delivered only in connection with the interim financial statements
delivered as at the end of each three, six and nine month period in each Fiscal
Year) containing computations for such quarter comparable to that required
pursuant to Section 4.01(a)(ii) (provided, however, that so long as the
Revolving Credit Agreement remains in effect, timely delivery of the certificate
for the corresponding period described in Section 8.01(b)(iii) of the Revolving
Credit Agreement shall satisfy the requirement of this clause (ii));
(c) together with each delivery of the financial statements required by
Section 4.01(a)(i) hereof, deliver to the Bank a letter from the Guarantor's
accountants specified in Section 4.01(a)(i) hereof stating that in performing
the audit necessary to render an opinion on the financial statements delivered
under Section 4.O1(a)(i), nothing has come to their attention that has caused
them to believe that there exists any Default or Event of Default by the
Guarantor in the fulfillment of the terms and provisions of this Guaranty
insofar as they relate to financial matters (which at the date of such statement
remains uncured); and if the accountants have obtained knowledge of such Default
or Event of Default, a statement specifying the nature and period of existence
thereof;
(d) promptly upon their becoming available to the Guarantor, the Guarantor
shall deliver to the Bank a copy of (i) all regular or special reports or
effective registration statements which Guarantor or any Subsidiary shall file
with the Securities and Exchange Commission (or any successor thereto)
(including without limitation filings on Forms 10-K, l0-Q and 8-K) or any
securities exchange, (ii) at any time after becoming subject to the Securities
Exchange Act of 1934, as amended, any proxy statement distributed by the
Guarantor to its shareholders, bondholders or the financial community in
general, and (iii) any management letter or other similar report submitted to
the Guarantor or any of its Subsidiaries by independent accountants presenting
in final form any results of, deficiencies discovered during or recommendations
arising from any annual, interim or special audit of the Guarantor or any of its
Subsidiaries; and
(e) promptly, from time to time, deliver or cause to be delivered to the
Bank such other information regarding Guarantor's and each Subsidiary's
operations, business affairs and financial condition as the Bank may reasonably
request. The Bank is hereby authorized to deliver a copy of any such financial
information delivered hereunder to the Bank (or any affiliate of the Bank) to
any regulatory authority having jurisdiction over the Bank pursuant to any
written request therefor, or to any other Person who shall acquire or consider
the acquisition of a participation interest in or assignment of all or any
portion of the Loan.
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SECTION 4.02. Maintain Properties. Maintain all properties necessary to
its operations in good working order and condition (ordinary wear and tear
excepted) and make all needed repairs, replacements and renewals as are
necessary to conduct its business in accordance with customary business
practices.
SECTION 4.03. Existence, Qualification, Etc. Do or cause to be done all
things necessary to preserve and keep in full force and effect its existence and
all material rights and material franchises, trade names, trademarks and
permits, and, except as otherwise expressly provided by this Agreement, maintain
its license or qualification to do business as a foreign corporation and good
standing in each jurisdiction in which its ownership or lease of property or the
nature of its business makes such license or qualification necessary and failure
to maintain qualification or good standing would reasonably be likely to have a
material adverse effect on the Guarantor or any of its Subsidiaries; except that
the Guarantor may effect the dissolution of Vitas Healthcare Corporation of
Texas so long as it remains an inactive Subsidiary of the Borrower prior to such
dissolution.
SECTION 4.04. Regulations and Taxes. Comply with, in all material
respects, or contest in good faith, all statutes and governmental regulations
applicable to the Guarantor or its Subsidiaries and pay all taxes, assessments,
governmental charges, claims for labor, supplies, rent and any other obligation
which, if unpaid, might become a Lien against any of its properties, except
liabilities being contested in good faith and against which adequate reserves
have been established.
SECTION 4.05. Insurance. (i) Keep all of its insurable properties
adequately insured in all material respects at all times with responsible
insurance carriers against loss or damage by fire and other hazards to the
extent and in the manner required by the Security Agreement and otherwise as are
customarily insured against by similar businesses owning such properties
similarly situated, (ii) maintain general public liability insurance and medical
malpractice insurance at all times with responsible insurance carriers against
liability on account of damage to persons and property having such limits,
deductibles, exclusions and co-insurance and other provisions providing no less
coverage than that specified in Schedule 4.05 delivered to the Bank
simultaneously with the execution of this Guaranty, such insurance policies to
be in form reasonably satisfactory to the Bank, and (iii) maintain insurance
under all applicable workers' compensation laws (or in the alternative, maintain
required reserves if self-insured for workers' compensation purposes). Without
limiting any additional requirement contained in the Security Agreement, each of
the policies of insurance described in this Section 4.05 shall provide that the
insurer shall give the Bank not less than thirty (30) days' prior written notice
before any such policy shall be terminated, lapse or be altered in any manner.
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SECTION 4.06. True Books. Keep true books of record and account in
accordance with commercially reasonable business practices in which full, true
and correct entries will be made of all of its dealings and transactions in all
material respects, and set up on its books such reserves as may be required by
Generally Accepted Accounting Principles with respect to doubtful accounts and
all taxes, assessments, charges, levies and claims and with respect to its
business in general, and include such reserves in quarterly as well as year-end
financial statements.
SECTION 4.07. Perform Covenants. Duly comply with all the terms and
covenants contained in all ESOP Loan Documents and other instruments and
documents given to the Bank pursuant hereto or thereto.
SECTION 4.08. Right of Inspection. Permit any Person designated by the
Bank at the Bank's expense, as the case may be, to visit and inspect any of the
properties, corporate books and financial reports of the Guarantor and its
Subsidiaries, and to discuss their respective affairs, finances and accounts
with their principal officers and independent auditors, all at reasonable times,
at reasonable intervals and with reasonable prior notice.
SECTION 4.09. Observe all Laws. Conform to and duly observe in all
material respects all laws, rules and regulations of any applicable regulatory
authority with respect to the conduct of its business.
SECTION 4.10. Governmental Licenses. To the extent the Guarantor or any
Subsidiaries provides goods or services giving rise to Accounts constituting
Government Receivables, maintain all licenses, permits, certifications and
approvals and take such other necessary action as shall entitle such Person to
obtain payment or reimbursement of such Account.
SECTION 4.11. Covenants Extending to Subsidiaries. Cause each of its
Subsidiaries to do with respect to itself, its business and its assets, each of
the things required of the Guarantor in Sections 4.02 through 4.10, inclusive.
SECTION 4.12. Officer's Knowledge of Default. Upon the President, the
chief executive officer, the chief financial officer, the Treasurer or the Vice
President for Legal and Regulatory Affairs of the Guarantor obtaining knowledge
of any Default or Event of Default hereunder or any default under any other
obligation of the Guarantor or any Subsidiary where the amount of such other
obligation or obligations aggregates $250,000 or more, cause such officer or an
Authorized Representative to promptly notify the Bank of the nature thereof, the
period of existence thereof, and what action the Guarantor proposes to take with
respect thereto.
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SECTION 4.13. Suits or Other Proceedings. Upon the President, the chief
executive officer, the chief financial officer, the Treasurer or the Vice
President for Legal and Regulatory Affairs of the Guarantor obtaining knowledge
of any litigation or other proceedings being instituted against the Guarantor or
any Subsidiary, or any attachment, levy, execution or other process being
instituted against any assets of the Guarantor or any Subsidiary, in an
aggregate amount greater than $500,000 and not otherwise covered by insurance
(or, in the alternative, not otherwise reserved against if self-insured),
promptly deliver to the Bank written notice thereof stating the nature and
status of such litigation, dispute, proceeding, levy, execution or other
process.
SECTION 4.14. Notice of Discharge of Hazardous Material or Environmental
Complaint. Promptly provide to the Bank true, accurate and complete copies of
any and all notices, complaints, orders, directives, claims, or citations
received by the Guarantor or any Subsidiary relating to any material (a)
violation or alleged violation by the Guarantor or any Subsidiary of any
applicable Environmental Laws or OSHA; (b) release or threatened release by the
Guarantor or any Subsidiary of any Hazardous Material, except where occurring
legally; or (c) liability or alleged liability of the Guarantor or any
Subsidiary for the costs of cleaning up, removing, remediating or responding to
a release of Hazardous Materials.
SECTION 4.15. Environmental Compliance. If the Guarantor or any Subsidiary
shall receive written notice from any governmental authority that the Guarantor
or any Subsidiary has violated any applicable Environmental Laws, the Guarantor
shall promptly (and in any event within the time period permitted by the
applicable governmental authority) remove or remedy, or cause the applicable
subsidiary to remove or remedy, such violation, unless the Guarantor in good
faith is disputing such claim of violation by appropriate proceedings promptly
commenced and diligently pursued and such claim does not give rise to or result
in the imposition of any Lien against property of the Guarantor or any
Subsidiary.
SECTION 4.16. Indemnification. The Guarantor hereby agrees to defend,
indemnify and hold the Bank harmless from and against any and all claims,
losses, liabilities, damages and expenses (including, without limitation,
cleanup costs and reasonable attorneys' fees) arising directly or indirectly
from, out of or by reason of the handling, storage, treatment, emission or
disposal of any Hazardous Material by or in respect of the Guarantor or any
Subsidiary or property owned or leased or operated by the Guarantor or any
Subsidiary. The provisions of this Section 4.16 shall survive repayment of the
Loan and termination of this Guaranty.
SECTION 4.17. Further Assurances. At its cost and expense, upon request of
the Bank, duly execute and deliver or cause to be duly executed and delivered,
to the Bank such further instruments,
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documents, certificates, financing and continuation statements, and do and cause
to be done such further acts that may be reasonably necessary or advisable in
the reasonable opinion of the Bank to carry out more effectively the provisions
and purposes of this Guaranty and the other ESOP Loan Documents.
SECTION 4.18. ERISA Requirement. Comply in all material respects with all
requirements of ERISA applicable to it and furnish to the Bank as soon as
possible and in any event (i) within thirty (30) days after the President or
chief executive officer of the Guarantor or, with respect to financial matters,
the Treasurer, any Assistant Treasurer or the chief financial officer of the
Guarantor, knows or has reason to know that any reportable event with respect to
any employee benefit plan maintained by the Guarantor or any Subsidiary which
could give rise to termination or the imposition of any material tax or penalty
has occurred, written statement of an Authorized Representative describing in
reasonable detail such reportable event and any action which the Guarantor or
applicable Subsidiary proposes to take with respect thereto, together with a
copy of the notice of such reportable event given to the PBGC or a statement
that said notice will be filed with the annual report of the United States
Department of Labor with respect to such plan if such filing has been
authorized, (ii) promptly after receipt thereof, a copy of any notice that the
Guarantor or any Subsidiary may receive from the PBGC relating to the intention
of the PBGC to terminate any employee benefit plan or plans of the Guarantor or
any Subsidiary or to appoint a trustee to administer any such plan, and (iii)
within 10 days after a filing with the PBGC pursuant to Section 412(n) of the
Code of a notice of failure to make a required installment or other payment with
respect to a plan, a certificate of an Authorized Representative setting forth
details as to such failure and the action that the Guarantor or its affected
Subsidiary, as applicable, proposes to take with respect thereto, together with
a copy of such notice given to the PBGC.
SECTION 4.19. Continued Operations. Continue at all times (i) to conduct
its business and engage principally in the same or similar line or lines of
business substantially as heretofore conducted, and (ii) preserve, protect and
maintain free from Liens its material patents, copyrights, licenses, trademarks,
trademark rights, trade names, trade name rights, trade secrets and know-how
necessary or useful in the conduct of its operations.
SECTION 4.20. Use of Proceeds. Cause the proceeds of the Loan to be used
solely for the purposes specified in the Preliminary Statements of this
Guaranty.
SECTION 4.21. Trade Names.
(a) Conduct, and cause each Obligated Subsidiary to conduct, its
business in all respects and obtain and maintain title to all Collateral
solely in the names set forth in Schedule 4.21 delivered to the Bank
simultaneously with the
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execution of this Guaranty unless the Guarantor shall have (i) given (or
caused the appropriate Obligated Subsidiary to give) the Bank ten (10)
days prior written notice of its intention to operate under another name,
and (ii) caused to be delivered to the Bank any additional financing
statements necessary to perfect a security interest in the Collateral (to
the extent contemplated hereunder);
(b) Cause at its expense all filings to be made and other action to
be taken as the Bank may reasonably request to continue the perfection of
the Bank's first priority security interest in the Collateral (to the
extent contemplated hereunder); and
(c) Except as may be set forth in Schedule 3.01(m), at all times
have the lawful right, power and authority, and cause each Obligated
Subsidiary to have the lawful right, power and authority, to utilize all
trade names or trade styles employed by Guarantor or such Obligated
Subsidiary to provide services giving rise to Accounts or to bill such
Accounts.
SECTION 4.22. Property Location. Maintain (and cause all Subsidiaries to
maintain) all Collateral which constitutes inventory or equipment at the
locations listed on Schedule 4.22 delivered to the Bank simultaneously with the
execution of this Guaranty, and advise the Bank at the time of delivery of each
certificate described in Section 4.01(a)(ii) and Section 4.01(b)(ii) of any
change in or addition to the location or locations of such property. The
information provided to the Bank shall include the address of each such
location, the identity (including legal name and any trade name, if different)
of the Person in whose facilities or custody such property is located, and such
additional information as the Bank shall reasonably deem necessary or advisable
in connection with perfecting or maintaining the perfection of a Lien on such
property pursuant to the ESOP Loan Documents.
SECTION 4.23. Chief Executive Offices. Not change (or permit any Obligated
Subsidiary to change) the location of its chief executive office from the
respective addresses set forth in the Revolving Credit Agreement as of the date
hereof except upon giving not less than thirty (30) days prior written notice to
the Bank and taking or causing to be taken all such action at Guarantor's
expense as may be reasonably requested by the Bank to perfect or maintain the
perfection of the security interest of the Bank in Accounts (to the extent
contemplated hereunder), general intangibles and related Collateral.
SECTION 4.24. New Obligated Subsidiaries. Upon the occurrence of a New
Guaranty Event, the Guarantor shall, as soon as practicable but in any event
within fifteen (15) Business Days of
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such event cause to be delivered to the Bank by each Required New Obligated
Subsidiary each of the following:
(i) a Subsidiary Guaranty substantially in the form attached hereto
as Exhibit C duly executed by such Required New Obligated Subsidiary;
(ii) a Subsidiary Security Agreement in the form attached hereto as
Exhibit D duly executed by such Required New Obligated Subsidiary;
(iii) an opinion of counsel to such Required New Obligated
Subsidiary dated as of the date of delivery of the Subsidiary Guaranty
provided in the foregoing clause (i) and addressed to the Bank,
substantially in the form of the opinion of special counsel for the
Guarantor and the Obligated Subsidiaries delivered on the Closing Date
(the "Initial Opinion") with respect to paragraphs (b), (g), (k) and (n)
thereof regarding the organization, good standing and foreign
qualification of such Required New Obligated Subsidiary, the authorization
of such Required New Obligated Subsidiary to execute, deliver and perform
its obligations under the Guaranty and the Subsidiary Security Agreement,
the due execution and delivery of the Guaranty and the Subsidiary Security
Agreement on behalf of such Required New Obligated Subsidiary as valid and
binding obligations of such Required New Obligated Subsidiary, enforceable
against such Required New Obligated Subsidiary in accordance with their
respective terms (subject to the exceptions set forth in paragraph (k) of
the Initial Opinion), and the creation and perfection of a security
interest in the collateral described in the Subsidiary Security Agreement
(subject to the exceptions set forth in paragraph (n) of the Initial
Opinion);
(iv) current copies of the charter documents, including partnership
agreements and certificate of limited partnership, if applicable, and
bylaws of such Required New Obligated Subsidiary, minutes of duly called
and conducted meetings (or duly effected consent actions) of the Board of
Directors, partners, or appropriate committees thereof (and, if required
by such charter documents, by-laws or by applicable laws, of the
shareholders or partners) of such Required New Obligated Subsidiary
authorizing the actions and the execution and delivery of documents
described in clauses (i) and (ii) of this Section 4.24 and evidence
satisfactory to the Bank that such Required New Obligated Subsidiary is
Solvent as of such date and after giving effect to the Subsidiary Guaranty
and the Subsidiary Security Agreement;
(v) such duly executed Uniform Commercial Code financing statements
and other documents and instruments, each in form and content acceptable
to the Bank, as shall be necessary to
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perfect the Liens created under the applicable Subsidiary Security
Agreement to the extent contemplated hereunder; and
(vi) the Subsidiary Stock (as defined in Section 2.07 hereof)
evidencing ownership of such Required New Obligated Subsidiary, together
with duly executed stock powers in blank affixed thereto.
For purposes of this Section 4.24, (i) "New Guaranty Event" means each
occurrence of any of the following: (A) the acquisition or creation after the
Closing Date of any Subsidiary (other than Strategic Investment Subsidiaries),
or (B) any Subsidiary in existence (but not an Obligated Subsidiary) as of the
Closing Date or any Strategic Investment Subsidiary (whenever created or
acquired) satisfying the criteria in clause (ii)(x) of the definition of
"Obligated Subsidiary" in Article I hereof, or (C) the aggregate operating
revenues of all Subsidiaries who are not Obligated Subsidiaries exceeding in any
calendar month ten percent (10%) of the consolidated operating revenues of the
Guarantor and its Subsidiaries, and (ii) "Required New Obligated Subsidiary"
means (A) in the case of a New Guaranty Event described in clauses (i)(A) or
(i)(B) immediately above, the Subsidiary giving rise to such New Guaranty Event,
and (B) in the case of a New Guaranty Event described in clause (i)(C)
immediately above, the Subsidiary (or Subsidiaries, to the extent necessary to
eliminate the occurrence of the New Guaranty Event) not then Obligated
Subsidiaries having the largest operating revenues in the relevant calendar
month.
SECTION 4.25. Sufficient Contributions. Make sufficient and timely
contributions to the Borrower pursuant to the Plan in order to enable the
Borrower to make in full timely payments of principal of and interest on the
Loan and all other amounts payable by the Borrower under the ESOP Loan
Documents.
SECTION 4.26. Modification of Covenants. In the event that, in connection
with the initial public offering of the Guarantor's common stock, covenants in
the Revolving Credit Agreement shall be amended by the Guarantor and the Lenders
(as defined in the Revolving Credit Agreement) to reflect the Guarantor's
resulting financial condition, then the parties hereto agree that they shall
enter into an amendment to this Guaranty effecting corresponding amendments to
the covenants contained herein.
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ARTICLE V
NEGATIVE COVENANTS
Until all of the obligations of the Borrower under the ESOP Loan Documents
to be performed and paid shall have been performed and paid in full, and until
the Agreement is terminated following such payment and performance, unless the
Bank shall otherwise consent in writing, the Guarantor will not, nor will it
permit any Subsidiary to, either directly or indirectly:
SECTION 5.01. Consolidated Shareholders' Equity. Permit Consolidated
Shareholders' Equity to be less than (i) $22,000,000 at the Closing Date, and
(ii) as at the last day of each fiscal quarter of the Guarantor and until (but
excluding) the last day of the next following fiscal quarter of the Guarantor,
the sum of (A) the amount of Consolidated Shareholders' Equity required to be
maintained pursuant to this Section 5.01 as at the end of the immediately
preceding fiscal quarter, plus (B) 50% of positive Consolidated Net Income
during the immediately preceding fiscal quarter of the Guarantor ending on such
day (including in Consolidated Net Income for purposes of this Section 5.01 only
any net gain or credit of an extraordinary nature) plus (C) 80% of the net
proceeds (less (only in connection with the consummation of the Guarantor's
offering of Qualified Equity Securities) an amount equal to the lesser of (i)
the amount required to redeem the 9% Preferred Stock, reduced by the net
proceeds to the Guarantor from the exercise of Warrant A dated December 17, 1991
or Warrant B dated December 17, 1991, as applicable, and (ii) $17,000,000) of
each sale of equity interest (or securities other than those constituting
Indebtedness exchangeable, convertible or exercisable into equity interests) in
the Guarantor or any Subsidiary.
SECTION 5.02. Current Ratio. Permit at any time the ratio of Consolidated
Current Assets to Consolidated Current Liabilities (before giving effect to any
prepayment obligation arising under Section 2.05(c)(iv) of the Revolving Credit
Agreement) to be less than 1.00 to 1.00.
SECTION 5.03. Consolidated Interest Coverage Ratio. Permit at any time
during the periods set forth below the Consolidated Interest Coverage Ratio to
be less than the respective amount set forth opposite each such period:
Period Ratio
------ -----
From the Closing Date through
December 31, 1996 1.75 to 1.00
From January 1, 1997 and
thereafter 2.25 to 1.00
SECTION 5.04. Consolidated Leverage Ratio. Permit at any time during the
periods set forth below the Consolidated Leverage
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Ratio to be more than the respective amount set forth opposite each such period:
Period Ratio
------ -----
From the Closing Date through
December 31, 1995 .75 to 1.00
From and including
January 1, 1996 through
December 31, 1996 .70 to 1.00
From and including
January 1, 1997 through
December 31, 1997 .55 to 1.00
From and including
January 1, 1998 and thereafter .50 to 1.00
SECTION 5.05. Consolidated Fixed Charge Ratio. Permit at any time during
the respective periods set forth below the Consolidated Fixed Charge Ratio to be
less than the respective amount set forth opposite such period:
Period Ratio
------ -----
From the Closing Date through
December 31, 1995 1.00 to 1.00
From and including
January 1, 1996 through
December 31, 1996 1.10 to 1.00
From and including
January 1, 1997 through
December 31, 1997 1.25 to 1.00
From and including
January 1, 1998 and thereafter 1.40 to 1.00
SECTION 5.06. Indebtedness. Incur, create, assume or permit to exist any
Indebtedness, howsoever evidenced, except
(i) Indebtedness existing as of the date hereof and as set forth in
Schedule 5.06 delivered to the Bank simultaneously with the execution of
this Guaranty and incorporated herein by reference;
(ii) Indebtedness owed under the Revolving Credit Loan Documents;
(iii) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
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(iv) additional Indebtedness not to exceed in the aggregate
$3,000,000 during each of the Fiscal Years ending September 30, 1995 and
1996 (on a non-cumulative basis, so that amounts not incurred in one
Fiscal Year may not be carried over to a subsequent Fiscal Year) incurred
to acquire computer hardware and software and related components or
telecommunications equipment, systems and services and other equipment;
(v) Indebtedness of the Guarantor or Vitas California evidenced by
the Seller Notes and the Guarantor's guaranty thereof or otherwise arising
under the CHC Transaction Documents; and
(vi) the guaranty by the Guarantor of lease obligations of Vitas
California.
SECTION 5.07. Liens. Incur, create or permit to exist any pledge, Lien,
charge or other encumbrance of any nature whatsoever with respect to any
property or assets now owned or hereafter acquired by the Guarantor or any of
its Subsidiaries, other than
(i) Liens existing as of the date hereof and as set forth in
Schedule 3.01(g) delivered to the Bank simultaneously with the execution
of this Guaranty;
(ii) Liens imposed by law for taxes, assessments or charges of any
Governmental Authority for claims not yet due or which are being contested
in good faith by appropriate proceedings and with respect to which
adequate reserves or other appropriate provisions are being maintained in
accordance with Generally Accepted Accounting Principles;
(iii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law or
created in the ordinary course of business and in existence less than 120
days from the date of creation thereof for amounts not yet due or which
are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves or other appropriate provisions are
being maintained in accordance with Generally Accepted Accounting
Principles;
(iv) Liens incurred or deposits made in the ordinary course of
business (including, without limitation, surety bonds and appeal bonds) in
connection with workers' compensation, unemployment insurance and other
types of social security benefits or to secure the performance of tenders,
bids, leases, contracts (other than for the repayment of Indebtedness),
statutory obligations and other similar obligations or arising as a result
of progress payments under government contracts;
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(v) easements (including, without limitation, reciprocal easement
agreements and utility agreements), rights-of-way, covenants, consents,
reservations, encroachments, variations and zoning and other restrictions,
charges or encumbrances (whether or not recorded), which do not interfere
materially with the ordinary conduct of the business of the Guarantor or
any Subsidiary and which do not materially detract from the value of the
property to which they attach or materially impair the use thereof to the
Guarantor or any Subsidiary;
(vi) Liens arising under the Revolving Credit Loan Documents and the
ESOP Loan Documents;
(vii) purchase money Liens to secure Indebtedness permitted under
Section 5.06(iv) hereof so long as such Indebtedness is incurred to
purchase computer hardware and software, the Indebtedness represents not
less than 75% of the purchase price of such assets, no other property
other than the property acquired with the proceeds of such Indebtedness
secures such Indebtedness; and
(viii) the right of the Sellers to payments from certain accounts
and funds pursuant to Sections 2.6 and 2.7 of the Asset Purchase Agreement
and the Joint Account Agreement (as such term is defined in the Asset
Purchase Agreement).
SECTION 5.08. Transfer of Assets. Sell, lease, transfer or otherwise
dispose of (i) any interest in any Subsidiary, or (ii) any other asset of
Guarantor or any Subsidiary except, in each case, (a) assets sold in the
ordinary course of business, (b) assets which are worn out, obsolete or no
longer necessary, or (c) assets transferred by Guarantor to any Obligated
Subsidiary, by one Obligated Subsidiary to another Obligated Subsidiary, or by
any Obligated Subsidiary to the Guarantor.
SECTION 5.09. Investments; Acquisitions. Purchase, own, invest in or
otherwise acquire, directly or indirectly, any stock or other securities or all
or substantially all of the assets, or make or permit to exist any interest
whatsoever in any other Person other than an Obligated Subsidiary or permit to
exist any loans or advances to any Person; provided, Guarantor and its
Subsidiaries may consummate the CHC Transaction in accordance with the CHC
Transaction Documents and otherwise may maintain investments or invest in, own,
make loans or advances to, or acquire
(i) Eligible Securities;
(ii) loans, advances and investments existing as of the date hereof
and as set forth in Schedule 3.01(d) delivered to the Bank simultaneously
with the execution of this Guaranty;
(iii) accounts receivable arising and trade credit granted in the
ordinary course of business and any securities received
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in satisfaction or partial satisfaction thereof in connection with
accounts of financially troubled Persons to the extent reasonably
necessary in order to prevent or limit loss;
(iv) loans and advances to other Persons in an aggregate outstanding
amount not exceeding at any time $750,000 except the dollar limit
restriction contained in this clause (iv) shall not apply to non-cash
loans and advances made to Persons in connection with the exercise of
stock options or other equity interests in the Guarantor so long as such
loan or advance is repaid within five (5) Business Days;
(v) Strategic Investments (including Strategic Investment
Subsidiaries not constituting Obligated Subsidiaries), provided that no
such Strategic Investment shall be made if after giving effect thereto (W)
the aggregate investment in any one Person shall exceed $1,000,000 (valued
at cost), (X) the aggregate amount of Strategic Investments made in any
Fiscal Year (on a noncumulative basis, with the effect that amounts not
expended in any Fiscal Year may not be expended in any subsequent Fiscal
Year) shall exceed $2,000,000, (Y) the aggregate amount of Strategic
Investments made in any Fiscal Year (on a noncumulative basis, with the
effect that amounts not expended in any Fiscal Year may not be expended in
any subsequent Fiscal Year), together with the aggregate amount of Costs
of Acquisitions (excluding the CHC Transaction) incurred during such
Fiscal Year (similarly computed on a non-cumulative basis), shall exceed
$5,000,000, or (Z) the aggregate amount of Strategic Investments shall
exceed five percent (5%) of Consolidated Shareholders' Equity, provided
that each of the limitations described in this Section 5.09(v) shall be
applied after giving effect to reductions in Strategic Investments from
receipt of cash distributions and cash management fees; and
(vi) Permitted Acquisitions provided that if the Cost of Acquisition
exceeds $2,500,000 the Guarantor shall have furnished to the Bank a
certificate in the form of Exhibit B prepared on a historical pro forma
basis giving effect to such Permitted Acquisition which certificate shall
demonstrate that no Default or Event of Default will exist; provided,
further, the aggregate Costs of Acquisitions (excluding the CHC
Transaction) in any Fiscal Year (on a noncumulative basis, with the effect
that amounts not expended in any Fiscal Year may not be expended in any
subsequent Fiscal Year), together with the aggregate amount of Strategic
Investments in such Fiscal Year (similarly computed on a non-cumulative
basis), shall not exceed $5,000,000.
SECTION 5.10. Dividends or Distributions. Declare or pay any dividends
(other than those payable solely in capital stock) or distribution in reduction
of capital or otherwise in respect of any equity interest, or purchase, redeem
or otherwise retire any such
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equity interest except (i) dividends paid with respect to Preferred Stock, (ii)
Preferred Stock Redemptions, (iii) redemptions of the Preferred Stock with the
net proceeds from the issuance and sale of Qualified Equity Securities, (iv)
payments to purchase stock of the Guarantor pursuant to the exercise by Plan
beneficiaries of put rights under Section 16(b) of the Plan, and (v) pursuant to
the exercise of rights of first refusal or similar rights relating to stock
options or securities issuable upon the exercise of stock options in an
aggregate amount in any Fiscal Year not exceeding $300,000 (on a non-cumulative
basis, with the effect that amounts not expended in any Fiscal Year may not be
expended in a subsequent Fiscal Year), provided that after giving effect to
payment of such dividend or Preferred Stock Redemption no Default or Event of
Default exist hereunder; provided further that, without limiting other rights of
the Bank hereunder or under the other ESOP Loan Documents, the provisions of
this Section 5.10 shall not prohibit any Preferred Stock Redemption after
December 30, 1996.
SECTION 5.11. Merger or Consolidation. (a) Consolidate with or merge into
any other Person, or permit any other Person to merge into it; or (b) liquidate,
wind-up or dissolve or sell, transfer or lease or otherwise dispose of all or a
substantial part of its assets (other than sales in the ordinary course of
business or transfers from an Obligated Subsidiary to the Guarantor or another
obligated Subsidiary or from the Guarantor to an Obligated Subsidiary);
provided, however, (i) any Subsidiary of the Guarantor may merge into or
transfer all or substantially all of its assets to or consolidate with any
wholly-owned Subsidiary of the Guarantor, and (ii) any Person may merge with the
Guarantor or any wholly-owned Subsidiary of the Guarantor (whether or not such
Subsidiary is the survivor, provided such Person becomes a Subsidiary and, if
required, an Obligated Subsidiary) if the Guarantor or such wholly-owned
Subsidiary shall be the survivor thereof and, if required, an Obligated
Subsidiary, and such merger shall not cause, create or result in the occurrence
of any Default or Event of Default hereunder.
SECTION 5.12. Change in Control. Cause, suffer or permit any Person or
group of Persons, other than the owners existing as of the Closing Date, to own
beneficially more than 49% (and after an initial public offering of Guarantor's
capital stock, 25%) of the outstanding securities of (on a fully diluted basis
and taking into account any outstanding securities or contract rights
exercisable, exchangeable or convertible into equity interests) the Guarantor
having voting rights in the election of directors.
SECTION 5.13. Transactions with Affiliates. Enter into any transaction
after the date hereof, including, without limitation, the purchase, sale,
leasing or exchange of property, real or personal, or the rendering of any
service, with any Affiliate of the Guarantor, except for the following: (a) such
Persons may render services to the Guarantor or its Subsidiaries for
compensation at the same rates generally paid by Persons engaged in
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the same or similar businesses for the same or similar services, and (b) such
transactions may be entered into in the ordinary course of and pursuant to the
reasonable requirements of the Guarantor's (or any Subsidiary's) business and
upon fair and reasonable terms no less favorable to the Guarantor (or any
Subsidiary) than would be obtained in a comparable arm's-length transaction with
a Person not an Affiliate and (c) the limitation contained in this Section does
not apply to compensation arrangements (present and deferred) for Affiliates who
are or were officers or employees of the Guarantor or any Subsidiary as of or
prior to the Closing Date if such compensation arrangements are (i) approved by
a majority of the non-employee directors of the Board of Directors or the
Compensation Committee of the Board of Directors and (ii) such compensation is
paid for services rendered to the Guarantor or such Subsidiary in the ordinary
course of business.
SECTION 5.14. ERISA. With respect to all employee pension benefit plans
maintained by the Guarantor or any Subsidiary:
(i) terminate any of such employee pension benefit plans so as to
incur any liability to the Pension Benefit Guaranty Corporation
established pursuant to ERISA;
(ii) allow or suffer to exist any prohibited transaction involving
any of such employee pension benefit plans or any trust created thereunder
which would subject the Guarantor or a Subsidiary to a tax or penalty or
other liability on prohibited transactions imposed under Internal Revenue
Code Section 4975 or ERISA;
(iii) fail to pay to any such employee pension benefit plan any
contribution which it is obligated to pay under the terms of such plan;
(iv) allow or suffer to exist any accumulated funding deficiency,
whether or not waived, with respect to any such employee pension benefit
plan;
(v) allow or suffer to exist any occurrence of a reportable event or
any other event or condition, which presents a material risk of
termination by the Pension Benefit Guaranty Corporation of any such
employee pension benefit plan that is a Single Employer Plan, which
termination could result in any liability to the Pension Benefit Guaranty
Corporation; or
(vi) incur any withdrawal liability with respect to any
Multi-employer Plan.
SECTION 5.15. Fiscal Year. Change its Fiscal Year unless the Guarantor can
demonstrate compliance with the covenants contained herein for both the Fiscal
Year in effect prior to any change and
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the new fiscal year period by delivery to the Bank of appropriate interim and
annual pro forma historical and current compliance certificates for such periods
and such other information as the Bank may reasonably request.
SECTION 5.16. Dissolution, etc. Wind up, liquidate or dissolve
(voluntarily or involuntarily) or commence or suffer any proceedings seeking any
such winding up, liquidation or dissolution, except in connection with (i) the
merger or consolidation of Subsidiaries into each other or into the Guarantor
permitted pursuant to Section 5.11 and (ii) the dissolution of Vitas Healthcare
Corporation of Texas so long as it remains an inactive Subsidiary of the
Guarantor prior to such dissolution.
SECTION 5.17. Rate Hedging Obligations. Incur any Rate Hedging Obligations
or enter into any agreements, arrangements, devices or instruments relating to
Rate Hedging Obligations, except in regard to Swap Agreements.
SECTION 5.18. Subordinated Obligations. Cause, suffer or permit to be made
any payments in respect of Subordinated Obligations except to the extent
expressly permitted by the Subordination Agreements.
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ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. The following shall constitute Events of
Default under this Guaranty (whether such occurrence shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):
(a) the Guarantor shall fail to observe or perform any of the terms,
covenant or provisions contained in Article II hereof, including without
limitation failure to pay any amount as and when the same shall become due as
therein provided; or
(b) default shall be made in the performance or observance of
any covenant set forth in Sections 4.06, 4.07, 4.08, 4.12, 4.13, 4.24, 4.25 or
Article V hereof and in the case of Section 4.01 through 4.05, 4.07 and 4.14
such default shall continue for a period of five (5) days; or
(c) if a default shall be made in the performance or observance of,
or shall occur under, any covenant, agreement or provision contained in this
Guaranty (other than as described in clauses (a) or (b) above) and such default
shall continue for 30 or more days after the earlier of receipt of notice of
such default by the Authorized Representative from the Bank, the President, the
chief executive officer, the chief financial officer, the Treasurer or the Vice
President for Legal and Regulatory Affairs of the Guarantor becomes aware of
such default, or if a default shall be made in the performance or observance of,
or shall occur under, any covenant, agreement or provision contained in any of
the subsidiary Guaranties, Subsidiary Security Agreements or other ESOP Loan
Documents (beyond any applicable grace period, if any, contained therein) or in
any instrument or document evidencing or creating any obligation, guaranty, or
Lien in favor of the Bank or delivered to the Bank in connection with or
pursuant to this Guaranty or any of the ESOP Loan Documents, or if any ESOP Loan
Document ceases to be in full force and effect (other than by reason of any
action by the Bank), or if without the written consent of the Bank, this
Guaranty or any other ESOP Loan Document shall be disaffirmed or shall
terminate, be terminable or be terminated or become void or unenforceable for
any reason whatsoever (other than in accordance with its terms in the absence of
default or by reason of any action by the Bank); or
(d) if a default shall occur, which is not waived, (i) in the
payment of any principal, interest, premium or other amounts with respect to any
Indebtedness (other than the Loans) of the Guarantor or of any Subsidiary in an
amount not less than $25O,000 in the aggregate outstanding, or (ii) in the
performance, observance or fulfillment of any term or covenant contained in any
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agreement or instrument under or pursuant to which any such Indebtedness may
have been issued, created, assumed, guaranteed or secured by the Guarantor or
any Subsidiary, and such default shall continue for more than the period of
grace, if any, therein specified, or if such default shall permit the holder of
any such Indebtedness to accelerate the maturity thereof; or
(e) if any representation, warranty or other statement of fact
contained herein or any other ESOP Loan Document or in any writing, certificate,
report or statement at any time furnished to the Bank by or on behalf of the
Guarantor or, any Obligated Subsidiary pursuant to or in connection with this
Guaranty or the other ESOP Loan Documents, or otherwise, shall be false or
misleading in any material respect when given; or
(f) if the Guarantor or any Subsidiary shall be unable to pay its
debts generally as they become due; file a petition to take advantage of any
insolvency statute; make an assignment for the benefit of its creditors;
commence a proceeding for the appointment of a receiver, trustee, liquidator or
conservator of itself or of the whole or any substantial part of its property;
file a petition or answer seeking reorganization or arrangement or similar
relief under the federal bankruptcy laws or any other applicable law or statute;
or
(g) if a court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee, liquidator or
conservator of the Guarantor or any Subsidiary or of the whole or any
substantial part of its properties and such order, judgment or decree continues
unstayed and in effect for a period of sixty (60) days, or approve a petition
filed against the Guarantor or any Subsidiary seeking reorganization or
arrangement or similar relief under the federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state, which
petition is not dismissed within thirty (30) days; or if, under the provisions
of any other law for the relief or aid of debtors, a court of competent
jurisdiction shall assume custody or control of the Guarantor or any Subsidiary
or of the whole or any substantial part of its properties, which control is not
relinquished within sixty (60) days; or if there is commenced against the
Guarantor or any Subsidiary any proceeding or petition seeking reorganization,
arrangement or similar relief under the federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state which
proceeding or petition remains undismissed for a period of sixty (60) days; or
if the Guarantor or any Subsidiary takes any action to indicate its consent to
or approval of any such proceeding or petition; or
(h) if (i) any final, non-appealable judgment where the amount not
covered by insurance (or the amount as to which the insurer denies liability) is
in excess of $250,000 is rendered against the Guarantor or any Subsidiary, or
(ii) there is any
53
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attachment, injunction or execution against any of the Guarantor's or any
Subsidiary's properties for any amount in excess of $250,000; and in either case
such judgment, attachment, injunction or execution remains unpaid, unstayed,
undischarged, unbonded or undismissed for a period of sixty (60) days; or
(i) if the Guarantor or any Subsidiary shall, other than in the
ordinary course of business (as determined by past practices), suspend all or
any part of its operations material to the conduct of the business of the
Guarantor and its Subsidiaries, taken as a whole; or
(j) if (i) the Guarantor or any Subsidiary shall engage in any
prohibited transaction (as described in Section 5.14(u) hereof), which is not
subject to a statutory or administrative exemption, involving any employee
pension benefit plan of the Guarantor or any Subsidiary, (ii) any accumulated
funding deficiency (as referred to in Section 5.14(iv) hereof), whether or not
waived, shall exist with respect to any Single Employer Plan, (iii) a reportable
event (as referred to in Section 5.14(v) hereof) (other than a reportable event
for which the statutory notice requirement to the Pension Benefit Guaranty
Corporation has been waived by regulation) shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed to administer or to terminate, any Single Employer Plan, which
reportable event or institution or proceedings is, in the reasonable opinion of
the Required Lenders, likely to result in the termination of such Single
Employer Plan for purposes of Title IV of ERISA, and in the case of such a
reportable event, the continuance of such reportable event shall be unremedied
for sixty (60) days after notice of such reportable event pursuant to Section
4043(a), (c) or (d) of ERISA is given, as the case may be, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, and such
termination results in a material liability of the Guarantor or any Subsidiary
to such Single Employer Plan or the Pension Benefit Guaranty Corporation, or (v)
the Guarantor or any Subsidiary shall withdraw from a Multi-employer Plan for
purposes of Title IV of ERISA, and, as a result of any such withdrawal, the
Guarantor or any Subsidiary shall incur withdrawal liability to such
Multi-employer Plan; and in each case in clauses (i) through (v) of this Section
6.01(i), such event or condition, together with all other such events or
conditions, if any, would subject the Guarantor or any Subsidiary to any tax,
penalty or other liabilities, and in each such case the event or condition is
not remedied to the satisfaction of the Required Lenders within ninety (90) days
after the earlier of (i) receipt of notice of such event or condition by the
Authorized Representative from the Bank or (ii) the Guarantor becomes aware of
such event or condition; or
(k) if the Guarantor or any Subsidiary shall breach any of the terms
or conditions of any agreement under which any Rate Hedging Obligation permitted
pursuant to Section 5.17 is created
54
<PAGE>
and such breach shall continue beyond any grace period, if any, relating thereto
pursuant to the terms of such obligation; or
(1) if there shall occur and not be waived an Event of Default as
defined in any of the Revolving Credit Loan Documents or any of the other ESOP
Loan Documents; or
(m) if there shall occur any loss of any permits, licenses,
authorizations, certifications or approvals from any federal, state or local
governmental or administrative authority or termination of any contract with any
such authority, which loss or termination (i) continues for a period greater
than 60 days and (ii) results in the suspension or termination of operations of
the Guarantor or any Subsidiary which produces 5% or more of the Guarantor's
gross revenues.
SECTION 6.02. Rights Upon an Event of Default. If any Event of Default
shall have occurred and not been waived subject to Section 2.08 hereof, the Bank
may proceed to protect and enforce its rights and interests hereunder and under
the other ESOP Loan Documents, and shall have the right to proceed first
directly against the Guarantor or any signatory to a Subsidiary Guaranty, and
the Bank shall have no obligation to proceed against or exhaust any other remedy
or remedies which it may have without resorting to any other security or
guaranty, whether held by or available to the Bank.
SECTION 6.03. No Remedy Exclusive. No remedy herein conferred upon or
reserved to the Bank is intended to be exclusive of any other available remedy
or remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute.
55
<PAGE>
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendments, Etc. No amendment or waiver of any provision of
this Guaranty, nor consent to any departure by the Guarantor in any event shall
be effective unless the same shall be in writing and signed by the Bank and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 7.02. Notices, Etc. All notices, demands or requests provided for
or permitted to be given pursuant to this Guaranty shall be deemed to have been
properly given or served by personal delivery, by telecopy with telephone or
telecopied confirmation of receipt, or by depositing in the United States mail,
postpaid and registered or certified, return receipt requested, and addressed to
the parties at their addresses set forth below. All notices, demands and
requests shall be effective upon being personally delivered at the address
specified herein, upon confirmation of receipt by telecopy, or three (3)
Business Days after being deposited in the United States mail. The time period
for which a response to any notice, demand or request must be given, if any,
shall commence to run from the date of delivery at the address specified herein,
the date of receipt of telecopy notice, or the date of receipt of the notice,
demand, or request, by the addressee thereof as disclosed by the return receipt.
Rejection or other refusal to accept or the inability to deliver because of
changed address of which no notice was given shall be deemed to be receipt of
the notice, demand or request sent. Any party hereto shall have the right from
time to time and at any time during the term of this Guaranty to change its
address or addressee and each shall have the right to specify as its address any
other address within the United States by giving notice in accordance with the
terms hereof. For the purposes of this Guaranty, the addresses of the parties
are as follows:
(a) if to the Guarantor at:
Vitas Healthcare Corporation
100 South Biscayne Boulevard
Miami, Florida 33131
Attention: Mark Ohlendorf, Chief Financial Officer
Telefacsimile No.: (305) 374-4765
56
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with a copy (which shall not constitute notice) to:
Vitas Healthcare Corporation
100 South Biscayne Boulevard
Miami, Florida 33131
Attention: Mark A. Sterling
Vice President for Legal and Regulatory Affairs
Telephone: (305) 350-6044
Telefacsimile: (305) 350-6059
(b) if to the Bank at:
NationsBank Plaza
150 S.E. Third Avenue
Miami, Florida 33131
Attention: Corporate Banking Department
Telefacsimile No.: (305) 577-5745
SECTION 7.03. No Waiver. No failure on the part of the Bank to exercise,
and no delay in exercising, any right hereunder or under the other ESOP Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right.
SECTION 7.04. Right of Set-off. Upon the occurrence of any Event of
Default, the Bank is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand other than deposits identified as for the
benefit of third parties) at any time held and other indebtedness at any time
owing by the Bank to or for the credit or the account of the Guarantor against
any and all of the obligations of the Guarantor now and hereafter existing under
this Guaranty, irrespective of whether or not the Bank shall have made any
demand hereunder and although such obligations may be contingent or unmatured.
SECTION 7.05. Costs, Expenses and Taxes. The Guarantor agrees to pay
immediately when due all costs and expenses in connection with the preparation,
execution, delivery, filing, recording, and administration and enforcement of or
monitoring of compliance with this Guaranty and any other documents which may be
delivered in connection with this Guaranty or the transactions contemplated
hereby, including, without limitation, the reasonable fees and out-of-pocket
expenses of the Bank and of counsel and any agents or consultants for the Bank,
with respect thereto and with respect to advising the Bank as to its rights and
responsibilities under this Guaranty, subject to an aggregate cap of fees and
expenses of counsel to the Bank of $55,000 in connection with the negotiation,
preparation and execution of the ESOP Loan Documents and the Loan Documents (as
defined in the Revolving Credit
57
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Agreement), excluding fees and expenses arising in connection with any
amendment, supplement or modification hereto or to any of the ESOP Loan
Documents or to any Loan Documents. In addition, the Guarantor shall pay any and
all documentary stamp, intangibles and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing and
recording of this Guaranty, and agrees to save the Bank harmless from and
against any and all liabilities with respect to or resulting from any delay in
paying or failure to pay such taxes and fees.
SECTION 7.06. Binding Effect. This Guaranty shall be binding upon and
inure to the benefit of the Guarantor and the Bank and their respective
successors and assigns, except that the Guarantor shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Bank. The Bank may assign or sell a participation in all or any
part of, or any interest (undivided or divided) in, the Bank's rights and
benefits under this Guaranty to any financial institution and agrees to give the
Guarantor written notice thereof. To the extent of any assignment by the Bank,
the assignee shall have the same rights and benefits against the Guarantor
hereunder as it would have had if such assignee were the Bank.
SECTION 7.07. Severability. Any provision of this Guaranty which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
SECTION 7.08. Governing Law. This Guaranty shall be governed by, and
construed in accordance with, the internal laws of the State of Florida, without
regard to its choice of law principles.
SECTION 7.09. Headings. Section headings in this Guaranty are included
herein for convenience of reference only and shall not constitute a part of this
Guaranty for any other purpose.
SECTION 7.10. Prior Agreements Superseded. This Guaranty and the other
ESOP Loan Documents shall completely and fully supersede all prior undertakings
or agreements, both written and oral, between the Guarantor and the Bank
relating to the subject matter hereof and thereof, including those contained in
any commitment letter between the Bank and the Guarantor executed in
anticipation of the issuance of the making of the Loan.
SECTION 7.11. Counterparts. This Guaranty may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
SECTION 7.12. Consents. Whenever pursuant to the terms of the ESOP Loan
Documents the consent of a party to the ESOP Loan
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Documents shall be required for any other Person to take any action or obtain
any right, privilege or other benefit thereunder, the party entitled to give or
withhold consent shall respond to any such request for consent duly made
hereunder within the time for such response expressly provided therefor in the
ESOP Loan Documents or, if no such time is so provided, within a reasonable time
following receipt thereof; provided that (i) nothing in this section shall
impair the effect of any other provision of the ESOP Loan Documents expressly
providing in certain circumstances that the failure to give consent shall
constitute a refusal to consent, (ii) in no event shall the Bank be required to
respond to any such request for consent more rapidly than thirty (30) days
following the latest date upon which the Bank receives such request for consent
and all information relating thereto which the Bank may request in connection
therewith, and (iii) failure of the Bank to respond to any request for consent
as provided in this Section 7.12 shall not discharge, diminish or constitute a
defense to enforcement of any obligations under the ESOP Loan Documents.
SECTION 7.13. Supplements to Schedules. The Guarantor may, from time to
time, amend or supplement the Schedules to this Guaranty by delivering
(effective upon receipt) to the Bank a copy of such revised Schedule or
Schedules which shall (i) be dated the date of delivery, (ii) be certified by an
Authorized Representative as true, complete and correct as of such date and as
delivered in replacement for the corresponding Schedule or Schedules previously
in effect, and (iii) show in reasonable detail (by blacklining or other
appropriate graphic means) the changes from each such corresponding predecessor
Schedule.
59
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IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
WITNESS: VITAS HEALTHCARE CORPORATION
/s/ Meganne Cusato By: /s/ Mark W. Ohlendorf
- ---------------------------- -----------------------------------
Name: Mark W. Ohlendorf
/s/ Terry L. Scaggs Title: Vice President
- ----------------------------
[The remainder of this page intentionally left blank.]
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WITNESS: NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION
/s/ Meganne Cusato By: /s/ Allison S. Freeland
- ---------------------------- -----------------------------------
Name: Allison S. Freeland
/s/ Terry L. Scaggs Title: Vice President
- ----------------------------
61
<PAGE>
EXHIBIT 10.61
WARRANT AGREEMENT
BETWEEN
NATIONSBANK, N.A.
AND
VITAS HEALTHCARE CORPORATION
July 18, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
CERTAIN DEFINITIONS
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
2.1 Form of Warrant Certificates ......................................... 5
2.2 Legend ............................................................... 5
2.3 Delivery of the Warrants ............................................. 5
ARTICLE 3
EXERCISE OF WARRANTS
3.1 Exercise Price ....................................................... 6
3.2 Restrictions on Exercise; Expiration ................................. 6
3.3 Method of Exercise; Payment of Exercise Price ........................ 6
3.4 Dividends and Distributions .......................................... 8
3.5 Stockholder Rights ................................................... 8
ARTICLE 4
ADJUSTMENTS
4.1 Adjustments .......................................................... 9
4.2 Termination of Right of Exercise on Fundamental Corporate Changes .... 12
4.3 Statements in the Warrants ........................................... 13
4.4 Fractional Interests ................................................. 13
4.5 No Dilution or Impairment ............................................ 13
ARTICLE 5
RESERVATION AND AUTHORIZATION OF COMMON SHARES
5.1 Reservation and Authorization ........................................ 13
5.2 Covenant Regarding Securities ........................................ 13
5.3 Registration ......................................................... 13
ARTICLE 6
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
6.1 Transfer and Exchange ................................................ 14
i
<PAGE>
ARTICLE 7
REGISTRATION RIGHTS
ARTICLE 8
MISCELLANEOUS
8.1 Loss or Mutilation ................................................... 17
8.2 Payment of Taxes ..................................................... 17
8.3 Notices .............................................................. 17
8.4 Governing Law ........................................................ 18
8.5 Assignment; Successors ............................................... 18
8.6 Counterparts ......................................................... 18
8.7 Amendments ........................................................... 18
8.8 Headings ............................................................. 19
8.9 Third Party Beneficiaries ............................................ 19
8.10 Severability ......................................................... 19
8.11 No Inconsistent Agreements ........................................... 19
VITAS AGREES TO PROVIDE A COPY OF THE EXHIBITS REFERENCED IN THIS AGREEMENT TO
THE COMMISSION UPON REQUEST.
ii
<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of July 18, 1997 (this "Agreement"), between
VITAS HEALTHCARE CORPORATION, a Delaware corporation (the "Corporation"), and
NATIONSBANK, N.A. (successor by merger of NationsBank, N.A. (South)
("NationsBank").
WHEREAS, pursuant to the terms of an Amendment No.6 dated as of March
24,1997 ("Amendment No. 6") to Amended and Restated Revolving Credit, Term Loan
and Reimbursement Agreement dated as of February 17,1995, as amended, among the
Corporation, NationsBank, as Agent, and NationsBank, as Lender (as previously
amended and as amended by Amendment No.6, the "Credit Agreement"), NationsBank,
among other things, has agreed to continue to make available to the Corporation
loans of up to $32,000,000 (the "Loans"), which Loans are evidenced by Notes of
the Corporation in favor of NationsBank (the "Notes");
WHEREAS, in order to induce NationsBank to enter into Amendment No. 6, the
Corporation has agreed to execute and deliver to NationsBank 486,532 stock
purchase warrants ("Warrants") issued pursuant to this Agreement entitling the
Holder(s) (as defined herein) thereof to purchase from the Corporation an
aggregate of 486,532 shares (the "Warrant Shares") of the Corporation's common
stock, par value $.001 per share ("Common Stock"), at the Exercise Price (as
defined herein), subject to adjustment as provided in Article 4 hereof, at any
time on or after the date hereof and before 5:00 P.M., New York City time, on
the Expiration Date (as defined herein), subject to the terms and conditions
hereof.
NOW, THEREFORE, in consideration of the foregoing and of the agreements
contained in the Credit Agreement, and for the purpose of defining the terms and
provisions of the Warrants and Warrant Shares and the respective rights and
obligations thereunder of the Corporation and the Holder(s), the Corporation and
NationsBank hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided:
(a) the terms defined in this Article 1 have the meanings assigned
to them in this Article, and include the plural as well as the singular;
and
(b) the words "herein," "hereof" and "hereunder," and other words of
similar import, refer to this Agreement as a whole and not to any
particular article, section or other subdivision.
"Adjustment Period" shall mean the period of five (5) consecutive trading
days selected by the Board of Directors in its sole discretion, during the
twenty (20) trading days preceding, and including the date as of which the Fair
Market Value of a security is to be determined.
<PAGE>
"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "under common control with" and "controlled
by"), as used with respect to any Person, shall mean 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 stock, by
agreement or otherwise; provided, however, that beneficial ownership of 25% or
more of the total voting power of all outstanding stock of a Person shall be
deemed to be control of such Person.
"Agreement" has the meaning set forth in the preamble hereto.
"Amendment No. 6" has the meaning set forth in the preamble hereto.
"Board of Directors" means the board of directors of the Corporation.
"Business Day" means any day which is not a Saturday, Sunday or a day on
which banking institutions in the States of New York or Florida are not
authorized or obligated by law, executive order, regulation or governmental
decree to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" has the meaning set forth in the preamble hereto.
"Corporation" has the meaning set forth in the preamble hereto.
"Current Market Price" of publicly traded shares of Common Stock or any
other class of capital stock or other security of the Corporation or any other
issuer for any given day shall mean the last reported sales price, regular way,
or, in case no sale takes place on such day, the average reported closing bid
and asked prices, regular way, in either case as reported on the New York Stock
Exchange Composite Tape or, if such security is not listed or admitted to
trading on any national securities exchange, on the NASDAQ National Market or,
if such security is not quoted on such NASDAQ National Market, the average of
the closing bid and asked prices on such day in the over-the-counter market as
reported by NASDAQ, or, if bid and asked prices for such security on such day
shall not have been reported through NASDAQ, the average of the bid and asked
prices for such day as furnished by any New York Stock Exchange member firm
regularly making a market in such security selected for such purpose by the
Board of Directors.
"Credit Agreement" has the meaning set forth in the preamble hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
2
<PAGE>
"Exempt Securities" shall mean the issuance of (a) Warrant Shares or other
securities issuable pursuant to the Warrants; (b) securities of the Corporation
issued upon the exercise, conversion or exchange of securities of the
Corporation issued prior to the date hereof; (c) shares of Common Stock or other
Corporation securities issued or issuable as a result of adjustments under
Section 4 or other applicable provisions of the Series B Certificate of
Designation or similar provisions of other convertible securities; (d) any
securities of the Corporation issued in exchange for assets or securities in a
merger, consolidation, sale or purchase of assets or other business combination
transaction approved by the Board of Directors; (e) any securities issuable or
any adjustment made or to be made to the Warrants or Warrant Shares under
Article 4 of this Agreement; (f) any rights or other securities issued or
issuable pursuant to a stockholder rights agreement under which the Board of
Directors would declare a dividend of one preferred (or common) share purchase
right for each outstanding share of Common Stock provided that such stockholder
rights agreement results in equivalent dividends on Warrant Shares; (g) any
shares of Common Stock pursuant to any plan providing for the reinvestment of
dividends or interest payable on securities of the Corporation and the
investment of additional optional amounts in shares of Common Stock under any
such plan; (h) any shares of Common Stock in a public offering registered under
the Securities Act; (i) any shares of Common Stock or options or rights to
purchase such shares pursuant to any stock option or bonus plan or plans now or
hereafter adopted by the Corporation (including any stock appreciation rights or
employee stock ownership plan) for the benefit of directors, officers, employees
and/or consultants of the Corporation and/or its subsidiaries or pursuant to any
employee benefit plan or program now or hereafter adopted by the Corporation for
the benefit of its employees and/or employees of its subsidiaries, or pursuant
to any specific grant not pursuant to any plan or program that is approved by
the Corporation's Board of Directors; or (j) the issuance or repurchase of
Corporation securities on or prior to the date the Warrants are first issued (or
any subsequent issuances of Common Stock, 9% Preferred Stock or Series B
Preferred Stock issued pursuant to warrants, options or rights previously
granted, outstanding or issued on the date the Warrants are first issued).
"Exercise Price" has the meaning set forth in Section 3.1 hereof.
"Expiration Date" means March 24, 2007.
"Extraordinary Distribution" shall mean any dividend or other distribution
with respect to the Common Stock (effected while any of the Warrants are
outstanding) of any shares of capital stock of the Corporation (other than
shares of Common Stock), other securities of the Corporation (other than
securities of the type referred to in Section 4.1(c)), evidences of indebtedness
of the Corporation or any other person or any other property other than cash
(including shares of any subsidiary of the Corporation), or any combination
thereof.
"Fair Market Value" shall mean, as to shares of Common Stock or any other
class of capital stock or securities of the Corporation or any other issuer
which are publicly traded, the average of the Current Market Prices of such
shares or securities for each day of the Adjustment Period. The "Fair Market
Value" of any security which is not publicly traded or of any other
3
<PAGE>
property shall mean the fair value thereof as determined in good faith by the
Board of Directors in its sole discretion.
"Holders" shall mean NationsBank or an Affiliate thereof and such other
Persons to whom NationsBank or an Affiliate thereof transfers Warrants in
compliance with the terms of this Agreement and each subsequent permitted
transferee.
"NationsBank" has the meaning set forth in the preamble hereto.
"9% Certificate of Designation" shall mean the Certificate of Designation,
Preferences and Other Rights of the 9.0% Cumulative Nonconvertible Preferred
Stock of the Corporation, as amended from time to time.
"9% Preferred Stock" shall mean the 9.0% Cumulative Nonconvertible
Preferred Stock of the Corporation, par value $1.00 per share, which is issued
under the 9% Certificate of Designation.
"Notes" has the meaning set forth in the preamble hereto.
"Person" shall mean a natural person, partnership, corporation,
association, joint stock company, trust, joint venture, unincorporated
association, governmental entity or any department, agency or political
subdivision thereof, or other entity.
"Private Placement Legend" means the legend in the form set forth in
Section 2.2 hereof.
"Qualified Initial Public Offering" shall mean a public offering of the
Corporation's Common Stock resulting in gross proceeds to the Corporation of not
less than $12 million and at a total market capitalization of the common equity
of the Corporation at that time of not less than $60 million.
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement dated as of June 4, 1993 among the Corporation, certain
stockholders of the Corporation, Chemed Corporation and the investors identified
on Schedule A thereto.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Series B Certificate of Designation" shall mean the Certificate of
Designation, Preferences and Other Rights of the Series B Convertible Preferred
Stock of the Corporation, as amended from time to time.
"Series B Preferred Stock" shall mean the Series B Convertible Preferred
Stock of the Corporation, par value $1.00 per share, which is issued under the
Series B Certificate of Designation.
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"Warrants" has the meaning set forth in the preamble hereto.
"Warrant Certificate" has the meaning set forth in Section 2.1 hereto.
"Warrant Shares" has the meaning set forth in the preamble hereto.
ARTICLE 2
ORIGINAL ISSUE OF WARRANTS
2.1 Form of Warrant Certificates. Any certificate representing the
Warrants (a "Warrant Certificate"), the form of which is attached hereto as
Exhibit A, shall be detachable from the Credit Agreement and any Notes and shall
be dated the date on which it is signed by a duly authorized officer of the
Corporation and shall have such insertions as are appropriate or required or
permitted by this Agreement and may have such letters, numbers or other marks of
identification as the Corporation may deem appropriate and as are not
inconsistent with the provisions of this Agreement.
2.2 Legend. Subject to the provisions hereof, each Warrant Certificate and
each certificate representing securities acquired upon exercise of the Warrants
shall bear the following legend on the face thereof:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF A CERTAIN AGREEMENT WHICH INCLUDES A RIGHT OF FIRST REFUSAL ON
THE SALE OF THE SECURITIES. COPIES OF THE AGREEMENT MAY BE OBTAINED UPON WRITTEN
REQUEST TO THE SECRETARY OF THE CORPORATION.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND CANNOT BE OFFERED, SOLD OR TRANSFERRED WITHOUT REGISTRATION
OR COMPLIANCE WITH EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS AND REGULATIONS PROMULGATED THEREUNDER.
A full statement of the powers, designations, preferences and relative,
participating, optional or other special rights of the shares of each class of
stock of the Corporation authorized to be issued, and the qualifications,
limitations or restrictions of such preferences and/or rights, will be furnished
to any stockholder without charge upon request to the Secretary of the
Corporation."
2.3 Delivery of the Warrants.
This Agreement contemplates the issuance of up to 486,532 Warrants,
subject to adjustment as provided herein. Concurrently with the execution and
delivery of this Agreement,
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the Corporation shall issue to NationsBank or an Affiliate thereof in connection
therewith (but detachable therefrom) a Warrant Certificate for 486,532 Warrants.
ARTICLE 3
EXERCISE OF WARRANTS
3.1 Exercise Price.
The Warrant Certificate shall entitle the Holders thereof, subject to the
provisions of this Agreement, to purchase an aggregate of four hundred
eighty-six thousand five hundred thirty-two (486,532) Warrant Shares at a per
share purchase price (the "Exercise Price") of $.0l, subject to the limitations
and adjustments as provided in Article 4 hereof; provided, however, that in no
event shall the exercise price per share of Common Stock be less than the par
value of such Common Stock.
3.2 Restrictions on Exercise; Expiration. Subject to the limitations and
adjustments as provided herein, on or before the Expiration Date, the Warrants
may be exercised on any Business Day as to all or any portion of the Warrant
Shares for which the Warrants are then exercisable as follows: (a) as of the
date of this Agreement and the issuance of the Warrant Certificate, the number
of Warrants which may be exercised pursuant to this Agreement, and the number of
Warrant Shares issuable upon exercise of such Warrants, shall be 194,613; (b) in
the event the Corporation shall not have been paid in full its Obligations (as
defined in the Credit Agreement) on or prior to August 30, 1997, the number of
Warrants which may be exercised pursuant to this Agreement, and the number of
Warrant Shares issuable upon exercise of such Warrants, shall be automatically
increased to 291,919 effective as of August 31,1997; (c) in the event the
Corporation shall not have paid in full its Obligations (as defined in the
Credit Agreement) on or prior to November 29, 1997, the number of Warrants which
may be exercised pursuant to this Agreement, and the number of Warrant Shares
issuable upon exercise of such Warrants, shall be automatically increased to
389,226 effective as of November 30,1997; and (d) in the event the Corporation
shall not have been paid in full its Obligations (as defined in the Credit
Agreement) on or prior to January 30, 1998, the number of Warrants which may be
exercised pursuant to this Agreement, and the number of Warrant Shares issuable
upon exercise of such Warrants, shall be automatically increased to 486,532
effective as of January 31, 1998. The Exercise Price shall not be adjusted by
reason of any such increase in the number of Warrants which may be exercised and
in the number of Warrant Shares issuable upon such exercise. If any of the
Warrants are not exercised by 5:00 p.m., New York City time, on the Expiration
Date, this Agreement and all unexercised Warrants shall expire and all rights of
the Holders hereunder and thereunder shall terminate unless otherwise provided
herein or therein.
3.3 Method of Exercise; Payment of Exercise Price.
(a) In order to exercise any of the Warrants, the Holder thereof must
provide written notice to the Corporation at its address set forth in Section
8.3 hereof in the form attached hereto as Exhibit B specifying the number of
Warrants being exercised. Such notice shall be
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accompanied by Warrant Certificates representing not less than the number of
Warrants being exercised, together with payment in full of the per share
Exercise Price multiplied by the number of Warrant Shares to be purchased
pursuant to the exercise. The Exercise Price shall be payable, at the option of
the Holder, by wire transfer, certified check, official bank check or bank
cashier's check payable to the order of the Corporation.
(b) In lieu of exercising Warrants pursuant to Section 3.3(a), the Holder
shall have the right to require the Corporation to convert the Warrants, in
whole or in part and at any time or times (the "Conversion Right"), into Warrant
Shares, by surrendering to the Corporation at its address set forth in Section
8.3 hereof the Warrant Certificate evidencing the Warrants to be converted,
accompanied by the form of conversion notice attached hereto as Exhibit C which
has been duly completed and signed. Upon exercise of the Conversion Right, the
Corporation shall deliver to the Holder (without payment by the Holder of any
Exercise Price) that number of Warrant Shares which is equal to the quotient
obtained by dividing (x) the value of the number of Warrants being converted at
the time the Conversion Right is exercised (determined by subtracting the
aggregate Exercise Price for all such Warrants immediately prior to the exercise
of the Conversion Right from the aggregate Fair Market Value of that number of
Warrant Shares purchasable upon exercise of such Warrants immediately prior to
the exercise of the Conversion Right (taking into account all applicable
adjustments pursuant to Article 4), by (y) the Fair Market Value of one share of
Common Stock immediately prior to the exercise of the Conversion Right. Any
references in this Agreement to the "exercise" of any Warrants, and the use of
the term "exercise" herein, shall be deemed to include (without limitation) any
exercise of the Conversion Right.
(c) If the number of Warrants being exercised is less than the number of
Warrants represented by the Warrant Certificate(s) tendered in connection with
the exercise, the Corporation shall issue new Warrant Certificate(s) for the
unexercised Warrants in accordance with instructions contained in the notice of
exercise and this Agreement.
(d) Upon exercise of any Warrant in conformity with the foregoing
provisions, the Corporation shall (i) transfer promptly to, or upon the written
order of, the Holder of such Warrant, appropriate evidence of ownership of any
Warrant Shares or other securities or property (including money) to which it is
entitled, registered or otherwise placed in such name or names as may be
directed in writing by the Holder thereof, (ii) deliver such evidence of
ownership and any other securities or property (including money) to the person
or persons entitled to receive the same, and (iii) reissue, as the case may be,
a Warrant Certificate for any unexercised Warrants. Each new Warrant Certificate
so issued shall bear the legend set forth in Section 2.2 if the Warrant
Certificate presented in connection with partial exercise thereof bore such
legend except to the extent that some or all of the transfer restrictions
referred to in such legend or this Agreement are no longer applicable pursuant
to Article 6 or as a result of registration of the Warrant Shares pursuant to
Article 7. All Warrant Certificates surrendered upon exercise of Warrants shall
be canceled. A Warrant shall be deemed to have been exercised immediately prior
to the close of business on the date of the surrender to the Corporation for
exercise of the Warrant Certificate representing such Warrant being exercised
and accompanied by the notice required
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under Section 3(a) or 3(b), as the case may be, for all purposes of this
Agreement, the person entitled to receive any Warrant Shares or other securities
or property deliverable upon such exercise shall, as between such person and the
Corporation, be deemed to be the Holder of such Warrant Shares or other
securities or property of record as of the close of business on such date and
shall be entitled to receive any Warrant Shares or other securities or property
(including money) to which such person would have been entitled had such person
been the record holder of such Warrant Shares or other securities or property on
such date.
3.4 Dividends and Distributions. For so long as any of the Warrants remain
outstanding and unexercised, the Corporation will, upon the declaration of a
cash dividend upon its Common Stock or other distribution to the holders of its
Common Stock (other than a dividend payable in shares of the Corporation's
Common Stock) and at least twenty (20) calendar days prior to the record date
for such dividend or other distribution (or if no record date is specified,
twenty (20) calendar days prior to the taking of the action), notify the Holders
of such declaration, which notice will contain, at a minimum, the following
information: (i) the date of the declaration of the dividend or distribution,
(ii) the amount of such dividend or distribution, (iii) the record date of such
dividend or distribution, and (iv) the payment date or distribution date of such
dividend or distribution. The failure to give the notice required by this
Section 3.4 or any defect therein shall not affect the legality or validity of
such dividend or distribution.
3.5 Stockholders Rights.
(a) Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the Holders thereof the right
to vote or to consent or to receive notice as a stockholder in respect of the
meetings of stockholders or the election of directors of the Corporation or any
other matter, or any rights whatsoever as a stockholder of the Corporation.
(b) Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as imposing any obligation on the registered
Holders thereof to purchase any securities or as imposing any liabilities on
such Holders as stockholders of the Corporation, whether such obligation or
liabilities are asserted by the Corporation or by creditors of the Corporation
(except for indemnities and other obligations in connection with registration
rights).
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ARTICLE 4
ADJUSTMENTS
4.1 Adjustments. The Exercise Price and the number of Warrant Shares
issuable upon exercise of each Warrant shall be subject to adjustment from time
to time as follows:
(a) Intentionally Omitted.
(b) Adjustments for Changes in Common Stock. Subject to the provisions of
Section 4.1(e), in the event the Corporation shall, at any time or from time to
time while any of the Warrants are outstanding, (i) pay a dividend or make a
distribution in respect of the Common Stock in shares of Common Stock or (ii)
subdivide or combine the outstanding shares of Common Stock into a greater or
lesser number of shares, in each case whether by reclassification of shares,
recapitalization of the Corporation or otherwise, then, in such event, each
Warrant will automatically, without any action on the part of the Holder or the
Corporation, become exercisable for that number of Warrant Shares equal to the
number of Warrant Shares for which a Warrant was exercisable immediately prior
to such event multiplied by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock outstanding
immediately before such event. An adjustment pursuant to this Section 4.1(b)
shall be effective upon payment of such dividend or distribution in respect of
the Common Stock and in the case of a subdivision or combination shall become
effective immediately as of the effective date thereof. Concurrently with the
automatic adjustment pursuant to this Section 4.1(b), the Exercise Price shall
be adjusted by multiplying the Exercise Price in effect immediately before the
event by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately before such event and the denominator of which is
the number of shares of Common Stock outstanding immediately after such event.
(c) Below Market Issuances. Subject to the provisions of Section 4.1(e),
in the event the Corporation shall, at any time or from time to time while any
of the Warrants are outstanding, sell or issue shares of Common Stock (other
than in a transaction subject to Section 4.1(b)), any security convertible into
shares of Common Stock or any option, right or warrant to purchase shares of
Common Stock for no consideration or at a purchase price per share of Common
Stock, or conversion price in the case of a security convertible into Common
Stock, less than the Fair Market Value of a share of Common Stock on the date of
issuance of such Common Stock, security convertible into Common Stock, option,
right or warrant, then, in such event, each Warrant will automatically, without
any action on the part of the holder thereof or the Corporation, become
exercisable for that number of Warrant Shares equal to the number of Warrant
Shares for which a Warrant was exercisable immediately before such sale or
issuance of Common Stock, securities convertible into Common Stock, options,
rights or warrants multiplied by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately before such sale or issuance
of Common Stock, securities convertible into Common Stock, options, rights or
warrants plus the maximum number of shares of Common Stock that could be
acquired upon the sale or issuance of the Common Stock or upon exercise in full
of all
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such conversion rights, options, rights and warrants and the denominator of
which is the number of shares of Common Stock outstanding immediately before
such sale or issuance of Common Stock, securities convertible into Common Stock,
options, rights or warrants plus the number of shares of Common Stock which
could be purchased at the Fair Market Value of a share of Common Stock at the
time of such sale or issuance for the maximum aggregate consideration payable
upon the sale or issuance of the Common Stock or upon exercise in full of all
such conversion rights, options, rights or warrants. Concurrently with the
automatic adjustment pursuant to this Section 4.1(c), the Exercise Price shall
be adjusted by multiplying the Exercise Price in effect immediately before such
sale or issuance of Common Stock, securities convertible into Common Stock,
options, rights or warrants by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately before such sale or issuance
of Common Stock, securities convertible into Common Stock, options, rights or
warrants plus the number of shares of Common Stock which could be purchased at
the Fair Market Value of a share of Common Stock at the time of such sale or
issuance for the maximum aggregate consideration payable upon the sale or
issuance of the Common Stock or upon exercise in full of all such conversion
rights, options or warrants, and the denominator of which is the number of
shares of Common Stock outstanding immediately before such sale or issuance of
Common Stock, securities convertible into Common Stock, options, rights or
warrants plus the maximum number of shares that could be acquired upon the sale
or issuance of the Common Stock or upon the exercise in full of all such
conversion rights, options, rights and warrants. For purposes of this Section
4.1(c), all shares of Common Stock issuable upon the conversion of such
convertible securities or upon exercise of such options, warrants or rights
shall be deemed to have been issued, for the purpose of computing the number of
Warrant Shares for which a Warrant is exercisable and the Exercise Price
hereunder, as of the time such convertible securities, options, warrants or
rights are issued or sold. If any rights of conversion or exercise of such
convertible securities, options, rights or warrants shall expire without having
been exercised, the number of Warrant Shares for which a Warrant is exercisable
and the Exercise Price shall forthwith be automatically adjusted to be the
number of Warrant Shares for which a Warrant is exercisable and the Exercise
Price that would have been in effect had an adjustment been made on the basis
that the only shares of Common Stock issued or sold were those actually issued
upon the conversion or exercise of such convertible securities, options, rights
or warrants. For purposes of this Section 4.1(c), the date of issuance of
options for shares of Common Stock shall mean the date of their grant. For
purposes of this Section 4.1(c), "Common Stock outstanding shall mean all shares
of Common Stock outstanding on a fully diluted basis, as if all securities
convertible into or exchangeable for Common Stock had been fully converted into
or exchanged for shares of Common Stock and any outstanding options, warrants or
other rights to purchase Common Stock or securities convertible into or
exchangeable for Common Stock had been fully exercised (and the resulting
securities converted into or exchanged for Common Stock), but excluding shares
of Common Stock issuable upon exercise of the Warrants.
(d) Extraordinary Distributions. Subject to the provisions of Section
4.1(e) and Section 4.2, in the event the Corporation shall, at any time or from
time to time while any of the Warrants are outstanding, make an Extraordinary
Distribution in respect of the Common Stock, whether by dividend, distribution,
reclassification of shares or recapitalization of the Corporation
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(including recapitalization or reclassification effected by a merger or
consolidation in which the Corporation is the surviving entity) then, in such
event, each Warrant will automatically, without any action on the part of the
holder thereof or the Corporation, become exercisable for that number of Warrant
Shares equal to the number of Warrant Shares for which a Warrant was exercisable
immediately before such Extraordinary Distribution multiplied by a fraction the
numerator of which is the product of (a) the number of shares of Common Stock
outstanding immediately before such Extraordinary Distribution multiplied by (b)
the Fair Market Value of a share of Common Stock on the record date with respect
to an Extraordinary Distribution and the denominator of which is (i) the product
of (x) the number of shares of Common Stock outstanding immediately before such
Extraordinary Distribution multiplied by (y) the Fair Market Value of a share of
Common Stock on the record date with respect to an Extraordinary Distribution
minus (ii) the Fair Market Value of the Extraordinary Distribution. The
Corporation shall send each Holder notice of its intent to make any
Extraordinary Distribution at the same time as, or as soon as practicable after,
such offer is first communicated (including by announcement of a record date in
accordance with the rules of any stock exchange on which the Common Stock is
listed or admitted to trading) to holders of Common Stock. Such notice shall
indicate the intended record date and the amount and nature of such
distribution, as well as the Exercise Price and the number of Warrant Shares for
which a Warrant may be exercised at such time. Concurrently with the automatic
adjustment pursuant to this Section 4.1(d), the Exercise Price shall be adjusted
by multiplying the Exercise Price in effect immediately before such
Extraordinary Distribution by a fraction the numerator of which is (i) the
product of (x) the number of shares of Common Stock outstanding immediately
before such Extraordinary Distribution multiplied by (y) the Fair Market Value
of a share of Common Stock on the record date with respect to an Extraordinary
Distribution, minus (ii) the Fair Market Value of the Extraordinary Distribution
and the denominator of which is the product of (a) the number of shares of
Common Stock outstanding immediately before such Extraordinary Distribution
multiplied by (b) the Fair Market Value of a share of Common Stock on the record
date with respect to an Extraordinary Distribution.
(e) Exempt Securities. Notwithstanding any other provision herein to the
contrary, the issuance of any Exempt Securities shall not be deemed to
constitute an issuance of Common Stock or other security of the Corporation (or
in the case of any repurchase, any Extraordinary Distribution) for purposes of
the foregoing anti-dilution provisions.
(f) De Minimus Adjustments. Notwithstanding any other provisions of this
Section 4.1, the Corporation shall not be required to make (i) any adjustment of
the number of Warrant Shares or the Exercise Price unless such adjustment would
require an increase or decrease of at least one percent (1%) in the aggregate
number of Warrant Shares for which Warrants are exercisable at that time, or
(ii) any adjustment of the Exercise Price unless such adjustment would require
an increase or decrease of at least one percent (1%) in the Exercise Price. Any
lesser adjustment shall be carried forward and shall be made no later than the
time of, and together with, the next subsequent adjustment which, together with
any adjustment or adjustments so carried forward, shall amount to an increase or
decrease of at least one percent (1%) of the number of Warrant Shares for which
Warrants are exercisable at that time or an increase or decrease of at least one
percent (1%) of the Exercise Price, whichever the case may be. If any action
would require adjustment of the Exercise
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Price pursuant to more than one paragraph of Section 4.1, only one
adjustment shall be made as determined in good faith by the Board of Directors
of the Corporation.
(g) Notice of Adjustment. Whenever an adjustment to the Exercise Price or
number of Warrants and Warrant Shares is required pursuant to this Section 4.1,
the Corporation shall forthwith place on file with the transfer agent for the
Common Stock, if any, and with the Treasurer of the Corporation, a statement
signed by the Treasurer or Assistant Treasurer of the Corporation stating the
adjusted number of Warrant Shares and the Exercise Price determined as provided
herein. Such statement shall set forth in reasonable detail such facts as shall
be necessary to show the reason and the manner of computing such adjustment,
including any determination of Fair Market Value involved in such computation.
Promptly after each adjustment to the number of Warrant Shares for which
Warrants are exercisable or the Exercise Price, the Corporation shall mail a
notice thereof and of the then prevailing number of Warrant Shares for which
Warrants are exercisable and the Exercise Price to each Holder.
4.2 Termination of Right of Exercise on Fundamental Corporate Changes.
Notwithstanding anything herein to the contrary, and subject to the notice
requirements of this Section 4.2, if the Corporation shall be a party to any
transaction which involves any consolidation or merger of the Corporation with
another corporation, or any sale of all or substantially all of the assets of
the Corporation to another corporation, and which is effected in such a way that
the holders of Common Stock shall be entitled to receive cash, stock, securities
or other assets with respect to or in exchange for Common Stock, then the right
to exercise the Warrants and thereby to purchase shares of Common Stock shall
terminate at the close of business on the date as of which the holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
cash, securities or other assets deliverable upon such consolidation, merger or
sale of all or substantially all of the assets of the Corporation. In case the
Corporation shall enter into any agreement or understanding or the Board of
Directors shall adopt any resolution authorizing or proposing any transaction of
the type described in this Section 4.2, or with respect to a voluntary or
involuntary dissolution, liquidation or winding up of the Corporation, then in
any such event the Corporation promptly shall cause to be mailed, by registered
or certified mail, postage paid, to the Holder of this Warrant at such Holder's
last address appearing on the records of the Corporation at the earliest
practicable time (and, in any event, not later than the later of (i) the date
the proxy materials (if any) are first distributed (or other notice is first
given) to the Corporation's shareholders regarding the proposed transaction, or
(ii) 20 days before the effective date (or record date, if earlier) of such
proposed transaction), notice of the date on which such reorganization, sale,
consolidation, merger, dissolution, liquidation or winding up or other such
transaction shall take place, as the case may be. Such notice shall also set
forth such facts as shall indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Exercise Price and the
kind and amount of securities and property purchasable upon exercise of the
Warrants. Such notice shall also specify the date as of which the holders of
record of the shares of Common Stock or other securities or property purchasable
upon exercise of the Warrants shall be entitled to exchange their shares or
other securities or property for securities, money or other property deliverable
upon such reorganization, sale, consolidation, merger, dissolution, liquidation
or winding up or other such transaction, as the case may be.
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4.3 Statements in the Warrants. Notwithstanding any adjustment in the
Exercise Price or the number or kind of Warrant Shares purchasable upon the
exercise of the Warrants, the Warrant Certificates theretofore or thereafter
issued may continue to express the same price and number and kind of shares as
are stated in the Warrant Certificate initially issued pursuant to this
Agreement.
4.4 Fractional Interests. In computing adjustments under this Article 4,
fractional interests in Common Stock shall be taken into account to the nearest
one-thousandth of a share. No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issued upon any exercise
of the Warrants, but, in lieu thereof, there shall be paid an amount in cash
equal to the same fraction of the Market Price of a whole share of Common Stock
on the business day preceding the day of exercise.
4.5 No Dilution or Impairment. The Corporation shall not amend its
Certificate of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times, in good faith, assist in
carrying out all such actions as may be reasonably necessary or appropriate in
order to protect the rights of the holders of the Warrants against dilution or
other impairment as set forth in this Agreement.
ARTICLE 5
RESERVATION AND AUTHORIZATION OF COMMON SHARES
5.1 Reservation and Authorization. The Corporation shall at all times
reserve and keep available for issuance upon exercise of the Warrants such
number of its duly authorized but unissued shares of Common Stock or other
securities of the Corporation purchasable upon exercise of the Warrants as will
be sufficient to permit the exercise in full of all outstanding Warrants and
will cause appropriate evidence of ownership of such shares of Common Stock or
other securities to be delivered to the Holders of the Warrants upon their
request for delivery of such, and all such shares of Common Stock or other
securities shall, at all times, be duly approved for listing, subject to
official notice of issuance, on each securities exchange, if any, on which such
shares of Common Stock or other securities are then listed.
5.2 Covenant Regarding Secruities. The Corporation covenants that all
shares of Common Stock or other securities of the Corporation that may be issued
upon the exercise of the Warrants will, upon issuance, be (a) duly authorized,
validly issued, fully paid and nonassessable, (b) free from preemptive and any
other similar rights and (c) free from any taxes, liens, charges or security
interest with respect thereto except transfer taxes and Florida documentary
stamp taxes to the extent applicable thereto.
5.3 Registration. If the Warrant Shares or any securities of the
Corporation issuable to NationsBank upon the exercise of the Warrants require
registration with, or approval of, any governmental authority (in addition to
such as the Corporation is required to obtain pursuant to
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Article 7 hereof), or the taking of any other action (in addition to such as the
Corporation is required to obtain pursuant to Article 7 hereof), under the laws
of the United States of America or any state or political subdivision thereof,
before such securities may be validly offered or sold in compliance with such
laws, then the Corporation covenants that it will, in good faith and as
expeditiously as practicable, endeavor to secure and maintain such registration
or approval or to take such other action, as the case may be; provided, however,
that the Corporation will not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process or to taxation in any such
jurisdiction where it is not then so subject; provided, further, that the
expenses of such registration shall be allocated in accordance with the
provisions the Registration Rights Agreement.
ARTICLE 6
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
6.1 Transfer and Exchange.
(a) Warrant Register. The Corporation shall keep and maintain at its
office a register in which, subject to such reasonable regulations as it may
prescribe, the Corporation shall provide for the registration of the Warrant
Certificates on the Corporation's records and transfers or exchanges of the
Warrant Certificates as herein provided.
(b) Restrictions on Transfer. (i) Each of NationsBank and its Affiliates
who are issued Warrants pursuant to this Warrant Agreement (A) represents that
it is acquiring the Warrants for its own account for investment and not with a
view to any distribution or public offering within the meaning of the Securities
Act, except in any case pursuant to the registration of such Warrants or Warrant
Shares under the Securities Act or any state securities or "blue sky" laws or
pursuant to a valid exemption from such registration requirement, (B)
acknowledges that the Warrants and the Warrant Shares issuable upon exercise
thereof have not been registered under the Securities Act or any state
securities or "blue sky" laws and (C) agrees that it will not sell or otherwise
transfer any of its Warrants or Warrant Shares except upon the terms and
conditions specified herein and that it will cause any transferee thereof to
agree to take and hold the same subject to the terms and conditions specified
herein, (D) acknowledges that any transfer agent now or hereafter employed or
utilized by the Corporation shall be instructed not to effect transfer of the
Warrants or the Warrant Shares issuable upon exercise thereof without prior
authorization from the Corporation in accordance with the terms hereof (or, if
the Corporation serves as its own transfer agent, a notation shall be made in
the Corporation's records indicating the transfer restrictions to which the
Warrants and Warrant Shares issuable upon exercise thereof are subject and that
the Warrants and the Warrant Shares may only be transferable in accordance with
this Agreement); and (E) represents it (I) is an "accredited investor" (as
defined in Rule 501(a)(1) of Regulation D promulgated under the Securities Act
by the Commission); (II) has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of its
investment in the Warrants and Warrant Shares issuable upon exercise of the
Warrants; (III) is able to bear the complete loss of its investment in the
Warrants and Warrant Shares issuable upon exercise of the Warrants; (IV) has had
the opportunity to ask questions of, and receive answers from, the Corporation
and its management concerning the
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<PAGE>
terms and conditions of the offering of the Warrants and Warrant Shares issuable
upon exercise of the Warrants and to obtain additional information; and (V) is
not relying upon any statements or instruments made or issued by any person
other than the Corporation in making its decision to invest in the Warrants and
Warrant Shares issuable upon exercise of the Warrants; and (ii) each of
NationsBank and its Affiliates who are issued Warrants pursuant to this
Agreement (A) is domiciled in North Carolina and received its offer to purchase
Warrants and Warrant Shares in North Carolina; (B) understands that the
Warrants and Warrant Shares issuable upon exercise of the Warrants will be
considered restricted securities within the meaning of Rule 144 under the
Securities Act; that Rule 144 may not be available for exemption from the
registration requirements of the Securities Act for the sale of such restricted
securities; that if Rule 144 is available, sales may be made in reliance upon
Rule 144 only in accordance with the terms and conditions of Rule 144, which
among other things generally requires that the securities be held for at least
one year and that sales shall be made in limited amounts; and that, if an
exemption for such sales by such holder of the Warrants or the Warrant Shares is
not available, registration of the securities may be required, but that the
Corporation is under no obligation to register the securities or to facilitate
compliance or to comply with any exemption except pursuant to Article 7 of this
Agreement; and (C) agrees that it will not sell, transfer, hypothecate, or
otherwise dispose of any of the Warrants and Warrant Shares issuable upon
exercise of the Warrants, except in compliance with the Securities Act and
applicable securities laws.
(c) Right of First Refusal. Notwithstanding any other provision of this
Agreement, until the Corporation consummates a Qualified Initial Public
Offering, no assignment, transfer or sale of any Warrants or any Warrant Shares
(other than a sale to an Affiliate) shall be made except in compliance with this
Agreement and the following right of first refusal:
(i) If any Holder of Warrants or Warrant Shares (the "Selling
Warrant Holder") desires to dispose of any Warrants or Warrant Shares, (the
"Offered Warrant Securities"), except as otherwise permitted hereunder, such
Selling Warrant Holder shall first give written notice (the "Warrant Securities
Offer Notice") to the Corporation. A Warrant Securities Offer Notice shall (A)
indicate that such Selling Warrant Holder wishes to dispose of the Offered
Warrant Securities, and (B) state the price and other material terms upon which
such Selling Warrant Holder wishes to dispose of such Warrant Securities and
offer to sell the Offered Warrant Securities, in whole (but not in part) (the
"Warrant Securities Offer") at the price and on the other material terms
described in the Warrant Securities Offer Notice, first, to the Corporation
and/or its designees.
(ii) The Corporation and/or its designees may offer to accept a
Warrant Securities Offer in whole (but not in part) by giving notice to the
Selling Warrant Holder within thirty (30) days after the Warrant Securities
Offer Date. The closing of such sale of Offered Warrant Securities shall be
consummated within five (5) days after the date the Corporation's and/or its
designees' offer is accepted by the Selling Warrant Holder at the principal
office of the Corporation (or at such other times or places as such Selling
Warrant Holder and the Corporation and/or its designees may agree).
(iii) if the Offered Warrant Securities have not been accepted by
the Corporation and/or its designees in accordance with this Section 6.1(c), the
Selling Warrant Holder may dispose of the Offered Warrant Securities, to one or
more Persons who each agree in writing to be bound by the terms of this
Agreement, on substantially the same terms but not more favorable than those
stated
15
<PAGE>
in the Warrant Securities Offer Notice, at any time up to one hundred (100) days
after the Warrant Securities Offer Date. Thereafter, the provisions of this
Section 6.1(c) will again apply.
(d) Notice of Transfer. Prior to or promptly after any assignment,
transfer or sale of the Warrants or any Warrant Shares, the Holder thereof shall
give written notice to the Corporation of such Holder's intention to effect such
assignment, transfer or sale, which notice shall set forth the date of such
proposed assignment, transfer or sale and the identity of the proposed
transferee. Each Holder wishing to effect such a transfer of the Warrants or any
Warrant Shares shall also furnish to the Corporation an agreement by the
transferee thereof that it is taking and holding the same subject to the terms
and conditions specified herein and a written opinion of such Holder's counsel,
in form reasonably satisfactory to the Corporation, to the effect that the
proposed transfer may be effected without registration under the Securities Act
and applicable state securities laws.
(e) Legend. Except as provided in Section 6.1(f) hereof, each Warrant
Certificate and each certificate for the Warrant Shares issued to NationsBank or
an Affiliate thereof or to a subsequent transferee thereof pursuant to Section
6.1(d) shall include the legend in substantially the form set forth in Section
2.2; provided that such legend shall not be required if such transfer is being
made in connection with a sale which is exempt from registration pursuant to
Rule 144 under the Securities Act.
(f) Termination of Transfer Restrictions. The restrictions set forth in
Sections 6.1(b) through (e) shall terminate and cease to be effective (i) if the
Warrants or any Warrant Shares issuable upon exercise thereof are registered
under the Securities Act and, in the case of Warrant Shares, when such Warrant
Shares are sold in reliance upon Rule 144 or (ii) on such earlier date as of
which the Corporation shall determine that such restrictions are no longer
required under applicable securities laws (and the Corporation shall respond
promptly, reasonably and in good faith to any reasonable request that the
Corporation make such a determination). Whenever such restrictions shall so
terminate the Holder of such Warrants and/or Warrant Shares shall be entitled to
receive from the Company, without expense (other than transfer taxes and Florida
documentary stamp tax, to the extent applicable), a new Warrant Certificate(s)
or certificates for such Warrant Shares not bearing the legend set forth in
Section 2.2 at which time the Company shall rescind any transfer restrictions
relating thereto.
ARTICLE 7
REGISTRATION RIGHTS
NationsBank (and its permitted transferees and assignees of this
Agreement) shall have and be entitled to exercise the rights of registration
granted to, and shall be subject to the obligations of, "Other Stockholders"
under the Registration Rights Agreement. As a condition precedent thereto,
NationsBank and each subsequent permitted transferee and assignee shall execute
and deliver to the Corporation and each other party to the Registration Rights
Agreement a counterpart signature page thereto.
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ARTICLE 8
MISCELLANEOUS
8.1 Loss or Mutilation. Upon receipt by the Corporation of (a) evidence
satisfactory to it of the ownership, and the loss, theft, destruction or
mutilation, of any Warrant Certificate and (b) of indemnity satisfactory to it
or, in the ease of mutilation, upon surrender and cancellation of the mutilated
Warrant Certificate, then, the Corporation shall execute and deliver to the
registered Holder of the lost, stolen, destroyed or mutilated Warrant
Certificate, in exchange for or in lieu thereof, a new Warrant Certificate of
the same tenor and for a like aggregate number of Warrant Shares. Upon the
issuance of any new Warrant Certificate under this Section 8.1, the Corporation
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and other expenses
in connection therewith including any transfer taxes and Florida documentary
stamp tax. Every new Warrant Certificate executed and delivered pursuant to this
Section in lieu of any lost, stolen or destroyed Warrant Certificate shall
constitute a contractual obligation of the Corporation, whether or not the
allegedly lost, stolen or destroyed Warrant Certificate shall be at any time
enforceable by anyone, and shall be entitled to the benefits of this Agreement.
The provisions of this Section 8.1 are exclusive and shall preclude (to the
extent lawful) all other rights or remedies with respect to the replacement of
the mutilated, lost, stolen, or destroyed Warrant Certificate.
8.2 Payment of Taxes. The Corporation shall pay any taxes and other
governmental charges that may be imposed on the Corporation under the laws of
the United States of America or any political subdivision or taxing authority
thereof or therein in respect of the issue or delivery of Warrant Shares or of
other securities or property deliverable upon exercise of the Warrants. The
Corporation shall not be required, however, to pay any tax or other charge
imposed in connection with any transfer involved in the issue of any certificate
for Warrant Shares or other securities or property issuable upon the exercise of
the Warrants or payment of cash to any person other than the Holder of a Warrant
Certificate surrendered upon exercise of the Warrants and in case of such
transfer or payment, the Corporation shall not be required to issue any stock
certificate or pay any cash until such tax or charge has been paid or it has
been established to the Corporation's satisfaction that no such tax or charge is
due.
8.3 Notices. Any notice, demand or delivery authorized by this Agreement
shall be in writing and shall be delivered by hand or overnight courier service,
mailed or set by facsimile as follows:
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To the Corporation:
Vitas Healthcare Corporation
100 South Biscayne Boulevard
Miami, Florida 33131
Attention: Chief Executive Officer
Telephone No. (305) 374-4765
To NationsBank:
NationsBank, N.A.
Independence Center, 15th Floor
Charlotte, North Carolina 28255
Attention: Agency Services
Telecopy: (704) 386-9923
or such other address or telecopy number as shall have been furnished to the
party giving or making such notice, demand or delivery. Any notice that is sent
in a manner provided herein shall have been duly given when sent.
8.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO
CONFLICTS OF LAW PRINCIPLES THEREOF.
8.5 Assignment; Successors. Subject to Section 6.1 hereof, this Agreement
may be assigned by NationsBank to any Affiliate at any time upon written notice.
This Agreement shall be binding upon and inure to the benefit of the Corporation
and the Holders and their respective successors and assigns, and the Holders
from time to time of the Warrants. Nothing in this Agreement is intended or
shall be construed to confer upon any person, other than the Corporation, and
the Holders, any right, remedy or claim under or by reason of this Agreement or
any part hereof.
8.6 Counterparts. This Agreement may be executed manually or by facsimile
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.
8.7 Amendments. Any provision of this Agreement or the Warrant Certificate
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed by the Corporation and the Holders of a majority in interest of
the issued or issuable Warrant Shares; provided, however, if any amendment
adversely affects the Exercise Price or the number of Warrant Shares issued upon
exercise of any Warrant, then the Holders of all the issued or issuable Warrant
Shares must sign the amendment.
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8.8 Headings. The descriptive headings of the several Sections of this
Agreement are inserted for convenience only and shall not control or affect the
meaning or construction of any of the provisions hereof.
8.9 Third Party Beneficiaries. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Corporation, on the
one hand, and NationsBank, on the other hand, and the Holders shall have the
right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of the
Holder hereunder.
8.10 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.
8.11 No Inconsistent Agreements. Except as set forth in the Registration
Rights Agreement, the Corporation has not, as of the date hereof, entered into,
nor shall it, on or after the date hereof, enter into, any agreement that is
inconsistent with the rights granted to the Holders herein or that otherwise
conflicts with the provisions hereof.
19
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered, as of the date first above written
VITAS HEALTHCARE CORPORATION
By: /s/ Hugh A. Westbrook
----------------------------------------
Name: Hugh A. Westbrook
Title: Chairman and Chief Executive Officer
NATIONSBANK, N.A.
By: /s/ Allison Freeland
----------------------------------------
Name: Allison Freeland
Title: Senior Vice President
20
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EXHIBIT 10.62
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF A CERTAIN AGREEMENT WHICH INCLUDES A RIGHT OF FIRST
REFUSAL ON THE SALE OF THE SECURITIES. COPIES OF THE AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND CANNOT BE OFFERED, SOLD OR TRANSFERRED WITHOUT REGISTRATION
OR COMPLIANCE WITH EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS AND REGULATIONS PROMULGATED THEREUNDER.
A full statement of the powers, designations, preferences and relative,
participating, optional or other special rights of the shares of each class of
stock of the Corporation authorized to be issued, and the qualifications,
Limitations or restrictions of such preferences and/or rights, will be furnished
to any stockholder without charge upon request to the Secretary of the
Corporation.
No.1 Warrants to purchase an aggregate
of 486,532 shares of Common Stock
WARRANT TO PURCHASE COMMON STOCK
This certifies that NationsBank, N.A. or its permitted assigns, is the
holder of 486,532 Warrants to purchase shares of Common Stock ("Common Stock")
of Vitas Healthcare Corporation (the "Corporation"). Each Warrant initially
entitles the holder thereof (the "Holder") to purchase from the Corporation one
(1) share of Common Stock at the purchase price (the "Exercise Price") set forth
in the Warrant Agreement (as defined below), subject to the terms and conditions
hereof and of the Warrant Agreement. In order to exercise the Warrants
represented by this Warrant Certificate, the registered Holder hereof must
surrender this Warrant Certificate at the office of Corporation as set forth in
the Warrant Agreement or to its successor.
This Warrant Certificate is issued under and in accordance with a Warrant
Agreement dated as of July 18,1997 by and between NationsBank, N.A. and the
Corporation (the "Warrant Agreement"), and is subject to the terms and
provisions contained therein, to all of which terms and provisions the Holder of
this Warrant Certificate consents by acceptance hereof. The Warrant Agreement is
hereby incorporated herein by reference and made a part hereof. Reference is
hereby made to the Warrant Agreement for a full description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Corporation and the Holder of the Warrants. The summary or the terms of the
Warrant Agreement contained in this Warrant Certificate is qualified in its
entirely by express reference to the Warrant Agreement. All terms used in this
Warrant Certificate that are defined in the Warrant Agreement shall have the
meanings assigned to them in the Warrant Agreement.
<PAGE>
Copies of the Warrant Agreement are on file at the office of the
Corporation and may be obtained by writing to the Corporation requesting the
same.
The number of shares of Common Stock purchasable upon the exercise of the
Warrants and the Exercise Price are subject to adjustment as provided in the
Warrant Agreement.
Subject to the requirements set forth in the Warrant Agreement and the
restrictions on transfer set forth therein, this Warrant Certificate and all
rights hereunder shall be transferable by the registered Holder hereof on the
register of the Corporation maintained by the Corporation for such purpose at
its office upon surrender of this Warrant Certificate duly endorsed, or
accompanied by a written instrument of transfer in form satisfactory to the
Corporation duly executed, by the registered Holder hereof or such Holder's
attorney duly authorized in writing and upon payment of any necessary transfer
tax or other governmental charge imposed upon such transfer. Upon any partial
transfer the Corporation will issue and deliver to such Holder a new Warrant
Certificate with respect to any portion not so transferred.
This Warrant Certificate shall be void and all rights evidenced hereby
shall cease on the Expiration Date unless otherwise provided in the Warrant
Agreement.
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This Warrant Certificate and the Warrant Agreement are subject to
amendment as provided in the Warrant Agreement.
Dated: July 18, 1997.
VITAS HEALTHCARE CORPORATION
By: /s/ Hugh A. Westbrook
---------------------------------
Name: Hugh A. Westbrook
Title: Chairman and Chief Executive
Officer
3
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EXHIBIT 10.63
[LETTERHEAD OF NATIONSBANK]
July 18,1997
Mr. Hugh A. Westbrook
Chairman of the Board and
Chief Executive Officer
Vitas Healthcare Corporation
100 South Biscayne Boulevard
Suite 1500
Miami, Florida 33131
Re: Warrant to Purchase 486,532 Shares of Vitas Common Stock
Dear Hugh:
Reference is made to that certain Warrant Agreement to be entered into between
Vitas Healthcare Corporation ("Vitas") and NationsBank, N.A. ("NationsBank")
(the "Warrant Agreement"), pursuant to which Vitas proposes to issue to
NationsBank a Warrant Certificate evidencing NationsBank's right to purchase
486,532 shares (the "Warrant Shares") of Vitas common stock, par value $.001 per
share, at an exercise price of $.01 per share, subject to the terms and
conditions thereof (the "Warrants").
The purpose of this letter is to confirm to Vitas Healthcare Corporation that in
the event the United States Bankruptcy Court for the District of Arizona vacates
its June 16, 1997 order authorizing the Trustee to enter into the Modification
of Promissory Note A (the "Modification") (which execution of the Modification
was a precondition to the effectiveness of Amendment No. 6 dated as of March 24,
1997 to the Amended and Restated Revolving Credit, Term Loan and Reimbursement
Agreement dated as of February 17, 1995 between Vitas and NationsBank of
Florida, National Association (predecessor in interest to NationsBank) (the
"Credit Agreement") and, as a result, NationsBank declares an Event of Default
under the Credit Agreement, then (i) all outstanding and unexercised Warrants
shall terminate and be null and void, ab initio, and (ii) any Warrant Shares or
other securities issued to the Holders (as such term is defined in the Warrant
Agreement) pursuant to the Warrant Agreement shall be immediately transferred by
such Holders to Vitas in exchange for the aggregate consideration received by
Vitas from such Holders in connection with the issuance of such Warrant Shares
or other securities. NationsBank further agrees that, in addition
<PAGE>
to any restrictions set forth in the Warrant Agreement, as a condition to
transferring or assigning any of its rights or obligations in, to or under the
Warrant Agreement, the Warrants, the Warrant Shares and any other securities
issued in exchange therefor or pursuant thereto, NationsBank shall cause any
such transferee or assignee to deliver to Vitas a letter agreement pursuant to
which such transferee or assignee agrees to the provisions set forth in the
preceding sentence.
NATIONSBANK, N.A.
By: /s/ Allison Freeland
-----------------------------
Name Allison Freeland
Title Senior Vice President
<PAGE>
Exhibit 10.64
WARRANT AGREEMENT
BETWEEN
NATIONSBANK, N.A.
AND
VITAS HEALTHCARE CORPORATION
September 1, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
CERTAIN DEFINITIONS
ARTICLE 2
ORIGINAL ISSUE OF WARRANTS
2.1 Form of Warrant Certificates.......................................... 5
2.2 Legend................................................................ 5
2.3 Delivery of the Warrants.............................................. 5
ARTICLE 3
EXERCISE OF WARRANTS
3.1 Exercise Price........................................................ 6
3.2 Restrictions on Exercise; Expiration.................................. 6
3.3 Method of Exercise; Payment of Exercise Price......................... 6
3.4 Dividends and Distributions........................................... 8
3.5 Stockholder Rights.................................................... 8
ARTICLE 4
ADJUSTMENTS
4.1 Adjustments........................................................... 9
4.2 Termination of Right of Exercise on Fundamental Corporate Changes..... 12
4.3 Statements in the Warrants............................................ 13
4.4 Fractional Interests.................................................. 13
4.5 No Dilution or Impairment............................................. 13
ARTICLE 5
RESERVATION AND AUTHORIZATION OF COMMON SHARES
5.1 Reservation and Authorization......................................... 13
5.2 Covenant Regarding Securities......................................... 13
5.3 Registration.......................................................... 13
ARTICLE 6
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
6.1 Transfer and Exchange................................................. 14
ARTICLE 7
REGISTRATION RIGHTS
i
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ARTICLE 8
MISCELLANEOUS
8.1 Loss or Mutilation.................................................... 17
8.2 Payment of Taxes...................................................... 17
8.3 Notices............................................................... 17
8.4 Governing Law......................................................... 18
8.5 Assignment; Successors................................................ 18
8.6 Counterparts.......................................................... 18
8.7 Amendments............................................................ 18
8.8 Headings.............................................................. 19
8.9 Third Party Beneficiaries............................................. 19
8.10 Severability.......................................................... 19
8.11 No Inconsistent Agreements............................................ 19
ii
<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of September 1, 1997 (this "Agreement"),
between VITAS HEALTHCARE CORPORATION, a Delaware corporation (the
"Corporation"), and NATIONSBANK, N.A. (successor by merger of NationsBank,
N.A. (South) ("NationsBank").
WHEREAS, pursuant to the terms of an Amendment No. 7 dated as of
September 1, 1997 ("Amendment No. 7") to Amended and Restated Revolving
Credit, Term Loan and Reimbursement Agreement dated as of February 17, 1995,
as amended, among the Corporation, NationsBank, as Agent, and NationsBank,
as Lender (as previously amended and as amended by Amendment No. 7, the
"Credit Agreement"), NationsBank, among other things, has agreed to continue
to make available to the Corporation loans of up to $32,000,000 (the "Loans"),
which Loans are evidenced by Notes of the Corporation in favor of NationsBank
(the "Notes");
WHEREAS, in order to induce NationsBank to enter into Amendment No. 7,
the Corporation has agreed to execute and deliver to NationsBank 291,918
stock purchase warrants ("Warrants") issued pursuant to this Agreement
entitling the Holder(s) (as defined herein) thereof to purchase from the
Corporation an aggregate of 291,918 shares (the "Warrant Shares") of the
Corporation's common stock, par value $.001 per share ("Common Stock"), at
the Exercise Price (as defined herein), subject to adjustment as provided in
Article 4 hereof, at any time on or after the date hereof and before 5:00
P.M., New York City time, on the Expiration Date (as defined herein), subject
to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the foregoing and of the agreements
contained in the Credit Agreement, and for the purpose of defining the terms
and provisions of the Warrants and Warrant Shares and the respective rights
and obligations thereunder of the Corporation and the Holder(s), the
Corporation and NationsBank hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided:
(a) the terms defined in this Article 1 have the meanings
assigned to them in this Article, and include the plural as well as the
singular; and
(b) the words "herein," "hereof" and "hereunder," and other
words of similar import, refer to this Agreement as a whole and not to any
particular article, section or other subdivision.
"Adjustment Period" shall mean the period of five (5) consecutive
trading days selected by the Board of Directors in its sole discretion,
during the twenty (20) trading days preceding, and including the date as of
which the Fair Market Value of a security is to be determined.
<PAGE>
"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by,
such Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "under common control with"
and "controlled by"), as used with respect to any Person, shall mean 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 stock, by agreement or otherwise; provided, however, that
beneficial ownership of 25% or more of the total voting power of all
outstanding stock of a Person shall be deemed to be control of such Person.
"Agreement" has the meaning set forth in the preamble hereto.
"Amendment No. 7" has the meaning set forth in the preamble hereto.
"Board of Directors" means the board of directors of the Corporation.
"Business Day" means any day which is not a Saturday, Sunday or a day
on which banking institutions in the States of New York or Florida are not
authorized or obligated by law, executive order, regulation or governmental
decree to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" has the meaning set forth in the preamble hereto.
"Corporation" has the meaning set forth in the preamble hereto.
"Current Market Price" of publicly traded shares of Common Stock or any
other class of capital stock or other security of the Corporation or any
other issuer for any given day shall mean the last reported sales price,
regular way, or, in case no sale takes place on such day, the average
reported closing bid and asked prices, regular way, in either case as
reported on the New York Stock Exchange Composite Tape or, if such security
is not listed or admitted to trading on any national securities exchange, on
the NASDAQ National Market or, if such security is not quoted on such NASDAQ
National Market, the average of the closing bid and asked prices on such day
in the over-the-counter market as reported by NASDAQ, or, if bid and asked
prices for such security on such day shall not have been reported through
NASDAQ, the average of the bid and asked prices for such day as furnished by
any New York Stock Exchange member firm regularly making a market in such
security selected for such purpose by the Board of Directors.
"Credit Agreement" has the meaning set forth in the preamble hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
2
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"Exempt Securities" shall mean the issuance of (a) Warrant Shares or
other securities issuable pursuant to the Warrants; (b) securities of the
Corporation issued upon the exercise, conversion or exchange of securities
of the Corporation issued prior to the date hereof; (c) shares of Common Stock
or other Corporation securities issued or issuable as a result of adjustments
under Section 4 or other applicable provisions of the Series B Certificate of
Designation or similar provisions of other convertible securities; (d) any
securities of the Corporation issued in exchange for assets or securities in
a merger, consolidation, sale or purchase of assets or other business
combination transaction approved by the Board of Directors; (e) any
securities issuable or any adjustment made or to be made to the Warrants or
Warrant Shares under Article 4 of this Agreement; (f) any rights or other
securities issued or issuable pursuant to a stockholder rights agreement
under which the Board of Directors would declare a dividend of one preferred
(or common) share purchase right for each outstanding share of Common Stock
provided that such stockholder rights agreement results in equivalent
dividends on Warrant Shares; (g) any shares of Common Stock pursuant to any
plan providing for the reinvestment of dividends or interest payable on
securities of the Corporation and the investment of additional optional
amounts in shares of Common Stock under any such plan; (h) any shares of
Common Stock in a public offering registered under the Securities Act; (i)
any shares of Common Stock or options or rights to purchase such shares
pursuant to any stock option or bonus plan or plans now or hereafter adopted
by the Corporation (including any stock appreciation rights or employee stock
ownership plan) for the benefit of directors, officers, employees and/or
consultants of the Corporation and/or its subsidiaries or pursuant to any
employee benefit plan or program now or hereafter adopted by the Corporation
for the benefit of its employees and/or employees of its subsidiaries, or
pursuant to any specific grant not pursuant to any plan or program that is
approved by the Corporation's Board of Directors; or (j) the issuance or
repurchase of Corporation securities on or prior to the date the Warrants are
first issued (or any subsequent issuances of Common Stock, 9% Preferred Stock
or Series B Preferred Stock issued pursuant to warrants, options or rights
previously granted, outstanding or issued on the date the Warrants are first
issued).
"Exercise Price" has the meaning set forth in Section 3.1 hereof.
"Expiration Date" means September 1, 2007.
"Extraordinary Distribution" shall mean any dividend or other
distribution with respect to the Common Stock (effected while any of the
Warrants are outstanding) of any shares of capital stock of the Corporation
(other than shares of Common Stock), other securities of the Corporation
(other than securities of the type referred to in Section 4.1(c)), evidences
of indebtedness of the Corporation or any other person or any other property
other than cash (including shares of any subsidiary of the Corporation), or
any combination thereof.
"Fair Market Value" shall mean, as to shares of Common Stock or any
other class of capital stock or securities of the Corporation or any other
issuer which are publicly traded, the average of the Current Market Prices
of such shares or securities for each day of the Adjustment Period. The "Fair
Market Value" of any security which is not publicly traded or of any other
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property shall mean the fair value thereof as determined in good faith by the
Board of Directors in its sole discretion.
"Holders" shall mean NationsBank or an Affiliate thereof and such other
Persons to whom NationsBank or an Affiliate thereof transfers Warrants in
compliance with the terms of this Agreement and each subsequent permitted
transferee.
"NationsBank" has the meaning set forth in the preamble hereto.
"9% Certificate of Designation" shall mean the Certificate of
Designation, Preferences and Other Rights of the 9.0% Cumulative
Nonconvertible Preferred Stock of the Corporation, as amended from time to
time.
"9% Preferred Stock" shall mean the 9.0% Cumulative Nonconvertible
Preferred Stock of the Corporation, par value $1.00 per share, which is
issued under the 9% Certificate of Designation.
"Notes" has the meaning set forth in the preamble hereto.
"Person" shall mean a natural person, partnership, corporation,
association, joint stock company, trust, joint venture, unincorporated
association, governmental entity or any department, agency or political
subdivision thereof, or other entity.
"Private Placement Legend" means the legend in the form set forth in
Section 2.2 hereof.
"Qualified Initial Public Offering" shall mean public offering of the
Corporation's Common Stock resulting in gross proceeds to the Corporation of
not less than $12 million and at a total market capitalization of the common
equity of the Corporation at that time of not less than $60 million.
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement dated as of June 4, 1993 among the Corporation, certain
stockholders of the Corporation, Cherned Corporation and the investors
identified on Schedule A thereto.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Series B Certificate of Designation" shall mean the Certificate of
Designation, Preferences and Other Rights of the Series B Convertible
Preferred Stock of the Corporation, as amended from time to time.
"Series B Preferred Stock" shall mean the Series B Convertible Preferred
Stock of the Corporation, par value $1.00 per share, which is issued under
the Series B Certificate of Designation.
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"Warrants" has the meaning set forth in the preamble hereto.
"Warrant Certificate" has the meaning set forth in Section 2.1 hereto.
"Warrant Shares" has the meaning set forth in the preamble hereto.
ARTICLE 2
ORIGINAL ISSUE OF WARRANTS
2.1 Form of Warrant Certificates. Any certificate representing the
Warrants (a "Warrant Certificate"), the form of which is attached hereto as
Exhibit A, shall be detachable from the Credit Agreement and any Notes and
shall be dated the date on which it is signed by a duly authorized officer of
the Corporation and shall have such insertions as are appropriate or required
or permitted by this Agreement and may have such letters, numbers or other
marks of identification as the Corporation may deem appropriate and as are
not inconsistent with the provisions of this Agreement.
2.2 Legend. Subject to the provisions hereof, each Warrant Certificate
and each certificate representing securities acquired upon exercise of the
Warrants shall bear the following legend on the face thereof:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF A CERTAIN AGREEMENT WHICH INCLUDES A RIGHT OF FIRST REFUSAL
ON THE SALE OF THE SECURITIES. COPIES OF THE AGREEMENT MAY BE OBTAINED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND CANNOT BE OFFERED, SOLD OR TRANSFERRED WITHOUT
REGISTRATION OR COMPLIANCE WITH EXEMPTION FROM REGISTRATION UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS AND REGULATIONS PROMULGATED THEREUNDER.
A full statement of the powers, designations, preferences and relative,
participating, optional or other special rights of the shares of each class
of stock of the Corporation authorized to be issued, and the qualifications,
limitations or restrictions of such preferences and/or rights, will be
furnished to any stockholder without charge upon request to the Secretary of
the Corporation.
2.3 Delivery of the Warrants
This Agreement contemplates the issuance of up to 291,918 Warrants,
subject to adjustment as provided herein. Concurrently with the execution
and delivery of this Agreement,
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the Corporation shall issue to NationsBank or an Affiliate thereof in
connection therewith (but detachable therefrom) a Warrant Certificate for
291,918 Warrants.
ARTICLE 3
EXERCISE OF WARRANTS
3.1 Exercise Price.
The Warrant Certificate shall entitle the Holders thereof, subject to
the provisions of this Agreement, to purchase an aggregate of two hundred
ninety-one thousand nine hundred eighteen (291,918) Warrant Shares at a per
share purchase price (the "Exercise Price") of $.01, subject to the
limitations and adjustments as provided in Article 4 hereof; provided,
however, that in no event shall the exercise price per share of Common Stock
be less than the par value of such Common Stock.
3.2 Restrictions on Exercise; Expiration. Subject to the limitations
and adjustments as provided herein, on or before the Expiration Date, the
Warrants may be exercised on any Business Day as to all or any portion of the
Warrant Shares for which the Warrants are then exercisable as follows: (a)
as of the date of this Agreement and the issuance of the Warrant Certificate,
the number of Warrants which may be exercised pursuant to this Agreement, and
the number of Warrant Shares issuable upon exercise of such Warrants, shall
be none; (b) in the event the Corporation shall not have paid in full its
Obligations (as defined in the Credit Agreement) on or prior to April 29,
1998, the number of Warrants which may be exercised pursuant to this
Agreement, and the number of Warrant Shares issuable upon exercise of such
Warrants, shall be 97,306 effective as of April 30, 1998; (c) in the event
the Corporation shall not have been paid in full its Obligations (as defined
in the Credit Agreement) on or prior to July 30, 1998, the number of warrants
which may be exercised pursuant to this Agreement, and the number of Warrant
Shares issuable upon exercise of such Warrants, shall be automatically
increased to 194,612 effective as of July 31, 1998; and (d) in the event the
Corporation shall not have paid in full its Obligations (as defined in the
Credit Agreement) on or prior to September 29, 1998, the number of Warrants
which may be exercised pursuant to this Agreement, and the number of Warrant
Shares issuable upon exercise of such Warrants, will be automatically
increased to 291,918 effective as of September 30, 1998. The Exercise Price
shall not be adjusted by reason of any such increase in the number of
Warrants which may be exercised and in the number of Warrant Shares issuable
upon such exercise. If any of the Warrants are not exercised by 5:00 p.m.,
New York City time, on the Expiration Date, this Agreement and all
unexercised Warrants shall expire and all rights of the Holders hereunder and
thereunder shall terminate unless otherwise provided herein or therein.
3.3 Method of Exercise; Payment of Exercise Price.
(a) In order to exercise any of the Warrants, the Holder thereof must
provide written notice to the Corporation at its address set forth in Section
8.3 hereof in the form attached hereto as Exhibit B specifying the number of
Warrants being exercised. Such notice shall be
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accompanied by Warrant Certificates representing not less than the number of
Warrants being exercised, together with payment in full of the per share
Exercise Price multiplied by the number of Warrant Shares to be purchased
pursuant to the exercise. The Exercise Price shall be payable at the option
of the Holder, by wire transfer, certified check, official bank check or bank
cashier's check payable to the order of the Corporation.
(b) In lieu of exercising Warrants pursuant to Section 3.3(a), the
Holder shall have the right to require the Corporation to convert the
Warrants, in whole or in part and at any time or times (the "Conversion
Right"), into Warrant Shares, by surrendering to the Corporation at its
address set forth in Section 8.3 hereof the Warrant Certificate evidencing
the Warrants to be converted, accompanied by the form of conversion notice
attached hereto as Exhibit C which has been duly completed and signed. Upon
exercise of the Conversion Right, the Corporation shall deliver to the Holder
(without payment by the Holder of any Exercise Price) that number of Warrant
Shares which is equal to the quotient obtained by dividing (x) the value of
the number of Warrants being converted at the time the Conversion Right is
exercised (determined by subtracting the aggregate Exercise Price for all
such Warrants immediately prior to the exercise of the Conversion Right from
the aggregate Fair Market Value of that number of Warrant Shares purchasable
upon exercise of such Warrants immediately prior to the exercise of the
Conversion Right (taking into account all applicable adjustments pursuant to
Article 4), by (y) the Fair Market Value of one share of Common Stock
immediately prior to the exercise of the Conversion Right. Any references in
this Agreement to the "exercise" of any Warrants, and the use of the term
"exercise" herein, shall be deemed to include (without limitation) any
exercise of the Conversion Right.
(c) If the number of Warrants being exercised is less than the number of
Warrants represented by the Warrant Certificate(s) tendered in connection
with the exercise, the Corporation shall issue new Warrant Certificate(s) for
the unexercised Warrants in accordance with instructions contained in the
notice of exercise and this Agreement.
(d) Upon exercise of any Warrant in conformity with the foregoing
provisions, the Corporation shall (i) transfer promptly to, or upon the
written order of, the Holder of such Warrant, appropriate evidence of
ownership of any Warrant Shares or other securities or property (including
money) to which it is entitled, registered or otherwise placed in such name
or names as may be directed in writing by the Holder thereof, (ii) deliver
such evidence of ownership and any other securities or property (including
money) to the person or persons entitled to receive the same, and (iii)
reissue, as the case may be, a Warrant Certificate for any unexercised
Warrants. Each new Warrant Certificate so issued shall bear the legend set
forth in Section 2.2 if the Warrant Certificate presented in connection with
partial exercise thereof bore such legend except to the extent that some or
all of the transfer restrictions referred to in such legend or this
Agreement are no longer applicable pursuant to Article 6 or as a result of
registration of the Warrant Shares pursuant to Article 7. All Warrant
Certificates surrendered upon exercise of Warrants shall be canceled. A
Warrant shall be deemed to have been exercised immediately prior to the close
of business on the date of the surrender to the Corporation for exercise of
the Warrant Certificate representing such Warrant being exercised and
accompanied by the notice required
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under Section 3(a) or 3(b), as the case may be, for all purposes of this
Agreement, the person entitled to receive any Warrant Shares or other
securities or property deliverable upon such exercise shall, as between such
person and the Corporation, be deemed to be the Holder of such Warrant Shares
or other securities or property of record as of the close of business on
such date and shall be entitled to receive any Warrant Shares or other
securities or property (including money) to which such person would have been
entitled had such person been the record holder of such Warrant Shares or
other securities or property on such date.
3.4 Dividends and Distributions. For so long as any of the Warrants
remain outstanding and unexercised, the Corporation will, upon the
declaration of a cash dividend upon its Common Stock or other distribution to
the holders of its Common Stock (other than a dividend payable in shares of
the Corporation's Common Stock) and at least twenty (20) calendar days prior
to the record date for such dividend or other distribution (or if no record
date is specified, twenty (20) calendar days prior to the taking of the
action), notify the Holders of such declaration, which notice will contain,
at a minimum, the following information: (i) the date of the declaration of
the dividend or distribution, (ii) the amount of such dividend or
distribution, (iii) the record date of such dividend or distribution, and
(iv) the payment date or distribution date of such dividend or distribution.
The failure to give the notice required by this Section 3.4 or any defect
therein shall not affect the legality or validity of such dividend or
distribution.
3.5 Stockholder Rights.
(a) Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the Holders thereof the
right to vote or to consent or to receive notice as a stockholder in respect
of the meetings of stockholders or the election of directors of the
Corporation or any other matter, or any rights whatsoever as a stockholder of
the Corporation.
(b) Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as imposing any obligation on the registered
Holders thereof to purchase any securities or as imposing any liabilities on
such Holders as stockholders of the Corporation, whether such obligation or
liabilities are asserted by the Corporation or by creditors of the
Corporation (except for indemnities and other obligations in connection with
registration rights).
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ARTICLE 4
ADJUSTMENTS
4.1 Adjustments. The Exercise Price and the number of Warrant Shares
issuable upon exercise of each Warrant shall be subject to adjustment from
time to time as follows:
(a) Intentionally Omitted.
(b) Adjustments for Changes in Common Stock. Subject to the provisions
of Section 4.1(e), in the event the Corporation shall, at any time or from
time to time while any of the Warrants are outstanding, (i) pay a dividend
or make a distribution in respect of the Common Stock in shares of Common
Stock or (ii) subdivide or combine the outstanding shares of Common Stock
into a greater or lesser number of shares, in each case whether by
reclassification of shares, recapitalization of the Corporation or otherwise,
then, in such event, each Warrant will automatically, without any action on
the part of the Holder or the Corporation, become exercisable for that number
of Warrant Shares equal to the number of Warrant Shares for which a Warrant
was exercisable immediately prior to such event multiplied by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock outstanding immediately before such event. An
adjustment pursuant to this Section 4.1(b) shall be effective upon payment of
such dividend or distribution in respect of the Common Stock and in the case
of a subdivision or combination shall become effective immediately as of the
effective date thereof. Concurrently with the automatic adjustment pursuant
to this Section 4.1(b), the Exercise Price shall be adjusted by multiplying
the Exercise Price in effect immediately before the event by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately before such event and the denominator of which is the number of
shares of Common Stock outstanding immediately after such event.
(c) Below Market Issuances. Subject to the provisions of Section 4.1(e),
in the event the Corporation shall, at any time or from time to time while
any of the Warrants are outstanding, sell or issue shares of Common Stock
(other than in a transaction subject to Section 4.1(b)), any security
convertible into shares of Common Stock or any option, right or warrant to
purchase shares of Common Stock for no consideration or at a purchase price per
share of Common Stock, or conversion price in the case of a security
convertible into Common Stock, less than the Fair Market Value of a share of
Common Stock on the date of issuance of such Common Stock, security
convertible into Common Stock, option, right or warrant, then, in such event,
each Warrant will automatically, without any action on the part of the holder
thereof or the Corporation, become exercisable for that number of Warrant
Shares equal to the number of Warrant Shares for which a Warrant was
exercisable immediately before such sale or issuance of Common Stock,
securities convertible into Common Stock, options, rights or warrants
multiplied by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately before such sale or issuance of Common
Stock, securities convertible into Common Stock, options, rights or warrants
plus the maximum number of shares of Common Stock that could be acquired upon
the sale or issuance of the Common Stock or upon exercise in full of all
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such conversion rights, options, rights and warrants and the denominator of
which is the number of shares of Common Stock outstanding immediately before
such sale or issuance of Common Stock, securities convertible into Common
Stock, options, rights or warrants plus the number of shares of Common Stock
which could be purchased at the Fair Market Value of a share of Common Stock
at the time of such sale or issuance for the maximum aggregate consideration
payable upon the sale or issuance of the Common Stock or upon exercise in
full of all such conversion rights, options, rights or warrants. Concurrently
with the automatic adjustment pursuant to this Section 4.1(c), the Exercise
Price shall be adjusted by multiplying the Exercise Price in effect
immediately before such sale or issuance of Common Stock, securities
convertible into Common Stock, options, rights or warrants by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately before such sale or issuance of Common Stock, securities
convertible into Common Stock, options, rights or warrants plus the number of
shares of Common Stock which could be purchased at the Fair Market Value of a
share of Common Stock at the time of such sale or issuance for the maximum
aggregate consideration payable upon the sale or issuance of the Common Stock
or upon exercise in full of all such conversion rights, options or warrants,
and the denominator of which is the number of shares of Common Stock
outstanding immediately before such sale or issuance of Common Stock,
securities convertible into Common Stock, options, rights or warrants plus
the maximum number of shares that could be acquired upon the sale or issuance
of the Common Stock or upon the exercise in full of all such conversion
rights, options, rights and warrants. For purposes of this Section 4.1(c),
all shares of Common Stock issuable upon the conversion of such convertible
securities or upon exercise of such options, warrants or rights shall be
deemed to have been issued, for the purpose of computing the number of Warrant
Shares for which a Warrant is exercisable and the Exercise Price hereunder,
as of the time such convertible securities, options, warrants or rights are
issued or sold. If any rights of conversion or exercise of such convertible
securities, options, rights or warrants shall expire without having been
exercised, the number of Warrants Shares for which a Warrant is exercisable
and the Exercise Price shall forthwith be automatically adjusted to be the
number of Warrant Shares for which a Warrant is exercisable and the Exercise
Price that would have been in effect had an adjustment been made on the basis
that the only shares of Common Stock issued or sold were those actually
issued upon the conversion or exercise of such convertible securities,
options, rights or warrants. For purposes of this Section 4.1(c), the date of
issuance of options for shares of Common Stock shall mean the date of their
grant. For purposes of this Section 4.1(c), "Common Stock outstanding shall
mean all shares of Common Stock outstanding on a fully diluted basis, as if
all securities convertible into or exchangeable for Common Stock had been
fully converted into or exchanged for shares of Common Stock and any
outstanding options, warrants or other rights to purchase Common Stock or
securities convertible into or exchangeable for Common Stock had been fully
exercised (and the resulting securities converted into or exchanged for
Common Stock), but excluding shares of Common Stock issuable upon exercise of
the Warrants.
(d) Extraordinary Distributions. Subject to the provisions of
Section 4.1(e) and Section 4.2, in the event the Corporation shall, at any
time or from time to time while any of the Warrants are outstanding, make an
Extraordinary Distribution in respect of the Common Stock, whether by
dividend, distribution, reclassification of shares or recapitalization of the
Corporation
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(including recapitalization or reclassification effected by a merger or
consolidation in which the Corporation is the surviving entity) then, in such
event, each Warrant will automatically, without any action on the part of the
holder thereof or the Corporation, become exercisable for that number of
Warrant Shares equal to the number of Warrant Shares for which a Warrant was
exercisable immediately before such Extraordinary Distribution multiplied by
a fraction the numerator of which is the product of (a) the number of shares
of Common Stock outstanding immediately before such Extraordinary
Distribution multiplied by (b) the Fair Market Value of a share of Common
Stock on the record date with respect to an Extraordinary Distribution and
the denominator of which is (i) the product of (x) the number of shares of
Common Stock outstanding immediately before such Extraordinary Distribution
multiplied by (y) the Fair Market Value of a share of Common Stock on the
record date with respect to an Extraordinary Distribution minus (ii) the Fair
Market Value of the Extraordinary Distribution. The Corporation shall send
each Holder notice of its intent to make any Extraordinary Distribution at
the same time as, or as soon as practicable after, such offer is first
communicated (including by announcement of a record date in accordance with
the rules of any stock exchange on which the Common Stock is listed or
admitted to trading) to holders of Common Stock. Such notice shall indicate
the intended record date and the amount and nature of such distribution, as
well as the Exercise Price and the number of Warrant Shares for which a
Warrant may be exercised at such time. Concurrently with the automatic
adjustment pursuant to this Section 4.1(d), the Exercise Price shall be
adjusted by multiplying the Exercise Price in effect immediately before such
Extraordinary Distribution by a fraction the numerator of which is (i) the
product of (x) the number of shares of Common Stock outstanding immediately
before such Extraordinary Distribution multiplied by (y) the Fair Market
Value of a share of Common Stock on the record date with respect to an
Extraordinary Distribution, minus (ii) the Fair Market Value of the
Extraordinary Distribution and the denominator of which is the product of (a)
the number of shares of Common Stock outstanding immediately before such
Extraordinary Distribution multiplied by (b) the Fair Market Value of a share
of Common Stock on the record date with respect to an Extraordinary
Distribution.
(e) Exempt Securities. Notwithstanding any other provision herein to
the contrary, the issuance of any Exempt Securities shall not be deemed to
constitute an issuance of Common Stock or other security of the Corporation
(or in the case of any repurchase, any Extraordinary Distribution) for
purposes of the foregoing anti-dilution provisions.
(f) De Minimis Adjustments. Notwithstanding any other provisions of
this Section 4.1, the Corporation shall not be required to make (i) any
adjustment of the number of Warrant Shares or the Exercise Price unless such
adjustment would require an increase or decrease of at least one percent (1%)
in the aggregate number of Warrant Shares for which Warrants are exercisable
at that time, or (ii) any adjustment of the Exercise Price unless such
adjustment would require an increase or decrease of at least one percent (1%)
in the Exercise Price. Any lesser adjustment shall be carried forward and
shall be made no later than the time of, and together with, the next
subsequent adjustment which, together with any adjustment or adjustments so
carried forward, shall amount to an increase or decrease of at least one
percent (1%) of the number of Warrant Shares for which Warrants are
exercisable at that time or an increase or decrease of at least one percent
(1%) of the Exercise Price, whichever the case may be. If any action would
require adjustment of the Exercise
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Price pursuant to more than one paragraph of Section 4.1, only one adjustment
shall be made as determined in good faith by the Board of Directors of the
Corporation.
(g) Notice of Adjustment. Whenever an adjustment to the Exercise
Price or number of Warrants and Warrant Shares is required pursuant to this
Section 4.1, the Corporation shall forthwith place on file with the transfer
agent for the Common Stock, if any, and with the Treasurer of the
Corporation, a statement signed by the Treasurer or Assistant Treasurer of
the Corporation stating the adjusted number of Warrant Shares and the
Exercise Price determined as provided herein. Such statement shall set forth
in reasonable detail such facts as shall be necessary to show the reason and
the manner of computing such adjustment, including any determination of Fair
Market Value involved in such computation. Promptly after each adjustment to
the number of Warrant Shares for which Warrants are exercisable or the
Exercise Price, the Corporation shall mail a notice thereof and of the then
prevailing number of Warrant Shares for which Warrants are exercisable and
the Exercise Price to each Holder.
4.2 Termination of Right of Exercise on Fundamental Corporate
Changes. Notwithstanding anything herein to the contrary, and subject to the
notice requirements of this Section 4.2, if the Corporation shall be a party
to any transaction which involves any consolidation or merger of the
Corporation with another corporation, or any sale of all or substantially all
of the assets of the Corporation to another corporation, and which is
effected in such a way that the holders of Common Stock shall be entitled to
receive cash, stock, securities or other assets with respect to or in
exchange for Common Stock, then the right to exercise the Warrants and
thereby to purchase shares of Common Stock shall terminate at the close of
business on the date as of which the holders of Common Stock of record shall
be entitled to exchange their shares of Common Stock for cash, securities or
other assets deliverable upon such consolidation, merger or sale of all or
substantially all of the assets of the Corporation. In case the Corporation
shall enter into any agreement or understanding or the Board of Directors
shall adopt any resolution authorizing or proposing any transaction of the
type described in this Section 4.2, or with respect to a voluntary or
involuntary dissolution, liquidation or winding up of the Corporation, then
in any such event the Corporation promptly shall cause to be mailed, by
registered or certified mail, postage paid, to the Holder of this Warrant at
such Holder's last address appearing on the records of the Corporation at the
earliest practicable time (and, in any event, not later than the later of (i)
the date the proxy materials (if any) are first distributed (or other notice
is first given) to the Corporation's shareholders regarding the proposed
transaction, or (ii) 20 days before the effective date (or record date, if
earlier) of such proposed transaction), notice of the date on which such
reorganization, sale, consolidation, merger, dissolution, liquidation or
winding up or other such transaction shall take place, as the case may be.
Such notice shall also set forth such facts as shall indicate the effect of
such action (to the extent such effect may be known at the date of such
notice) on the Exercise Price and the kind and amount of securities and
property purchasable upon exercise of the Warrants. Such notice shall also
specify the date as of which the holders of record of the shares of Common
Stock or other securities or property purchasable upon exercise of the
Warrants shall be entitled to exchange their shares or other securities or
property for securities, money or other property deliverable upon such
reorganization, sale, consolidation, merger, dissolution, liquidation or
winding up or other such transaction, as the case may be.
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4.3 Statements in the Warrants. Notwithstanding any adjustment in the
Exercise Price or the number or kind of Warrant Shares purchasable upon the
exercise of the Warrants, the Warrant Certificates theretofore or thereafter
issued may continue to express the same price and number and kind of shares
as are stated in the Warrant Certificate initially issued pursuant to this
Agreement.
4.4 Fractional Interests. In computing adjustments under this Article
4, fractional interests in Common Stock shall be taken into account to the
nearest one-thousandth of a share. No fractional shares of Common Stock or
scrip representing fractional shares of Common Stock shall be issued upon any
exercise of the Warrants, but, in lieu thereof, there shall be paid an amount
in cash equal to the same fraction of the Market Price of a whole share of
Common Stock on the business day preceding the day of exercise.
4.5 No Dilution or Impairment. The Corporation shall not amend its
Certificate of Incorporation or participate in any reorganization, transfer
or assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, for the purpose of avoiding or seeking to avoid
the observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times, in good faith, assist in
carrying out all such actions as may be reasonably necessary or appropriate
in order to protect the rights of the holders of the Warrants against
dilution or other impairment as set forth in this Agreement.
ARTICLE 5
RESERVATION AND AUTHORIZATION OF COMMON SHARES
5.1 Reservation and Authorization. The Corporation shall at all times
reserve and keep available for issuance upon exercise of the Warrants such
number of its duly authorized but unissued shares of Common Stock or other
securities of the Corporation purchasable upon exercise of the Warrants as
will be sufficient to permit the exercise in full of all outstanding Warrants
and will cause appropriate evidence of ownership of such shares of Common
Stock or other securities to be delivered to the Holders of the Warrants upon
their request for delivery of such, and all such shares of Common Stock or
other securities shall, at all times, be duly approved for listing, subject to
official notice of issuance, on each securities exchange, if any, on which
such shares of Common Stock or other securities are then listed.
5.2 Covenant Regarding Securities. The Corporation covenants that all
shares of Common Stock or other securities of the Corporation that may be
issued upon the exercise of the Warrants will, upon issuance, be (a) duly
authorized, validly issued, fully paid and nonassessable, (b) free from
preemptive and any other similar rights and (c) free from any taxes, liens,
charges or security interest with respect thereto except transfer taxes and
Florida documentary stamp taxes to the extent applicable thereto.
5.3 Registration. If the Warrant Shares or any securities of the
Corporation issuable to NationsBank upon the exercise of the Warrants require
registration with, or approval of, any governmental authority (in addition to
such as the Corporation is required to obtain pursuant to
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Article 7 hereof), or the taking of any other action (in addition to such as
the Corporation is required to obtain pursuant to Article 7 hereof), under
the laws of the United States of America or any state or political
subdivision thereof, before such securities may be validly offered or sold in
compliance with such laws, then the Corporation covenants that it will, in
good faith and as expeditiously as practicable, endeavor to secure and
maintain such registration or approval or to take such other action, as the
case may be; provided, however, that the Corporation will not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action that would subject it to general service of
process or to taxation in any such jurisdiction where it is not then so
subject; provided, further, that the expenses of such registration shall be
allocated in accordance with the provisions of the Registration Rights
Agreement.
ARTICLE 6
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
6.1 Transfer and Exchange.
(a) Warrant Register. The Corporation shall keep and maintain at its
office a register in which, subject to such reasonable regulations as it may
prescribe, the Corporation shall provide for the registration of the Warrant
Certificates on the Corporation's records and transfers or exchanges of the
Warrant Certificates as herein provided.
(b) Restrictions on Transfer. (i) Each of NationsBank and its
Affiliates who are issued Warrants pursuant to this Warrant Agreement (A)
represents that it is acquiring the Warrants for its own account for
investment and not with a view to any distribution or public offering within
the meaning of the Securities Act, except in any case pursuant to the
registration of such Warrants or Warrant Shares under the Securities Act or
any state securities or "blue sky" laws or pursuant to a valid exemption from
such registration requirement, (B) acknowledges that the Warrants and the
Warrant Shares issuable upon exercise thereof have not been registered under
the Securities Act or any state securities or "blue sky" laws and (C) agrees
that it will not sell or otherwise transfer any of its Warrants or Warrant
Shares except upon the terms and conditions specified herein and that it will
cause any transferee thereof to agree to take and hold the same subject to
the terms and conditions specified herein, (D) acknowledges that any transfer
agent now or hereafter employed or utilized by the Corporation shall be
instructed not to effect transfer of the Warrants or the Warrant Shares
issuable upon exercise thereof without prior authorization from the
Corporation in accordance with the terms hereof (or, if the Corporation
serves as its own transfer agent, a notation shall be made in the
Corporation's records indicating the transfer restrictions to which the
Warrants and Warrant Shares issuable upon exercise thereof are subject and
that the Warrants and the Warrant Shares may only be transferable in
accordance with this Agreement); and (E) represents it (I) is an "accredited
investor" (as defined in Rule 501(a)(1) of Regulation D promulgated under the
Securities Act by the Commission);(II) has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and risks of its investment in the Warrants and Warrant Shares issuable upon
exercise of the Warrants; (III) is able to bear the complete loss of its
investment in the Warrants and Warrant Shares issuable upon exercise of the
Warrants; (IV) has had the opportunity to ask questions of, and receive
answers from, the Corporation and its management concerning the
14
<PAGE>
terms and conditions of the offering of the Warrants and Warrant Shares
issuable upon exercise of the Warrants and to obtain additional information;
and (V) is not relying upon any statements or instruments made or issued by
any person other than the Corporation in making its decision to invest in the
Warrants and Warrant Shares issuable upon exercise of the Warrants; and (ii)
each of NationsBank and its Affiliates who are issued Warrants pursuant to
this Agreement (A) is domiciled in North Carolina and received its offer to
purchase Warrants and Warrant Shares in North Carolina; (B) understands that
the Warrants and Warrant Shares issuable upon exercise of the Warrants will
be considered restricted securities within the meaning of Rule 144 under the
Securities Act; that Rule 144 may not be available for exemption from the
registration requirements of the Securities Act for the sale of such
restricted securities; that if Rule 144 is available, sales may be made in
reliance upon Rule 144 only in accordance with the terms and conditions of
Rule 144, which among other things generally requires that the securities be
held for at least one year and that the sales shall be made in limited
amounts; and that, if an exemption for such sales by such holder of the
Warrants or the Warrant Shares is not available, registration of the
securities may be required, but that the Corporation is under no obligation
to register the securities or to facilitate compliance or to comply with any
exemption except pursuant to Article 7 of this Agreement; and (C) agrees that
it will not sell, transfer, hypothecate, or otherwise dispose of any of the
Warrants and Warrant Shares issuable upon exercise of the Warrants, except in
compliance with the Securities Act and applicable securities laws.
(c) Right of First Refusal. Notwithstanding any other provision of
this Agreement, until the Corporation consummates a Qualified Initial Public
Offering, no assignment, transfer or sale of any Warrants or any Warrant
Shares (other than a sale to an Affiliate) shall be made except in compliance
with this Agreement and the following right of first refusal:
(i) If any Holder of Warrants or Warrant Shares (the "Selling
Warrant Holder") desires to dispose of any Warrants or Warrant Shares, (the
"Offered Warrant Securities"), except as otherwise permitted hereunder, such
Selling Warrant Holder shall first give written notice (the "Warrant
Securities Offer Notice") to the Corporation. A Warrant Securities Offer
Notice shall (A) indicate that such Selling Warrant Holder wishes to dispose
of the Offered Warrant Securities, and (B) state the price and other material
terms upon which such Selling Warrant Holder wishes to dispose of such
Warrant Securities and offer to sell the Offered Warrant Securities, in whole
(but not in part)(the "Warrant Securities Offer") at the price and on the
other material terms described in the Warrant Securities Offer Notice, first,
to the Corporation and/or its designees.
(ii) The Corporation and/or its designees may offer to accept a
Warrant Securities Offer in whole (but not in part) by giving notice to the
Selling Warrant Holder within thirty (30) days after the Warrant Securities
Offer Date. The closing of such sale of Offered Warrant Securities shall be
consummated within five (5) days after the date the Corporation's and/or its
designees' offer is accepted by the Selling Warrant Holder at the principal
office of the Corporation (or at such other times or places as such Selling
Warrant Holder and the Corporation and/or its designees may agree).
(iii) If the Offered Warrant Securities have not been accepted by
the Corporation and/or its designees in accordance with this Section 6.1(c),
the Selling Warrant Holder may dispose of the Offered Warrant Securities, to
one or more Persons who each agree in writing to be bound by the terms of
this Agreement, on substantially the same terms but not more favorable than
those stated
15
<PAGE>
in the Warrant Securities Offer Notice, at any time up to one hundred (100)
days after the Warrant Securities Offer Date. Thereafter, the provisions of
this Section 6.1(c) will again apply.
(d) Notice of Transfer. Prior to or promptly after any assignment,
transfer or sale of the Warrants or any Warrant Shares, the Holder thereof
shall give written notice to the Corporation of such Holder's intention to
effect such assignment, transfer or sale, which notice shall set forth the
date of such proposed assignment, transfer or sale and identify of the
proposed transferee. Each Holder wishing to effect such a transfer of the
Warrants or any Warrant Shares shall also furnish to the Corporation an
agreement by the transferee thereof that it is taking and holding the same
subject to the terms and conditions specified herein and a written opinion
of such Holder's counsel, in form reasonably satisfactory to the Corporation,
to the effect that the proposed transfer may be effected without registration
under the Securities Act and applicable state securities laws.
(e) Legend. Except as provided in Section 6.1(f) hereof, each Warrant
Certificate and each certificate for the Warrant Shares issued to NationsBank
or an Affiliate thereof or to a subsequent transferee thereof pursuant to
Section 6.1(d) shall include the legend in substantially the form set forth
in Section 2.2; provided that such legend shall not be required if such
transfer is being made in connection with a sale which is exempt from
registration pursuant to Rule 144 under the Securities Act.
(f) Termination of Transfer Restrictions. The restrictions set forth in
Sections 6.1(b) through (e) shall terminate and cease to be effective (i) if
the Warrants or any Warrant Shares issuable upon exercise therof are
registered under the Securities Act and, in the case of Warrant Shares, when
such Warrant Shares are sold in reliance upon Rule 144 or (ii) on such
earlier date as of which the Corporation shall determine that such
restrictions are no longer required under applicable securities laws (and the
Corporation shall respond promptly, reasonably and in good faith to any
reasonable request that the Corporation make such a determination). Whenever
such restrictions shall so terminate the Holder of such Warrants and/or
Warrant Shares shall be entitled to receive from the Company, without expense
(other than transfer taxes and Florida documentary stamp tax, to the extent
applicable), a new Warrant Certificate(s) or certificates for such Warrant
Shares not bearing the legend set forth in Section 2.2 at which time the
Company shall rescind any transfer restrictions relating thereto.
ARTICLE 7
REGISTRATION RIGHTS
NationsBank (and its permitted transferees and assignees of this
Agreement) shall have and be entitled to exercise the rights of registration
granted to, and shall be subject to the obligations of, "Other
Stockholders" under the Registration Rights Agreement. As a condition
precedent thereto, NationsBank and each subsequent permitted transferee and
assignee shall execute and deliver to the Corporation and each other party
to the Registration Rights Agreement a counterpart signature page thereto.
16
<PAGE>
ARTICLE 8
MISCELLANEOUS
8.1 Loss or Mutilation. Upon receipt by the Corporation of (a)
evidence satisfactory to it of the ownership, and the loss, theft,
destruction or mutilation, of any Warrant Certificate and (b) of indemnity
satisfactory to it or, in the case of mutilation, upon surrender and
cancellation of the mutilated Warrant Certificate, then, the Corporation
shall execute and deliver to the registered Holder of the lost, stolen,
destroyed or mutilated Warrant Certificate, in exchange for or in lieu
thereof, a new Warrant Certificate of the same tenor and for a like
aggregate number of Warrant Shares. Upon the issuance of any new Warrant
Certificate under this Section 8.1, the Corporation may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and other expenses in connection therewith
including any transfer taxes and Florida documentary stamp tax. Every new
Warrant Certificate executed and delivered pursuant to this Section in lieu
of any lost, stolen or destroyed Warrant Certificate shall constitute a
contractual obligation of the Corporation, whether or not the allegedly lost,
stolen or destroyed Warrant Certificate shall be at any time enforceable by
anyone, and shall be entitled to the benefits of this Agreement. The
provisions of this Section 8.1 are exclusive and shall preclude (to the
extent lawful) all other rights or remedies with respect to the replacement of
the mutilated, lost, stolen, or destroyed Warrant Certificates.
8.2 Payment of Taxes. The Corporation shall pay any taxes and other
governmental charges that may be imposed on the Corporation under the laws of
the United States of America or any political subdivision or taxing authority
thereof or therein in respect of the issue or delivery of Warrant Shares or of
other securities or property deliverable upon exercise of the Warrants. The
Corporation shall not be required, however, to pay any tax or other charge
imposed in connection with any transfer involved in the issue of any
certificate for Warrant Shares or other securities or property issuable upon
the exercise of the Warrants or payment of cash to any person other than the
Holder of a Warrant Certificate surrendered upon exercise of the Warrants and
in case of such transfer or payment, the Corporation shall not be required to
issue any stock certificate or pay any cash until such tax or charge has been
paid or it has been established to the Corporation's satisfaction that no
such tax or charge is due.
8.3 Notices. Any notice, demand or delivery authorized by this
Agreement shall be in writing and shall be delivered by hand or overnight
courier service, mailed or set by facsimile as follows:
17
<PAGE>
To the Corporation:
Vitas Healthcare Corporation
100 South Biscayne Boulevard
Miami, Florida 33131
Attention: Chief Executive Officer
Telephone No. (305) 374-4765
To NationsBank:
NationsBank, N.A.
Independence Center, 15th Floor
Charlotte, North Carolina 28255
Attention: Agency Services
Telecopy: (704) 386-9923
or such other address or telecopy number as shall have been furnished to the
party giving or making such notice, demand or delivery. Any notice that is
sent in a manner provided herein shall have been duly given when sent.
8.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO
CONFLICTS OF LAW PRINCIPLES THEREOF.
8.5 Assignment; Successors. Subject to Section 6.1 hereof, this
Agreement may be assigned by NationsBank to any Affiliate at any time upon
written notice. This Agreement shall be binding upon and inure to the
benefit of the Corporation and the Holders and their respective successors
and assigns, and the Holders from time to time of the Warrants. Nothing in
this Agreement is intended or shall be construed to confer upon any person,
other than the Corporation and the Holders, any right, remedy or claim under
or by reason of this Agreement or any part hereof.
8.6 Counterparts. This Agreement may be executed manually or by
facsimile 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.
8.7 Amendments. Any provision of this Agreement or the Warrant
Certificate may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Corporation and the Holders of a
majority in interest of the issued or issuable Warrant Shares; provided,
however, if any amendment adversely affects the Exercise Price or the number
of Warrant Shares issued upon exercise of any Warrant, then the Holders of
all the issued or issuable Warrant Shares must sign the document.
18
<PAGE>
8.8 Headings. The descriptive headings of the several Sections of this
Agreement are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
8.9 Third Party Beneficiaries. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Corporation, on
the one hand, and NationsBank, on the other hand, and the Holders shall have
the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of the
Holder hereunder.
8.10 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances is held
invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way
impaired or affected thereby, it being intended that all of the rights and
privileges of the parties shall be enforceable to the fullest extent
permitted by law.
8.11 No Inconsistent Agreements. Except as set forth in the
Registration Rights Agreement, the Corporation has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into,
any agreement that is inconsistent with the rights granted to the Holders
herein or that otherwise conflicts with the provisions hereof.
19
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered, as of the date first above written.
VITAS HEALTHCARE CORPORATION
By: /s/ Hugh A. Westbrook
------------------------------------------
Name: Hugh A. Westbrook
Title: Chairman and Chief Executive Officer
NATIONSBANK, N.A.
By: /s/ Allison Freeland
------------------------------------------
Name: Allison Freeland
Title: Senior Vice President
20
<PAGE>
EXHIBIT A
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF A CERTAIN AGREEMENT WHICH INCLUDES A RIGHT OF FIRST REFUSAL
ON THE SALE OF THE SECURITIES. COPIES OF THE AGREEMENT MAY BE OBTAINED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND CANNOT BE OFFERED, SOLD OR TRANSFERRED WITHOUT
REGISTRATION OR COMPLIANCE WITH EXEMPTION FROM REGISTRATION UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS AND REGULATIONS PROMULGATED THEREUNDER.
A full statement of the powers, designations, preferences and relative,
participating, optional or other special rights of the shares of each class
of stock of the Corporation authorized to be issued, and the qualifications,
limitations or restrictions of such preferences and/or rights, will be
furnished to any stockholder without charge upon request to the Secretary of
the Corporation.
No.1 Warrants to purchase an aggregate
of 291,918 shares of Common Stock
WARRANT TO PURCHASE COMMON STOCK
This certifies that NationsBank, N.A. or its permitted assigns, is the
holder of 291,918 Warrants to purchase shares of Common Stock ("Common
Stock") of Vitas Healthcare Corporation (the "Corporation"). Each Warrant
initially entitles the holder thereof (the "Holder") to purchase from the
Corporation one (1) share of Common Stock at the purchase price (the
"Exercise Price") set forth in the Warrant Agreement (as defined below),
subject to the terms and conditions hereof and of the Warrant Agreement. In
order to exercise the Warrants represented by this Warrant Certificate, the
registered Holder hereof must surrender this Warrant Certificate at the
office of Corporation as set forth in the Warrant Agreement or to its
successor.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of September 1, 1997 by and between NationsBank,
N.A. and the Corporation (the "Warrant Agreement"), and is subject to the
terms and provisions contained therein, to all of which terms and provisions
the Holder of this Warrant Certificate consents by acceptance hereof. The
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof. Reference is hereby made to the Warrant Agreement for a full
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Corporation and the Holder of the Warrants. The
summary or the terms of the Warrant Agreement contained in this Warrant
21
<PAGE>
qualified in its entirety by express reference to the Warrant Agreement. All
terms used in this Warrant Certificate that are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
Copies of the Warrant Agreement are on file at the office of the
Corporation and may be obtained by writing to the Corporation requesting the
same.
The number of shares of Common Stock purchasable upon the exercise of
the Warrants and the Exercise Price are subject to adjustment as provided in
the Warrant Agreement.
Subject to the requirements set forth in the Warrant Agreement and the
restrictions on transfer set forth therein, this Warrant Certificate and all
rights hereunder shall be transferable by the registered Holder hereof on the
register of the Corporation maintained by the Corporation for such purpose at
its office upon surrender of this Warrant Certificate duly endorsed, or
accompanied by a written instrument of transfer in form satisfactory to the
Corporation duly executed, by the registered Holder hereof or such Holder's
attorney duly authorized in writing and upon payment of any necessary
transfer tax or other governmental charge imposed upon such transfer. Upon
any partial transfer the Corporation will issue and deliver to such Holder a
new Warrant Certificate with respect to any portion not so transferred.
This Warrant Certificate shall be void and all rights evidenced hereby
shall cease on the Expiration Date unless otherwise provided in the Warrant
Agreement.
22
<PAGE>
This Warrant Certificate and the Warrant Agreement are subject to
amendment as provided in the Warrant Agreement.
Dated: __________, 1997
VITAS HEALTHCARE CORPORATION
By:
-------------------------------------------
Name:
Title: Chairman and Chief Executive Officer
23
<PAGE>
EXHIBIT B
Notice of Intention to Exercise Warrant for Cash
------------------------------------------------
The undersigned holder of the attached Warrant Certificate hereby
exercises the right to exchange the attached Warrant Certificate for the
number of shares of Common Stock of Vitas Healthcare Corporation shown below
in accordance with the terms thereof and directs that (i) such shares be
issued and delivered to the undersigned as provided by the terms of the
attached Warrant Certificate, and (ii) a certificate representing the number
of shares covered by the attached Warrant Certificate which shall thereafter
remain unexercised, if any, also be delivered to the undersigned. This notice
is accompanied by the Aggregate Purchase price shown below.
1. Number of shares as to which exercised:
-----------------------------
AND
2. Aggregate Purchase Price:
-------------------------------------------
-------------------------------------------
(Signature of Holder)
<PAGE>
EXHIBIT C
Notice of Intention to Exercise Warrant by Conversion
The undersigned holder of the attached Warrant Certificate hereby
irrevocably elects to exercise the right, represented by the attached Warrant
Certificate, to convert Warrants represented thereby into ____ shares of
Common Stock of Vitas Healthcare Corporation and directs that (i) such shares
be issued and delivered to the undersigned as provided by the terms of the
attached Warrant Certificate, and (ii) a certificate representing the number
of shares covered by the attached Warrant Certificate which shall thereafter
remain unexercised, if any, also be delivered to the undersigned.
---------------------------------
(Signature of Holder)
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered, as of the date first above written.
VITAS HEALTHCARE CORPORATION
By: /s/ Hugh A. Westbrook
------------------------
Name:
Title: Chairman and Chief Executive Officer
NATIONSBANK, N.A.
By:
-------------------------
Name:
Title: Senior Vice President
<PAGE>
EXHIBIT 10.65
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF A CERTAIN AGREEMENT WHICH INCLUDES A RIGHT OF FIRST REFUSAL
ON THE SALE OF THE SECURITIES. COPIES OF THE AGREEMENT MAY BE OBTAINED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND CANNOT BE OFFERED, SOLD OR TRANSFERRED WITHOUT
REGISTRATION OR COMPLIANCE WITH EXEMPTION FROM REGISTRATION UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS AND REGULATIONS PROMULGATED THEREUNDER.
A full statement of the powers, designations, preferences and relative,
participating, optional or other special rights of the shares of each class
of stock of the Corporation authorized to be issued, and the qualifications,
limitations or restrictions of such preferences and/or rights, will be
furnished to any stockholder without charge upon request to the Secretary of
the Corporation.
No. 1 Warrants to purchase an aggregate
of 291,918 shares of Common Stock
WARRANT TO PURCHASE COMMON STOCK
This certifies that NationsBank, N.A. or its permitted assigns, is the
holder of 291,918 Warrants to purchase shares of Common Stock ("Common Stock")
of Vitas Healthcare Corporation (the "Corporation"). Each Warrant initially
entitles the holder thereof (the "Holder") to purchase from the Corporation
one (1) share of Common Stock at the purchase price (the "Exercise Price")
set forth in the Warrant Agreement (as defined below), subject to the terms
and conditions hereof and of the Warrant Agreement. In order to exercise the
Warrants represented by this Warrant Certificate, the registered Holder
hereof must surrender this Warrant Certificate at the office of Corporation
as set forth in the Warrant Agreement or to its successor.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of September 1, 1997 by and between NationsBank,
N.A. and the Corporation (the "Warrant Agreement"), and is subject to the
terms and provisions contained therein, to all of which terms and provisions
the Holder of this Warrant Certificate consents by acceptance hereof. The
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof. Reference is hereby made to the Warrant Agreement for a full
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Corporation and the Holder of the Warrants. The
summary or the terms of the Warrant Agreement contained in this Warrant
Certificate is qualified in its entirety by express reference to the Warrant
Agreement. All terms used in this Warrant Certificate that are defined in
the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
<PAGE>
Copies of the Warrant Agreement are on file at the office of the
Corporation and may be obtained by writing to the Corporation requesting the
same.
The number of shares of Common Stock purchasable upon the exercise of
the Warrants and the Exercise Price are subject to adjustment as provided in
the Warrant Agreement.
Subject to the requirements set forth in the Warrant Agreement and the
restrictions on transfer set forth therein, this Warrant Certificate and all
rights hereunder shall be transferable by the registered Holder hereof on the
register of the Corporation maintained by the Corporation for such purpose at
its office upon surrender of this Warrant Certificate duly endorsed, or
accompanied by a written instrument of transfer in form satisfactory to the
Corporation duly executed, by the registered Holder hereof or such Holder's
attorney duly authorized in writing and upon payment of any necessary transfer
tax or other governmental charge imposed upon such transfer. Upon any partial
transfer the Corporation will issue and deliver to such Holder a new Warrant
Certificate with respect to any portion not so transferred.
This Warrant Certificate shall be void and all rights evidenced hereby
shall cease on the Expiration Date unless otherwise provided in the Warrant
Agreement.
2
<PAGE>
This Warrant Certificate and the Warrant Agreement are subject to
amendment as provided in the Warrant Agreement.
Dated: , 1997
----------------
VITAS HEALTHCARE CORPORATION
By: /s/ Hugh Waterbard
---------------------------------
Name:
Title: Chairman and Chief Executive Officer
3
<PAGE>
Exhibit 11.1
Statement Re: Computation of Per share Earnings
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
----------------------------------
1994 1995 1996
---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
PRIMARY
AVERAGE SHARES OUTSTANDING............................................... 1,601,912 1,613,993 1,723,595
COMMON STOCK EQUIVALENTS................................................. 2,985,273 -- --
---------- ---------- ----------
TOTAL.................................................................... 4,587,185 1,613,993 1,723,595
NET INCOME............................................................... $ 5,141 $ (2,845) $ (7,092)
ADJUSTMENTS TO NET INCOME:
9% PREFERRED STOCK DIVIDENDS........................................... (2,498) (2,498) (2,498)
SERIES B PREFERRED STOCK DIVIDENDS..................................... (2,100) (2,100) (2,100)
INCOME FROM US GOVERNMENT SECURITIES................................... 1,287 -- --
---------- ---------- ----------
NET INCOME PER COMMON SHARE.............................................. $ 1,830 $ (7,443) $ (11,690)
---------- ---------- ----------
---------- ---------- ----------
PER SHARE AMOUNT......................................................... $ .40 $ (4.61) $ (6.78)
---------- ---------- ----------
---------- ---------- ----------
FULLY DILUTED
AVERAGE SHARES OUTSTANDING............................................... 1,601,912 1,613,993 1,723,595
COMMON STOCK EQUIVALENTS................................................. 2,985,273 -- --
ADDITIONAL COMMON STOCK EQUIVALENTS...................................... 121,949 -- --
---------- ---------- ----------
TOTAL.................................................................... 4,709,134 1,613,993 1,723,595
NET INCOME............................................................... $ 5,141 (2,845) (7,092)
ADJUSTMENTS TO NET INCOME:
9% PREFERRED STOCK DIVIDENDS........................................... (2,498) (2,498) (2,498)
SERIES B PREFERRED STOCK DIVIDENDS..................................... (2,100) (2,100) (2,100)
INCOME FROM US GOVERNMENT SECURITIES................................... 1,287 -- --
---------- ---------- ----------
NET INCOME ATTRIBUTABLE TO COMMON SHARE.................................. $ 1,830 $ (7,443) $ (11,690)
INCOME FROM ADDITIONAL INVESTMENTS IN US GOVERNMENT SECURITIES........... 132 -- --
---------- ---------- ----------
NET INCOME PER FULLY DILUTED COMMON SHARE................................ $ 1,962 $ (7,443) $ (11,690)
---------- ---------- ----------
---------- ---------- ----------
PER SHARE AMOUNT......................................................... $ .42 $ (4.61) $ (6.78)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<PAGE>
EXHIBIT 21.1
Subsidiaries of the Company
Name State of Incorporation
1. Vitas Healthcare Corporation of Delaware
California
2. Vitas Healthcare Corporation of Delaware
Central Florida
3. Vitas Healthcare Corporation of
Florida Florida
4. Vitas Healthcare Corporation of Delaware
Ohio
5. Vitas Healthcare Corporation of Delaware
Pennsylvania
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and
to the use of our reports dated January 24, 1997, except for the third
paragraph of Note 1 as to which the date is September 15, 1997, the second
paragraph of Note 4 as to which the date is September 18, 1997 and Note 7 as
to which the date is September 1, 1997 with respect to Vitas Healthcare
Corporation and February 20, 1995 with respect to Community Hospice Care,
Inc. et al, in the Registration Statement (Form S-1) and related Prospectus
of Vitas Healthcare Corporation dated September 22, 1997.
/s/ Ernst & Young LLP
Ernst & Young LLP
Miami, Florida
September 22, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.1
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
JUNE 30, 1997 INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS THEN
ENDED AND THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1996
<PERIOD-START> OCT-01-1996 OCT-01-1995
<PERIOD-END> JUN-30-1997 SEP-30-1996
<CASH> 9,225 5,351
<SECURITIES> 0 0
<RECEIVABLES> 20,993 22,872
<ALLOWANCES> (6,509) (6,000)
<INVENTORY> 0 0
<CURRENT-ASSETS> 25,774 29,223
<PP&E> 33,147 30,788
<DEPRECIATION> (19,941) (15,701)
<TOTAL-ASSETS> 85,859 92,276
<CURRENT-LIABILITIES> 41,427 38,977
<BONDS> 0 0
62,117 60,491
0 0
<COMMON> 17 16
<OTHER-SE> (50,261) (48,491)
<TOTAL-LIABILITY-AND-EQUITY> 85,859 92,276
<SALES> 0 0
<TOTAL-REVENUES> 150,323 213,856
<CGS> 0 0
<TOTAL-COSTS> 150,043 216,553
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 3,283 7,958
<INTEREST-EXPENSE> 3,652 4,674
<INCOME-PRETAX> (924) (7,092)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (924) (7,092)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (924) (7,092)
<EPS-PRIMARY> (.74) (2.56)
<EPS-DILUTED> 0 0
</TABLE>
