FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-7008
COMMUNITY PSYCHIATRIC CENTERS
(Exact name of registrant as specified in its charter)
NEVADA 94-1599386
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
24502 Pacific Park Drive, Laguna Hills, CA 92656
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714)831-1166
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date: 43,530,672 as of
May 31, 1994
Total number of pages: 14
Exhibit Index at page: 13
Page 1 of 14
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
May 31 May 31
1994 1993 1994 1993
---------------- ------------------
(In thousands except per share data)
REVENUES:
<S> <C> <C> <C> <C>
Operating revenues, net $200,590 $169,461 $108,424 $ 85,798
Investment income and other 741 1,377 382 351
-------- -------- -------- --------
201,331 170,838 108,806 86,149
-------- -------- -------- --------
OPERATING COSTS AND EXPENSES:
Operating costs exclusive of
depreciation 113,408 88,889 59,884 43,384
General and administrative
expense 73,062 72,404 39,241 32,788
Depreciation and amortization 8,911 7,475 4,626 3,640
Interest, principally on
long-term debt 1,800 1,137 1,072 520
Restructuring charge (credit)
- Note B (875) 54,950
-------- -------- -------- --------
196,306 224,855 104,823 80,332
-------- -------- -------- --------
EARNINGS (LOSS) BEFORE TAXES 5,025 (54,017) 3,983 5,817
Income taxes (benefit)
- Note C 2,011 (19,572) 1,594 2,327
-------- -------- -------- --------
NET EARNINGS (LOSS) $ 3,014 $(34,445) $ 2,389 $ 3,490
======== ======== ======== ========
EARNINGS (LOSS) PER SHARE $ .07 $ (0.80) $ 0.06 $ 0.08
WEIGHTED AVERAGE COMMON SHARES 43,247 42,955 43,367 42,938
DIVIDENDS PER COMMON SHARE $ .01 $ 0.09 $ .01 $ 0.00
</TABLE>
See notes to condensed consolidated financial statements.
Page 2 of 14
<PAGE>
<PAGE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31 November 30
1994 1993
(Unaudited) (Audited)
-------------------------
ASSETS (thousands of dollars)
- - ------
CURRENT:
<S> <C> <C>
Cash and cash equivalents $ 14,284 $ 24,640
Short-term investments 7,908 10,932
Accounts receivable, less allowances
for doubtful accounts
1994 - $23,683/1993 - $22,658 102,325 80,024
Receivable from third parties
under reimbursement contracts 1,194 --
Assets held for sale - Note B 7,774 10,551
Refundable income taxes 8,343 5,763
Other assets 15,023 18,327
-------- --------
TOTAL CURRENT ASSETS 156,851 150,237
PROPERTY, BUILDINGS & EQUIPMENT-at
cost less allowances for depreciation
1994 - $80,370/1993 - $77,851 355,588 339,078
REFUNDABLE AND DEFERRED TAXES 3,646 1,126
OTHER ASSETS 26,419 24,178
EXCESS OF INVESTMENTS IN SUBSIDIARIES
OVER NET ASSETS ACQUIRED 16,308 15,721
-------- --------
$558,812 $530,340
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
- - ----------------------------------
CURRENT:
Accounts payable and accrued expenses $ 45,310 $ 38,365
Dividends payable 111 111
Income taxes payable 3,352 2,641
Payable to third parties under
reimbursement contracts -- 4,990
Accrued restructuring costs - Note B 3,655 8,666
Current maturities on long-term debt 12,668 940
-------- --------
TOTAL CURRENT LIABILITIES 65,096 55,713
LONG-TERM DEBT, EXCLUSIVE OF CURRENT
MATURITIES 47,457 40,718
DEFERRED COMPENSATION 1,769 1,814
DEFERRED INCOME TAXES 13,841 9,603
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1.00,
authorized 2,000 shares; none issued
Common Stock, par value $1.00, authorized
100,000 shares; issued 1994 - 46,856
shares 1993 - 46,856 shares 46,856 46,856
Additional paid-in capital 61,244 65,341
Less due from employees for exercise
of stock options (35) (35)
Retained earnings 361,924 359,345
Foreign currency translation adjustment (3,172) (3,815)
Less treasury stock-at cost 1994 - 3,330
shares and 1993 - 3,763 shares (36,168) (45,200)
-------- --------
430,649 422,492
-------- --------
$558,812 $530,340
======== ========
</TABLE>
NOTE: The balance sheet at November 30, 1993 has been derived from
the audited financial statement at that date.
See notes to condensed consolidated financial statements.
Page 3 of 14
<PAGE>
<PAGE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
May 31
1994 (Unaudited) 1993
---------------------
(thousands of dollars)
CASH FLOWS FROM
OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings (loss) $ 3,014 $(34,445)
Items not resulting in cash flows:
Depreciation and amortization 8,911 7,475
Provision for uncollectible accounts 10,752 11,405
Restructuring charge (credit) (875) 54,950
(Gain) on sale of property,
buildings and equipment (162)
Deferred income taxes - Note B (20,044)
Other (529) (84)
Changes in assets and liabilities:
Accounts receivable (33,053) (17,021)
Receivable (payable) to (from) third
parties under reimbursement contracts (6,184) 4,480
Prepaid expenses and other current assets 3,304 2,943
Accounts payable and accrued expense 6,945 (782)
Accrued restructuring costs (8,862) (1,372)
Dividend payable -- (3,842)
Income taxes (151) (1,262)
-------- --------
Net cash used for operations (16,728) 2,239
FINANCING:
Proceeds from revolving credit facilities 19,311 --
Dividends paid (435) (3,864)
Purchase of treasury shares -- (838)
Payments of deferred compensation -- (6,286)
Net proceeds from exercise of stock options,
payments on loans and related transactions 4,935 --
Payments on long-term debt (883) (434)
------- --------
Net cash provided (used for) financing activities 22,928 (11,422)
INVESTING:
Payments received on notes 2,851 443
Purchase of property, buildings and equipment (21,376) (21,467)
Proceeds from sale of property, buildings
and equipment 5,035 583
Investment in affiliate -- (1,602)
Payment for business acquisitions:
Property, buildings and equipment (2,517) --
Excess of purchase price over fair value of
assets acquired (549) --
-------- --------
Net cash used for investing activities (16,556) (22,043)
-------- --------
Net increase (decrease) in cash and
cash equivalents (10,356) (31,226)
Beginning cash and cash equivalents 24,640 67,837
-------- --------
Ending cash and cash equivalents $ 14,284 $ 36,611
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
Page 4 of 14
<PAGE>
<PAGE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1994
NOTE A: 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 Rule
10-01 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. For further
information, refer to the consolidated financial statements
and footnotes thereto included in the registrant's annual
report on Form 10-K for the year ended November 30, 1993.
NOTE B: Restructuring Charge (Credit)
Effective February 28, 1993, the Company recorded a pre-
tax charge of $55.0 million ($35.0 million after tax) in
connection with the decision to close seven of its psychiatric
hospitals. The charge comprised $35.3 million to write down
buildings and other fixed assets, $2.1 million to write off
intangibles, $14.4 million for future operating losses of the
seven hospitals and related corporate restructuring costs
associated with terminating employees, and $3.2 million for
additional accounts receivable allowances at the seven
hospitals. Six of the restructured hospitals have ceased
operations. The seventh hospital, which returned to operating
status effective March 1, 1994, has been reconstituted under
new management into a rapid stabilization facility. Of the
six closed hospitals, two have been sold, one is in escrow,
two are being held for sale or lease and one is being
converted into a THC facility. The Company received cash
proceeds of approximately $5.0 million in January and February
of 1994 from the sale of two of these hospitals.
Effective February 28, 1994, the Company recorded a
restructuring credit totalling $7.2 million ($4.3 million
after tax) from the resolution of the previously restructured
psychiatric assets. The restructuring credit resulted from
the Company's success in controlling hospital closure costs
and in divesting one of its restructured properties at a
higher price than the year-ago writedown of the facility
anticipated.
Effective February 28, 1994, the Company recorded a
restructuring charge of $6.3 million ($3.8 million after tax)
in connection with the decision to close three addition
psychiatric facilities. The charge comprised $3.7 million for
future operating losses and $2.6 million for additional
accounts receivable allowances and reserves for other assets
at the three hospitals. Of the three closed hospitals, one is
being held for sale and two will be converted into THC
facilities.
Page 5 of 14
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<PAGE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1994
NOTE C: Statement of Financial Accounting Standards No. 109
The Company implemented the provisions of SFAS No. 109,
"Accounting for Income Taxes", effective December 1, 1992.
The implementation had no material effect on the financial
statements of the Company.
NOTE D: Credit Agreement
On May 6, 1994, the Company, Transitional Hospitals
Corporation (THC - the Company's wholly-owned long-term care
subsidiary) and Bank of America National Trust and Savings
Association ("the Bank") entered into a credit agreement ("the
Agreement") whereby the Company or THC may borrow, repay and
reborrow up to $50 million through December 31, 1994.
Interest is payable at LIBOR plus 2.75% during the revolving
loan period.
Borrowings are unsecured and are guaranteed by the Company's
domestic subsidiaries. The Agreement contains provisions
which, among other things, place restrictions on borrowing,
capital expenditures and the payment of dividends, and
requires the maintenance of certain financial ratios including
tangible net worth, fixed charge coverage and funded debt.
NOTE E: Concentrations of Credit Risk
Concentrations of credit risk with respect to accounts
receivable are limited due to the large number of entities
comprising the Company's payor mix and their dispersion across
the country. The Company's policy is designed to limit
exposure to any one payor.
As of May 31, 1994, accounts receivable from one of the
Company's largest state government payors increased to $9.8
million from $4.5 million at November 30, 1993. During the
current year, this state government payor temporarily ceased
payment of Medicaid claims to all providers (due to fiscal
budget constraints), including the Company, and is expected to
resume payment of all unpaid claims in the near future. The
Company has increased business with this payor in the current
year due to the addition of new programs and an increase in
patient days. The Company does not believe that any
significant collection problems will be experienced with this
payor.
NOTE F: Certain amounts have been reclassified to conform with
1994 presentations.
Page 6 of 14
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
Results of Operations
Six Months Ended May 31, 1994
The following table represents selected unaudited pro forma income
statement data for the six months ended May 31, 1994 and 1993, adjusted as
if the restructuring for the seven hospitals restructured in fiscal year
1993 had occurred on November 30, 1992. The table also excludes the
results of operations for the three hospitals restructured effective
February 28, 1994 and includes the results of operations of the hospital
that was returned to operating status effective March 1, 1994. The data
presented below may not be indicative of the results that would have been
obtained had the transaction described above actually occurred on the date
assumed. In the opinion of management, this data includes all
adjustments, consisting of normal recurring adjustments that the Company
considers necessary for a fair presentation of the data set forth therein.
<TABLE>
<CAPTION>
Six Months Ended
May 31,
1994 (Unaudited) 1993
---------------------
(thousands of dollars)
<S> <C> <C>
Net operating revenues $198,998 $150,405
Investment income and other 741 1,377
-------- --------
199,739 151,782
Costs and expenses:
Operating 112,288 78,397
General and Administrative 71,826 64,764
Depreciation and amortization 8,786 7,156
Interest expense 1,800 1,137
-------- --------
Total costs and expenses 194,700 151,454
Earnings before income taxes 5,039 328
Income taxes 2,016 131
-------- --------
Net earnings $ 3,023 $ 197
======== ========
</TABLE>
The following discussion excludes the restructuring charges and the
operating results (with the exception of the hospital returned to
operations effective March 1, 1994) for the fiscal year 1993 and 1994
Restructured Hospitals.
Net operating revenues for the six months ended May 31, 1994
increased by approximately 32.3% to $199.0 million from $150.4 million for
the period ending May 31, 1993. This increase was due primarily to the
addition of $32.8 million of THC revenue in the first six months of 1994
as compared to the first six months of 1993.
Net operating revenues from the United States psychiatric hospitals
increased by 8.0% or approximately $10.5 million as a result of a 10.5%
increase in adjusted patient days to 314,522 from 284,727 which was
partially offset by a decrease in the net revenue per adjusted patient
day. The increase in adjusted patient days was due in large part to the
success of program introductions and expansions, resulting in an increase
in residential treatment patient days and in partial hospitalization
visits. Adjusted patient days increased despite a 10% decrease in average
length of stay. The decrease in net revenue per adjusted patient day was
the result of the continuing shift in reimbursement to negotiated rates
and cost-based reimbursement from private pay, as well as the growth of
the residential treatment and partial programs.
Page 7 of 14
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
Results of Operations (continued)
Six Months Ended May 31, 1994 (continued)
Net operating revenues from the Company's United Kingdom operations
increased by 33.5% or approximately $5.3 million as a result of an
increase in inpatient admissions and average length of stay which was
partially offset by a decline in net revenue per adjusted patient day.
Operating expenses increased as a percentage of net operating
revenues to 56.4% in the six months ended May 31, 1994 from 52.1% in the
six months ended May 31, 1993. The year to year increase was primarily
attributable to expenses incurred in connection with expansion of the
Company's THC operations and an increase in personnel costs related to the
Company's development of an expanded continuum of care in its psychiatric
business.
General and administrative expenses as a percentage of net operating
revenues decreased to 36.1% from 43.1%. This change was due primarily to
the implementation of cost containment programs in the second quarter of
1993 and a management reorganization in the fourth quarter of 1993, which
included reduction of personnel and elimination of overhead.
For the THC subsidiary, operating and general and administrative
expenses exceeded revenues for the six months ended May 31, 1994 because
a large majority (nine of twelve facilities) of these hospitals recently
opened. Long-term critical care hospitals such as those operated by THC
typically sustain significant start-up costs because there is a six-month
delay in receiving exemption from the Medicare Prospective Payment System,
during which time the reimbursement for treating Medicare patients is less
than the full cost.
Following is a summary of net income by business segment for the six
months ended May 31, 1994:
<TABLE>
<CAPTION>
(000's)
-----------------
1994 1993
------- --------
<S> <C> <C>
U.S. Psychiatric division $ 8,496 $(34,011)
U.K. Psychiatric division 3,239 1,842
Long-term critical care division (8,721) (2,276)
------- --------
Net income $ 3,014 $(34,445)
======= ========
</TABLE>
For the reasons described above, earnings before depreciation,
amortization, interest, other income and income taxes for the six months
ended May 31, 1994 on a pro forma basis increased from $7.2 million in the
first six months of 1993 to $14.9 million in the first six months of 1994.
Depreciation expense increased as a result of property and equipment
additions at THC.
Interest expense increased in 1994 as a result of the increase in
long-term debt.
Page 8 of 14
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
Results of Operations (continued)
Three Months Ended May 31, 1994
The following table represents selected unaudited pro forma income
statement data for the quarters ended May 31, 1994 and 1993, adjusted as
if the restructuring for the seven hospitals restructured in fiscal year
1993 had occurred on November 30, 1992. The table also excludes the
results of operations for the three hospitals restructured effective
February 28, 1994 and includes the results of operations of the hospital
that was returned to operating status effective March 1, 1994. The data
presented below may not be indicative of the results that would have been
obtained had the transactions described above actually occurred on the
date assumed. In the opinion of management, this data includes all
adjustments, consisting of normal recurring adjustments that the Company
considers necessary for a fair presentation of the data set forth therein.
<TABLE>
<CAPTION>
Quarter Ended
May 31,
1994 (Unaudited) 1993
---------------------
(thousands of dollars)
<S> <C> <C>
Net operating revenues $108,424 $ 80,247
Investment income and other 382 351
-------- --------
108,806 80,598
Costs and expenses:
Operating 59,884 41,599
General and Administrative 39,241 31,267
Depreciation and amortization 4,626 3,512
Interest expense 1,072 520
-------- --------
Total costs and expenses 104,823 76,898
Earnings (loss) before income taxes 3,983 3,700
Income taxes 1,594 1,480
-------- --------
Net earnings $ 2,389 $ 2,220
======== ========
</TABLE>
The following discussion excludes the restructuring charges and the
operating results (with the exception of the hospital returned to
operations effective March 1, 1994) for the fiscal year 1993 and 1994
Restructured Hospitals.
Net operating revenues for the quarter ended May 31, 1994 increased
by approximately 35.1% to $108.4 million from $80.2 million for the prior
quarter. This increase was due primarily to the addition of $19.7 million
of THC revenue in the second fiscal quarter of 1994 as compared to the
second fiscal quarter of 1993.
Net operating revenues from the United States psychiatric hospitals
increased by 7.7% or approximately $5.3 million as a result of a 11.2%
increase in adjusted patient days to 167,531 from 150,600 which was
partially offset by a decrease in the net revenue per adjusted patient
day. The increase in adjusted patient days was due in large part to the
success of program introductions and expansions, resulting in an increase
in residential treatment patient days and in partial hospitalization
visits. Adjusted patient days increased despite a 7% decrease in average
length of stay. The decrease in net revenue per adjusted patient day was
the result of the continuing shift in reimbursement to negotiated rates
and cost-based reimbursement from private pay, as well as the growth of
the residential treatment and partial programs.
Page 9 of 14
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
Results of Operations (continued)
Three Months Ended May 31, 1994 (continued)
Net operating revenues from the Company's United Kingdom operations
increased by 37.6% or approximately $3.2 million as a result of an
increase in inpatient admissions and average length of stay which was
partially offset by a decline in net revenue per adjusted patient day.
Operating expenses increased as a percentage of net operating
revenues to 55.2% in the quarter ended May 31, 1994 from 51.8% in the
quarter ended May 31, 1993. The year to year increase was primarily
attributable to expenses incurred in connection with expansion of the
Company's THC operations and an increase in personnel costs related to the
Company's development of an expanded continuum of care in its psychiatric
business.
General and administrative expenses as a percentage of net operating
revenues decreased as a percentage of net operating revenues to 36.2% from
39.0%. This change was due primarily to the implementation of cost
containment programs in the second quarter of 1993 and a management
reorganization in the fourth quarter of 1993, which included reduction of
personnel and elimination of overhead.
For the THC subsidiary, operating and general and administrative
expenses exceeded revenues for the six months ended May 31, 1994 due to
the fact that a large majority (nine of twelve facilities) of these
hospitals recently opened. Long-term critical care hospitals such as
those operated by THC typically sustain significant start-up costs because
there is a six-month delay in receiving exemption from the Medicare
Prospective Payment System, during which time the reimbursement for
treating Medicare patients is less than the full cost.
Following is a summary of net income by business segment for the
quarter ended May 31, 1994:
<TABLE>
<CAPTION>
(000's)
----------------
1994 1993
------- -------
<S> <C> <C>
U.S. Psychiatric division $ 4,497 $ 3,634
U.K. Psychiatric division 1,907 1,079
Long-term critical care division (4,015) (1,223)
------- -------
Net income $ 2,389 $ 3,490
======= =======
</TABLE>
For the reasons described above, earnings before depreciation,
amortization, interest, other income and income taxes for the quarter
ended May 31, 1994 on a pro forma basis increased from $7.4 million in the
second quarter of 1993 to $9.3 million in the second quarter of 1994.
Depreciation expense increased as a result of property and equipment
additions at THC.
Interest expense increased in 1994 as a result of the increase in
long-term debt.
Financial Condition at May 31, 1994
At May 31, 1994, cash and equivalents were $14,284 and total working
capital was $91,755, net of the accrual for restructuring costs of $3,655.
Cash was principally used during the six months ended May 31, 1994 to fund
Page 10 of 14
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
Results of Operations (continued)
Financial Condition at May 31, 1994 (continued)
working capital and operating losses for THC facilities, and for the
purchase of equipment and improvements ($21.4 million). The Company also
acquired a residential treatment center in the United Kingdom for a
purchase price of $3.1 million. In March of 1994, the Company paid a one
time dividend to shareholders of record on March 1, 1994 totaling $435,000
(.01 per share). The increase in accounts receivable at May 31, 1994, is
due primarily to the expansion of THC's operation during the first two
quarters and an increase in U.S. Psychiatric division receivables from a
significant state governmental payor (see Note E to the financial
statements). Proceeds from borrowings on revolving credit facilities
totalled $19.3 million during the first two quarters of 1994.
Capital expenditures for the balance of 1994 are estimated at
approximately $9 million for the U.S. psychiatric division and $3 million
for the U.K. psychiatric division.
Capital expenditures for the THC operations for the same period are
estimated at approximately $25 million. In addition to these capital
expenditures, the Company expects to invest approximately $8 million over
the balance of fiscal year 1994 to fund the working capital needs of THC.
The Company has a $25.0 million revolving credit facility with Bank
of America National Trust and Savings Association ("BofA"). At May 31,
1994, $25.0 million was outstanding under this facility. The Company may
borrow, repay and reborrow up to $25 million through November 30, 1995
(the revolving loan period), at which time any amount outstanding is
converted into a term loan payable in equal quarterly installments through
November 30, 1998. The Company's subsidiary in the U.K. has a credit
facility whereby the Company is allowed to borrow up to $15 million. At
May 31, 1994, approximately $7.6 million was outstanding under this
facility. On May 6, 1994, the Company entered into an additional
revolving credit facility with Bank of America for $50 million. As of
July 1, 1994, $20 million was outstanding under this facility. Any amount
outstanding under this facility is due and payable on December 31, 1994.
The Company believes that its current cash and cash equivalent balances,
its operating cash flow, and the amounts available under its revolving
credit facilities will be sufficient to fund the Company's operations and
capital expenditures through the end of fiscal 1994. The Company is also
presently evaluating proposals for additional funding from other financing
sources. Additional funding sources will be needed to support further
expansion of THC and to repay outstanding borrowings under the $50 million
credit facility.
Page 11 of 14
<PAGE>
<PAGE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
May 31, 1994
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
See Part I, Item 3 of the Company's Report on Form 10-K for the fiscal
year ended November 30, 1993.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The following table describes the matters voted upon at the annual
meeting of stockholders held May 19, 1994 and shows as to each matter
the number of votes cast for, against or withheld, and number of
abstentions and broker nonvotes, as to each matter:
<TABLE>
<CAPTION>
Against/ Broker
For Withheld Abstentions Nonvotes
------------- -------- ----------- --------
<S> <C> <C> <C> <C>
1. Election of three
directors to serve
until the annual
meeting in 1997 and
until their successors
are duly elected and
qualified:
a. Richard L. Conte 38,272,870 630,744 -- --
b. Dana L. Shires 38,273,033 630,581 -- --
c. Robert L. Thomas 38,287,339 616,275 -- --
2. Shareholder Proposal re-
commending that the Board
terminate the Company's
Shareholder Rights Plan. 19,549,558 12,276,338 944,262 6,133,456
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
A) The following exhibits are included herein:
Exhibit 10: Credit Agreement among Community Psychiatric Centers,
Transitional Hospital Corporation and Bank of America National Trust
and Savings Association. Registrant agrees to furnish
supplementally a copy of any omitted schedules to the Commission
upon request.
Exhibit 11: Computation of Earnings per Share
The registrant was not required to file a Form 8-K during the three
months ended May 31, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNITY PSYCHIATRIC CENTERS
(Registrant)
Dated: July 13, 1994 /s/ STEVEN S. WEIS
----------------------------
Steven S. Weis
Chief Financial Officer
Page 12 of 14
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page No.
--------
<S> <S> <C>
11 Computation of Earnings Per Share 14
</TABLE>
Page 13 of 14
<PAGE>
<PAGE>
EXHIBIT 11
<TABLE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Six Months Ended Three Months Ended
May 31, May 31,
1994 1993 1994 1993
----------------- ------------------
(Amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
Weighted average
common shares<F1> $43,247 $ 42,955 $ 43,367 $ 42,938
Net Earnings (Loss) $ 3,014 $(34,445) $ 2,389 $ 3,490
======= ======== ======== ========
Earnings (Loss) per share $ .07 $ (0.80) $ .06 $ .08
======= ======== ======== ========
<F1> Dilutive common stock equivalents are less than 3% of weighted average
common shares outstanding.
</TABLE>
Page 14 of 14
<PAGE>
<PAGE> 1
==============================================================================
- - ------------------------------------------------------------------------------
CREDIT AGREEMENT
Dated as of May 6, 1994
among
COMMUNITY PSYCHIATRIC CENTERS,
TRANSITIONAL HOSPITALS CORP.
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
==============================================================================
- - ------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C> <C>
ARTICLE I
DEFINITIONS........................................... 1
1.01 Defined Terms......................................... 1
"Arranger"............................................ 1
"Acquisition"......................................... 1
"Affiliate"........................................... 1
"Agreement"........................................... 2
"Applicable Margin"................................... 2
"Assignee"............................................ 2
"Attorney Costs"...................................... 2
"Bank"................................................ 2
"Bank's Payment Office"............................... 2
"Bankruptcy Code"..................................... 2
"Base Rate"........................................... 2
"Base Rate Loan"...................................... 3
"Borrowing"........................................... 3
"Business Day"........................................ 3
"Capital Adequacy Regulation"......................... 3
"Capital Expenditures"................................ 3
"Capital Lease"....................................... 3
"Capital Lease Obligations"........................... 3
"Cash"................................................ 3
"Cash Equivalents".................................... 4
"CERCLA".............................................. 4
"Closing Date"........................................ 4
"Code"................................................ 4
"Commitment".......................................... 4
"Company"............................................. 4
"Compliance Certificate".............................. 4
"Consolidated Assets"................................. 5
"Consolidated Interest Expense"....................... 5
"Consolidated Interest Income"........................ 5
"Consolidated Net Interest Expense"................... 5
"Contingent Obligation"............................... 5
"Contractual Obligations"............................. 5
"Controlled Group" ................................... 6
"Conversion Date"..................................... 6
"Default"............................................. 6
"Disposition"......................................... 6
"Dollars"............................................. 6
"Domestic Lending Office"............................. 6
"Domestic Subsidiary"................................. 6
"EBITDA".............................................. 6
"EBITDA to Consolidated Net Interest Expense"......... 7
"Environmental Claims"................................ 7
"Environmental Laws".................................. 7
"ERISA"............................................... 7
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C> <C>
"ERISA Affiliate"...................................... 7
"ERISA Event".......................................... 7
"Eurodollar Reserve Percentage"........................ 8
"Event of Default"..................................... 8
"Event of Loss"........................................ 8
"Exchange Act"......................................... 8
"FDIC"................................................. 8
"Federal Funds Rate"................................... 9
"Federal Reserve Board"................................ 9
"Funded Debt".......................................... 9
"GAAP"................................................. 9
"Governmental Authority".............................. 10
"Guarantor"........................................... 10
"Guaranty"............................................ 10
"Guaranty Obligation"................................. 10
"Hazardous Materials"................................. 10
"Indebtedness"........................................ 11
"Indemnified Person".................................. 11
"Indemnified Liabilities"............................. 11
"Ineligible Securities"............................... 11
"Insolvency Proceeding"............................... 11
"Intangible Assets"................................... 12
"Interest Payment Date"............................... 12
"Interest Period"..................................... 12
"Joint Venture"....................................... 13
"Lending Office"...................................... 13
"Lien"................................................ 13
"Loan"................................................ 13
"Loan Documents"...................................... 13
"Margin Stock"........................................ 13
"Material Adverse Effect"............................. 13
"Multiemployer Plan".................................. 14
"Net Funded Debt"..................................... 14
"Net Funded Debt to EBITDA Ratio"..................... 14
"Net Issuance Proceeds"............................... 14
"Net Proceeds"........................................ 14
"Notice of Borrowing"................................. 15
"Notice of Conversion/Continuation"................... 15
"Notice of Lien"...................................... 15
"Obligations"......................................... 15
"Offshore Lending Office"............................. 15
"Offshore Rate"....................................... 15
"Offshore Rate Loan".................................. 16
"Operating Lease"..................................... 16
"Ordinary Course of Business"......................... 16
"Organization Documents".............................. 16
"PBGC"................................................ 16
"Participant"......................................... 16
"Permitted Liens"..................................... 16
"Person".............................................. 17
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C> <C>
"Plan"............................................... 17
"Property"........................................... 17
"Qualified Plan"..................................... 17
"Rate Contracts"..................................... 17
"Reportable Event"................................... 17
"Requirement of Law"................................. 17
"Responsible Officer"................................ 17
"SEC"................................................ 18
"September Agreement"................................ 18
"Shareholders' Equity"............................... 18
"Solvent"............................................ 18
"Subsidiary"......................................... 18
"Surety Instruments"................................. 18
"Tangible Net Worth"................................. 18
"Termination Date"................................... 19
"Total Liabilities".................................. 19
"Transferee"......................................... 19
"Unfunded Pension Liabilities"....................... 19
"United States" and "U.S."........................... 19
"Wholly-Owned Subsidiary"............................ 19
"Withdrawal Liabilities"............................. 19
1.02 Other Interpretive Provisions........................ 19
(a) Defined Terms.................................. 19
(b) The Agreement.................................. 20
(c) Certain Common Terms........................... 20
(d) Performance; Time.............................. 20
(e) Contracts...................................... 20
(f) Laws........................................... 20
(g) Captions....................................... 20
(h) Independence of Provisions..................... 20
1.03 Accounting Principles................................ 21
ARTICLE II
THE CREDIT........................................... 21
2.01 Amounts and Terms of the Commitment.................. 21
2.02 Loan Accounts........................................ 21
2.03 Procedure for Borrowing.............................. 21
2.04 Conversion and Continuation Elections................ 22
2.05 Voluntary Termination or Reduction of the
Commitment........................................... 24
2.06 Optional Prepayments................................. 24
2.07 Repayment............................................ 24
2.08 Interest............................................. 24
2.09 Fees................................................. 25
(a) Facility Fee................................... 25
(b) Commitment Fees................................ 26
2.10 Computation of Fees and Interest..................... 26
2.11 Payments by the Company.............................. 27
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C> <C>
2.12 Security and Guaranty................................ 27
2.13 Alternate Borrower................................... 27
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY............... 27
3.01 Taxes................................................ 27
3.02 Illegality........................................... 28
3.03 Increased Costs and Reduction of Return.............. 29
3.04 Funding Losses....................................... 29
3.05 Inability to Determine Rates......................... 30
3.06 Reserves on Offshore Rate Loans...................... 31
3.07 Certificates of the Bank............................. 31
3.08 Survival............................................. 31
ARTICLE IV
CONDITIONS PRECEDENT................................. 31
4.01 Conditions of Initial Loans.......................... 31
(a) Credit Agreement............................... 31
(b) Resolutions; Incumbency........................ 31
(c) Articles of Incorporation; By-laws and Good
Standing....................................... 32
(d) Guaranties..................................... 32
(e) Legal Opinions................................. 32
(f) Payment of Fees................................ 33
(g) Certificate.................................... 33
(h) Financial Statements........................... 34
(i) Due Diligence.................................. 34
(j) Other Documents................................ 34
(k) No Material Adverse Change..................... 34
(l) Amendment to September Agreement............... 34
4.02 Conditions to All Borrowings...................... 34
(a) Notice of Borrowing or
Continuation/Conversion........................ 34
(b) Continuation of Representations and
Warranties..................................... 34
(c) No Existing Default............................ 34
ARTICLE V
REPRESENTATIONS AND WARRANTIES....................... 35
5.01 Corporate Existence and Power........................ 35
5.02 Corporate Authorization; No Contravention............ 35
5.03 Governmental Authorization........................... 36
5.04 Binding Effect....................................... 36
5.05 Litigation........................................... 36
5.06 No Default........................................... 36
5.07 ERISA Compliance..................................... 37
5.08 Use of Proceeds; Margin Regulations.................. 38
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C> <C>
5.09 Title to Properties................................. 38
5.10 Taxes............................................... 39
5.11 Financial Condition................................. 39
5.12 Environmental Matters............................... 39
5.13 Guaranty............................................ 40
5.14 Regulated Entities.................................. 40
5.15 No Burdensome Restrictions.......................... 40
5.16 Solvency............................................ 40
5.17 Labor Relations..................................... 40
5.18 Copyrights, Patents, Trademarks and Licenses, etc... 41
5.19 Subsidiaries........................................ 41
5.20 Broker's; Transaction Fees.......................... 41
5.21 Insurance........................................... 41
5.22 Full Disclosure..................................... 41
ARTICLE VI
AFFIRMATIVE COVENANTS............................... 42
6.01 Financial Statements................................ 42
6.02 Certificates; Other Information..................... 42
6.03 Notices............................................. 43
6.04 Preservation of Corporate Existence, Etc............ 44
6.05 Maintenance of Property............................. 45
6.06 Insurance........................................... 45
6.07 Payment of Obligations.............................. 45
6.08 Compliance with Laws................................ 46
6.09 Inspection of Property and Books and Records........ 46
6.10 Environmental Laws.................................. 46
6.11 Use of Proceeds..................................... 47
6.12 Solvency............................................ 47
6.13 Further Assurances.................................. 47
6.14 Licensing........................................... 47
ARTICLE VII
NEGATIVE COVENANTS.................................. 47
7.01 Limitation on Liens................................. 47
7.02 Disposition of Assets............................... 49
7.03 Consolidations and Mergers.......................... 50
7.04 Loans and Investments............................... 50
7.05 Limitation on Indebtedness.......................... 51
7.06 Transactions with Affiliates........................ 51
7.07 Use of Proceeds..................................... 52
7.08 Contingent Obligations.............................. 52
7.09 Joint Ventures...................................... 52
7.10 Compliance with ERISA............................... 52
7.11 Lease Obligations................................... 53
7.12 Restricted Payments................................. 53
7.13 Net Funded Debt to EBITDA Ratio..................... 54
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C> <C>
7.14 EBITDA to Consolidated Net Interest Expense
Ratio............................................... 54
7.15 Tangible Net Worth.................................. 54
7.16 Change in Business.................................. 54
7.17 Accounting Changes.................................. 54
7.18 Use of Proceeds - Ineligible Securities............. 54
ARTICLE VIII
EVENTS OF DEFAULT................................... 55
8.01 Event of Default.................................... 55
(a) Non-Payment................................... 55
(b) Representation or Warranty ................... 55
(c) Specific Defaults............................. 55
(d) Other Defaults................................ 55
(e) Cross-Default................................. 55
(f) Insolvency; Voluntary Proceedings............. 56
(g) Involuntary Proceedings....................... 56
(h) ERISA......................................... 56
(i) Monetary Judgments............................ 57
(j) Non-Monetary Judgments........................ 57
(k) Loss of Licenses.............................. 57
(1) Adverse Change................................ 58
(m) Guarantor Defaults............................ 58
8.02 Remedies............................................ 58
8.03 Rights Not Exclusive................................ 58
ARTICLE IX
MISCELLANEOUS....................................... 59
9.01 Amendments and Waivers.............................. 59
9.02 Notices............................................. 59
9.03 No Waiver; Cumulative Remedies...................... 59
9.04 Costs and Expenses.................................. 60
9.05 Indemnity........................................... 60
(a) General Indemnity............................. 60
(b) Environmental Indemnity....................... 61
9.06 Marshalling; Payments Set Aside..................... 61
9.07 Successors and Assigns...............................62
9.08 Assignments, Participations, etc.....................62
9.09 Set-off............................................. 63
9.10 Automatic Debits of Fees............................ 64
9.11 Counterparts........................................ 64
9.12 Severability........................................ 64
9.13 No Third Parties Benefited.......................... 64
9.14 Time................................................ 64
9.15 Governing Law and Jurisdiction...................... 65
9.16 Waiver of Jury Trial................................ 65
9.17 Notice of Claims; Claims Bar........................ 65
</TABLE>
vi
<PAGE> 8
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C> <C>
9.18 Entire Agreement................................... 66
9.19 Interpretation..................................... 66
SCHEDULES
Schedule 1.01 Currently Owned Government Securities
Schedule 4.01 Healthcare Complaints and Notices
Schedule 5.05 Litigation
Schedule 5.07 ERISA
Schedule 5.11 Permitted Liabilities
Schedule 5.12 Environmental Matters
Schedule 5.19 Subsidiaries and Equity Investments
Schedule 7.01 Permitted Liens
Schedule 7.02 Dispositions Planned and Permitted
Schedule 7.05 Permitted Indebtedness
Schedule 7.08 Contingent Obligations
EXHIBITS
Exhibit A Guaranty
Exhibit B Compliance certificate
</TABLE>
vii
<PAGE> 9
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of May 6, 1994, among Community
Psychiatric Centers, a Nevada corporation ("CPC"), Transitional Hospitals
Corporation, a Delaware corporation ("THC"), and Bank of America National Trust
and Savings Association, a United States national banking association ("Bank").
WHEREAS, the Bank has agreed to make available to the company a revolving
credit facility upon the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 Defined Terms. In addition to the terms defined elsewhere in
this Agreement, the following terms have the following meanings:
"Arranger" means BB Securities, Inc., a wholly-owned subsidiary
of BankAmerica corporation. The Arranger is a registered broker-
dealer and permitted to underwrite and deal in certain Ineligible
Securities.
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly,
in (a) the acquisition of all or substantially all of the assets of a
Person, or of any business or division of a Person (including, without
limitation, acquisition by, assumption, purchase, assignment, sublease
or in any other manner of leases, leasehold interests or lease rights
or obligations), (b) the acquisition, of in excess of 50% of the
capital stock, partnership interests or equity of any Person or
otherwise causing any Person to become a Subsidiary of the Company, or
(c) a merger or consolidation or any other combination with another
Person (other than a Person that is a Subsidiary of the Company)
provided that the Company or the Company's Subsidiary is the surviving
entity or retains record and beneficial ownership of in excess of
fifty percent (50%) of the voting stock thereof.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person.
1
<PAGE> 10
A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power
to direct or cause the direction of the management and policies of
the other Person, whether through the ownership of voting
securities, by contract or otherwise. Without limitation, any
director, executive officer or beneficial owner of 5% or more of
the equity of a Person, other than such a beneficial owner of the
Company's equity who is neither an officer nor a director of
the Company or any of its Subsidiaries and who holds such equity
for investment, shall for the purposes of this Agreement, be deemed
to control the other Person. Notwithstanding the foregoing, no
Bank shall be deemed an "Affiliate" of the Company or of any
Subsidiary of the Company.
"Agreement" means this Credit Agreement, as amended from time
to time in accordance with the terms hereof.
"Applicable Margin" means
(i) with respect to Base Rate Loans, one and fifty
hundredths percent (1.50%); and
(ii) with respect to Offshore Rate Loans, two and seventy
five hundredths percent (2.75%) per annum.
"Assignee" has the meaning specified in subsection 9.08(a).
"Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the reasonably
allocated reasonable fees of internal legal services and all
reasonable disbursements of internal counsel.
"Bank" has the meaning specified in the introductory clause
hereto.
"Bank's Payment Office" means the address for payments set
forth on the signature page hereto in relation to the Bank or such
other address as the Bank may from time to time specify in
accordance with Section 9.02.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. Section 101, et seq.).
"Base Rate" means, for any day, the higher of:
(a) the rate of interest in effect for such day as
publicly announced from time to time by the Bank in San Francisco,
California, as its "reference rate." It is a rate set by the Bank
based upon various factors including the Bank's costs and desired
return, general
2
<PAGE> 11
economic conditions and other factors, and is used as a reference
point for pricing some loans, which may be priced at, above, or
below such announced rate; and
(b) 0.50% per annum above the latest Federal Funds Rate.
Any change in the reference rate announced by the Bank shall take
effect at the opening of business on the day specified in the public
announcement of such change.
"Base Rate Loan" means a Loan that bears interest based on the
Base Rate.
"Borrowing" means a borrowing hereunder.
"Business Day", if it relates to a Base Rate Loan, means any
day other than a Saturday, Sunday or other day on which commercial
banks in New York City or Los Angeles are authorized or required by
law to close and, if it relates to any Offshore Rate Loan, means a
day on which dealings are carried on in the applicable offshore
dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or
any other law, rule or regulation, whether or not having the force
of law, in each case, regarding capital adequacy of any bank or of
any corporation controlling a bank.
"Capital Expenditures" means, for any period and with respect
to any Person, the aggregate of all expenditures by such Person and
its Subsidiaries for the acquisition or leasing of fixed or capital
assets or additions to equipment (including replacements, capitalized
repairs and improvements during such period) which should be
capitalized under GAAP on a consolidated balance sheet of such
Person and its Subsidiaries. Without limiting the foregoing, each
Acquisition is a Capital Expenditure.
"Capital Lease" has the meaning specified in the definition of
"Capital Lease Obligations."
"Capital Lease Obligations" means all monetary obligations of
the Company or any of its Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, is classified as a
capital lease ("Capital Lease").
"Cash" means (a) currency or (b) a credit balance in any bank
account.
3
<PAGE> 12
"Cash Equivalents" means:
(a) securities issued or fully guaranteed or insured by
the United States Government or any agency thereof and backed by
the full faith and credit of the United States having maturities
of not more than ten years from the date of acquisition and
securities currently owned by the Company appearing on
Schedule 1.01 until that portfolio is liquidated in the Ordinary
Course of Business;
(b) certificates of deposit, time deposits, Eurodollar
time deposits, repurchase agreements, reverse repurchase
agreements, or bankers' acceptances, having in each case a tenor
of not more than twelve months, issued by any Bank, or by any
U.S. commercial bank having combined capital and surplus of not
less than $100,000,000 whose short term securities are rated at
least A-1 by Standard & Poor's Corporation and P-1 by Moody's
Investors Service, Inc.;
(c) commercial paper of an issuer rated at least A-1 by
Standard & Poor's Corporation or P-1 by Moody's Investors
Service Inc. and in either case having a tenor of not more than
three months; and
(d) senior corporate debt instruments or municipal
obligations of an issuer rated at least AAA by Standard & Poor's
Corporation or the equivalent by Moody's Investors Services Inc.
and in either case having maturities of not more than ten years.
"CERCLA" has the meaning specified in the definition of
"Environmental Laws."
"Closing Date" means the date on which all conditions precedent
set forth in Section 4.01 are satisfied or waived by the Bank.
"Code" means the Internal Revenue Code of 1986 as amended, and
regulations from time to time promulgated thereunder.
"Commitment" has the meaning specified in subsection 2.01.
"Company" means CPC and each of its Subsidiaries.
"Compliance Certificate" means a certificate of a Responsible
Officer delivered pursuant to subsection 6.02(a) in substantially
the form of Exhibit B hereto.
4
<PAGE> 13
"Consolidated Assets" means for the Company and its Subsidiaries,
the aggregate book value of the Company's assets, as shown in the
consolidated financial statements of the Company prepared in
accordance with GAAP.
"Consolidated Interest Expense" means, for any period, and with
respect to any Person, gross consolidated interest expense for the
period (including all commissions, discounts, fees and other charges
in connection with standby letters of credit and similar instruments)
for such Person and its Subsidiaries, plus the portion of the
up-front costs and expenses for Rate Contracts (to the extent not
included in gross interest expense) fairly allocated to such Rate
Contracts as expenses for such period as determined in accordance
with GAAP.
"Consolidated Interest Income" means, for any period and with
respect to any Person, gross consolidated interest income for the
period of such Person and its Subsidiaries.
"Consolidated Net Interest Expense" means Consolidated Interest
Expense net of Consolidated Interest Income.
"Contingent Obligation" means, as to any Person, (a) any Guaranty
Obligation of that Person; and (b) any direct or indirect obligation or
liability, contingent or otherwise, of that Person (i) in respect of
any Surety Instrument issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings
or payments, (ii) to purchase any materials, supplies or other
Property from, or to obtain the services of, another Person if the
relevant contract or other related document or obligation requires
that payment for such materials, supplies or other Property, or for
such services, shall be made regardless of whether delivery of such
materials, supplies or other Property is ever made or tendered or
such services are ever performed or tendered to such Person, or
(iii) in respect of any Rate Contract that is not entered into in
connection with a bona fide hedging operation that provides
offsetting benefits to such Person. The amount of any Contingent
Obligation shall (subject, in the case of Guaranty Obligations, to
the last sentence of the definition of "Guaranty Obligation") be
deemed equal to the maximum reasonably anticipated liability in
respect thereof, and shall, with respect to item (iii) of this
definition, be marked to market on a current basis.
"Contractual Obligations" means, as to any Person, any provision
of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other
instrument, document or agreement to which such Person is a party or
by which it or any of its Property is bound.
5
<PAGE> 14
"Controlled Group" means the Company and all Persons (whether or
not incorporated) under common control or treated as a single
employer with the Company pursuant to Section 414(b), (c), (m) or (o)
of the Code.
"Conversion Date" means any date on which the Company converts a
Base Rate Loan to an Offshore Rate Loan or an Offshore Rate Loan to
a Base Rate Loan.
"Default" means any event or circumstance which, with the giving
of notice, the lapse of time, or both, would (if not cured or
otherwise remedied during such time) constitute an Event of Default.
"Disposition" means (i) the sale, lease, conveyance or other
disposition of Property, other than sales or other dispositions
expressly permitted by subsection 7.02(a) or 7.02(b), and (ii) the
sale or transfer by the Company or any Subsidiary of the Company of
any equity securities issued by any Subsidiary of the Company and
held by such transferor Person.
"Dollars", "dollars" and "$" each mean lawful money of the United
States.
"Domestic Lending Office" means the office of the Bank designated
as such in the signature pages hereto or such other office of the
Bank as it may from time to time specify to the Company.
"Domestic Subsidiary" means any Subsidiary of CPC which is
incorporated under the laws of a state of the United States or of the
District of Columbia.
"EBITDA" means, for any period and for any Person, for such
Person and its Subsidiaries on a consolidated basis, determined in
accordance with GAAP, the sum of (a) the net income (or net loss) for
such period, plus (b) all amounts treated as expenses for depreciation
and the amortization of intangibles of any kind to the extent included
in the determination of such net income (or loss), plus (c) all taxes
on or measured by income to the extent included in the determination
of such net income (or loss), plus (d) with respect to the Company and
its Subsidiaries for any period ending on or before the last day of
February 1994, the restructuring charge of $34,906,000 as disclosed
in the Company's Form 10Q for the quarter ended February 28, 1993
plus (e) Consolidated Net Interest Expense for such period; provided,
however, that net income (or loss) shall be computed for these
purposes without giving effect to extraordinary losses or
extraordinary gains.
6
<PAGE> 15
"EBITDA to Consolidated Net Interest Expense" means the ratio,
as of the last day of any fiscal quarter, of (a) EBITDA for the
fiscal period consisting of that fiscal quarter and the three
immediately preceding fiscal quarters to (b) the sum of Consolidated
Net Interest Expense for such fiscal period.
"Environmental Claims" means all claims, however asserted, by any
Person alleging liability or responsibility for violation of any
Environmental Law, or for release or injury to the environment,
threat to public health, personal injury (including sickness, disease
or death), property damage, natural resources damage, or otherwise
alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution,
civil or criminal penalties, injunctive relief, or other type of
relief, resulting from or based upon the presence, placement,
discharge, emission or release (including intentional and
unintentional, negligent and non-negligent, sudden or non-sudden,
accidental or non-accidental, placement, spills, leaks, discharges,
emissions or releases) of any Hazardous Material at, in, or from
Property, whether or not owned by the Company.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental,
health, safety and land use matters; including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Clean Air Act, the Federal Water Pollution Control
Act of 1972, the Solid Waste Disposal Act, the Federal Resource
Conservation and Recovery Act, the Toxic Substances Control Act, the
Emergency Planning and Community Right-to-Know Act, the California
Hazardous Waste Control Law, the California Solid Waste Management,
Resource, Recovery and Recycling Act, the California Water Code and
the California Health and Safety Code.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and regulations promulgated
thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Company within the meaning
of Section 414(b), 414(c) or 414(m) of the Code.
"ERISA Event" means (a) a Reportable Event with respect to a
Qualified Plan or a Multiemployer Plan; (b) a withdrawal by the
Company or any ERISA Affiliate from a
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<PAGE> 16
Qualified Plan subject to Section 4063 of ERISA during a plan year in
which it was a substantial employer (as defined in Section 4001(a)(2)
of ERISA); (c) a complete or partial withdrawal by the Company or any
ERISA Affiliate from a Multiemployer Plan; (d) the filing of a notice
of intent to terminate, the treatment of a plan amendment as a
termination under Section 4041 or 4041A of ERISA or the commencement
of proceedings by the PBGC to terminate a Qualified Plan or
Multiemployer Plan subject to Title IV of ERISA; (e) a failure by the
Company or any member of the Controlled Group to make required
contributions to a Qualified Plan or Multiemployer Plan; (f) an event
or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Qualified Plan or Multiemployer Plan;
(g) the imposition of any liability under Title IV of ERISA, other
than PBGC premiums due but not delinquent under Section 4007 of ERISA,
upon the Company or any ERISA Affiliate; (h) an application for a
funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code with respect to any Plan; (i) a non-exempt
prohibited transaction occurs with respect to any Plan for which the
Company or any Subsidiary of the Company may be directly or
indirectly liable; or (j) a violation of the applicable requirements
of Section 404 or 405 of ERISA or the exclusive benefit rule under
Section 401(a) of the Code by any fiduciary or disqualified person
with respect to any Plan for which the Company or any member of the
Controlled Group may be directly or indirectly liable.
"Eurodollar Reserve Percentage" has the meaning specified in the
definition of "Offshore Rate".
"Event of Default" means any of the events or circumstances
specified in Section 8.01.
"Event of Loss" means, with respect to any Property, any of the
following: (a) any loss, destruction or damage of such Property;
(b) any pending or threatened institution of any proceedings for the
condemnation or seizure of such Property or for the exercise of any
right of eminent domain; or (c) any actual condemnation, seizure or
taking, by exercise of the power of eminent domain or otherwise, of
such Property, or confiscation of such Property or the requisition of
the use of such Property.
"Exchange Act" means the Securities and Exchange Act of 1934, and
regulations promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation, or any
entity succeeding to any of its principal functions.
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<PAGE> 17
"Federal Funds Rate" means, for any period, the rate set forth
in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Board
(including any such successor, "H.15(519)") for such day opposite the
caption "Federal Funds (Effective)". If on any relevant day such rate
is not yet published in H.15(519), the rate for such day will be the
rate set forth in the daily statistical release designated as the
Composite 3:30 p.m. Quotations for U.S. Government Securities, or any
successor publication, published by the Federal Reserve Bank of
New York (including any such successor, the "Composite 3:30 p.m.
Quotation") for such day under the caption "Federal Funds Effective
Rate". If on any relevant day the appropriate rate for such previous
day is not yet published in either H.15(519) or the Composite
3:30 p.m. Quotations, the rate for such day will be the arithmetic
mean as determined by the Bank of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York time)
on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Bank.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System, or any entity succeeding to any of its
principal functions.
"Funded Debt" means the sum on a consolidated basis, as of the
last day of any fiscal quarter, of (a) the aggregate principal amount
of all Indebtedness of the Company for borrowed money (including debt
securities issued by the Company) on that date, plus (b) the aggregate
amount of all monetary obligations of the Company in respect of
Capital Leases on that date (but excluding leases among the Company
and its Subsidiaries), plus (c) the aggregate amounts on which a
drawing has been received or paid by an issuing bank under any letter
of credit for which the Company is an account party which drawing or
payment has not been reimbursed to the issuing bank by the Company
as of the date of determination, all as determined in accordance with
GAAP.
"GAAP" means generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession),
or in such other statements by such other entity as may be in general
use by significant segments of the U.S. accounting profession,
which are applicable to the circumstances as of the date of
determination.
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<PAGE> 18
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank
(or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guarantor" means each Domestic Subsidiary of the Company and,
with respect to borrowing by THC, the Company itself.
"Guaranty" means each Guaranty, substantially in the form of
Exhibit A with appropriate insertions, with respect to the obligations
of the Company, executed by each Subsidiary and, with respect to the
obligations of THC, by the Company and each Subsidiary other than THC.
"Guaranty Obligation" means, as applied to any Person, any
direct or indirect liability of that Person with respect to any
Indebtedness, lease, dividend, letter of credit or other obligation
(the "primary obligations") of another Person (the "primary obligor"),
including any obligation of that Person, whether or not contingent,
(a) to purchase, repurchase or otherwise acquire such primary
obligations or any property constituting direct or indirect security
therefor, or (b) to advance or provide funds (i) for the payment or
discharge of any such primary obligation, or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet item, level
of income or financial condition of the primary obligor, or (c) to
purchase property, securities or services primarily for the purpose
of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation, or
(d) otherwise to assure or hold harmless the holder of any such
primary obligation against loss in respect thereof; in each case
(a), (b), (c) or (d), including arrangements wherein the rights and
remedies of the holder of the primary obligation are limited to
repossession or sale of certain property of such Person. The amount
of any Guaranty Obligation shall be deemed equal to the stated or
determinable amount of the primary obligation in respect of which
such Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in
respect thereof.
"Hazardous Materials" means all those substances which are
regulated by, or which may form the basis of liability under, any
Environmental Law, including all substances identified under any
Environmental Law as a pollutant,
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<PAGE> 19
contaminant, hazardous waste, hazardous constituent, special waste,
hazardous substance, hazardous material, or toxic substance, or
petroleum or petroleum derived substance or waste.
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the ordinary
course of business pursuant to ordinary terms); (c) all
non-contingent reimbursement or payment obligations with respect
to Surety Instruments; (d) all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or
businesses; (e) all indebtedness created or arising under any
conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to Property acquired by the
Person (even though the rights and remedies of the seller or bank
under such agreement in the event of default are limited to
repossession or sale of such property); (f) all Capital Lease
Obligations; (g) all net obligations with respect to Rate Contracts;
(h) all indebtedness referred to in clauses (a) through (g) above
secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien
upon or in Property (including accounts and contracts rights) owned
by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness; and (i) all Guaranty
Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (a) through (g) above.
"Indemnified Person" has the meaning specified in subsection
9.05(a).
"Indemnified Liabilities" has the meaning specified in subsection
9.05(a).
"Ineligible Securities" means securities which may not be
underwritten or dealt in by member banks of the Federal Reserve
System under Section 16 of the Banking Act of 1933 (12 U.S.C.
Section 24, Seventh), as amended.
"Insolvency Proceeding" means (a) any case, action or proceeding
before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors, or (b) any general
assignment for the benefit of creditors, composition, marshalling of
assets for creditors, or other, similar arrangement in respect of
its creditors generally or any substantial portion of its creditors; in
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<PAGE> 20
each case (a) and (b) undertaken under U.S. Federal, State or foreign
law, including the Bankruptcy Code.
"Intangible Assets" means assets that are considered intangible
assets under GAAP, including customer lists, goodwill, internally
developed computer software, copyrights, trade names, trademarks and
patents but not including the Company's SMS computer project and
costs relating thereto or costs relating to the startup of any
facilities.
"Interest Payment Date" means, with respect to any Offshore Rate
Loan, the last day of each Interest Period applicable to such Loan
and, with respect to Base Rate Loans, the last Business Day of each
calendar quarter and each date a Base Rate Loan is converted into an
Offshore Rate Loan, provided, however, that if any Interest Period
for a Offshore Rate Loan exceeds three months, the date which falls
three months after the beginning of such Interest Period and after
each Interest Payment Date thereafter shall also be an Interest
Payment Date.
"Interest Period" means, (a) with respect to any Offshore Rate
Loan, the period commencing on the Business Day the Loan is disbursed
or continued or on the Conversion Date on which the Loan is converted
to the Offshore Rate Loan and ending on the date one, two, three or
six months thereafter, as selected by the Company in its Notice of
Borrowing or Notice of Conversion/Continuation; and (b) provided that:
(i) if any Interest Period pertaining to an Offshore Rate
Loan would otherwise end on a day which is not a Business Day,
that Interest Period shall be extended to the next succeeding
Business Day unless, in the case of an Offshore Rate Loan, the
result of such extension would be to carry such Interest Period
into another calendar month, in which event such Interest Period
shall end on the immediately preceding Business Day;
(ii) any Interest Period pertaining to an Offshore Rate
Loan that begins on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period) shall end
on the last Business Day of the calendar month at the end of
such Interest Period; and
(iii) no Interest Period for any Loan shall extend beyond
the Termination Date.
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<PAGE> 21
"Joint Venture" means a single-purpose corporation, partnership,
joint venture or other similar legal arrangement (whether created
pursuant to contract or conducted through a separate legal entity)
now or hereafter formed by the Company or any of its Subsidiaries
with another Person in order to conduct a common venture or
enterprise with such Person.
"Lending Office" means, with respect to the Bank, the office or
offices of the Bank specified as its "Lending Office" or "Domestic
Lending Office" or "Offshore Lending Office", as the case may be,
opposite its name on the signature page hereto, or such other office
or offices of the Bank as it may from time to time notify the Company.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preference, priority or other security
interest or preferential arrangement of any kind or nature whatsoever
(including those created by, arising under or evidenced by any
conditional sale or other title retention agreement, the interest of
a lessor under a Capital Lease Obligation, any financing lease having
substantially the same economic effect as any of the foregoing, or the
filing of any financing statement naming the owner of the asset to
which such lien relates as debtor, under the UCC or any comparable
law) and any contingent or other agreement to provide any of the
foregoing, but not including the interest of a lessor under an
Operating Lease.
"Loan" means an extension of credit by the Bank to the Company
or THC pursuant to Article II, and may be a Base Rate Loan or an
Offshore Rate Loan.
"Loan Documents" means this Agreement, the Guaranties and all
documents delivered to the Bank in connection therewith and all Rate
Contracts between the Company or any Subsidiary and the Bank.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the Federal Reserve Board.
"Material Adverse Effect" means (a) a material adverse change in
or a material adverse effect upon the operations, business,
properties, condition (financial or otherwise) or prospects of the
Company or the Company and its Subsidiaries taken as a whole, or
(b) an impairment of the ability of the Company to perform under any
Loan Document and avoid any Event of Default, or (c) the illegality,
invalidity, nonbinding effect or unenforceability of any material
Loan Document. However, neither the effectuation of the
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<PAGE> 22
restructuring disclosed in the Form 10Q of the Company for the
quarter ended February 28, 1993 nor the effectuation of the
restructuring disclosed in the Form 10Q of the Company for
the quarter ended February 28, 1994 shall be deemed to be a
subsequent Material Adverse Effect.
"Multiemployer Plan" means a "multiemployer plan" (within the
meaning of Section 4001(a)(3) of ERISA) and to which any member of
the Controlled Group makes, is making, or is obligated to make
contributions or, during the preceding three calendar years, has
made, or been obligated to make, contributions.
"Net Funded Debt" means Funded Debt net of Cash and Cash
Equivalents held by or in the name of the Company.
"Net Funded Debt to EBITDA Ratio" means the ratio, as of the
last day of any fiscal quarter, of: (a) Net Funded Debt on such date
to (b) EBITDA for the fiscal period consisting of that fiscal quarter
and the three immediately preceding fiscal quarters.
"Net Issuance Proceeds" means, in respect of any issuance of
equity, cash proceeds and non-cash proceeds received or receivable
by the Company in connection therewith, net of commissions and
underwriting discounts and reasonable out-of-pocket costs and
expenses paid or incurred in connection therewith in favor of any
Person not an Affiliate of the Company, such costs and expenses not
to exceed 5% of the gross proceeds of such issuance.
"Net Proceeds" means proceeds in cash, checks or other cash
equivalent financial instruments (including Cash Equivalents) as and
when received by the Person making a Disposition, net of: (a) the
direct costs relating to such Disposition excluding amounts payable
to the Company or any Affiliate of the Company, (b) sale, use or
other transaction taxes paid or payable as a result thereof, and
(c) amounts required to be applied to repay principal, interest
and prepayment premiums and penalties on Indebtedness secured by a
Lien on the asset which is the subject of such Disposition.
"Net Proceeds" shall also include proceeds paid on account of any
Event of Loss; and net of (i) all money actually applied to repair
or reconstruct the damaged property or property affected by the
condemnation or taking, (ii) all of the costs and expenses
reasonably incurred in connection with the collection of such
proceeds, award or other payments, and (iii) any amounts retained by
or paid to parties having superior rights to such proceeds, awards
or other payments.
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<PAGE> 23
"Notice of Borrowing" means a notice given by the Company to the
Bank pursuant to Section 2.03, in a form acceptable to the Bank.
"Notice of Conversion/Continuation" means a notice given by the
Company to the Bank pursuant to Section 2.04, in a form acceptable to
the Bank.
"Notice of Lien" means any "notice of lien" or similar document
intended to be filed or recorded with any court, registry, recorder's
office, central filing office or other Governmental Authority for the
purpose of evidencing, creating, perfecting or preserving the
priority of a Lien securing obligations owing to a Governmental
Authority.
"Obligations" means all Loans, and other Indebtedness, advances,
debts, liabilities, obligations, covenants and duties owing by the
Company to the Bank, or any other Person required to be indemnified,
that arises under any Loan Document, whether or not for the payment
of money, whether arising by reason of an extension of credit, loan,
guaranty, indemnification or in any other manner, whether direct or
indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising
and however acquired.
"Offshore Lending Office" means with respect to the Bank, the
office of the Bank designated as such in the signature pages hereto
or such other office of the Bank as the Bank may from time to time
specify to the Company.
"Offshore Rate" means, for each Interest Period in respect of
Offshore Rate Loans comprising part of the same Borrowing, an
interest rate per annum (rounded upward to the nearest 1/16th of 1%)
determined pursuant to the following formula:
LIBOR
Offshore Rate = ------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means the maximum reserve
percentage (expressed as a decimal, rounded upward to the nearest
1/100th of 1%) in effect on the date LIBOR for such Interest
Period is determined (whether or not applicable to the Bank)
under regulations issued from time to time by the Federal
Reserve Board for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently
referred to as
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<PAGE> 24
"Eurocurrency liabilities") having a term comparable to
such Interest Period; and
"LIBOR" means the rate of interest per annum determined
by the Bank to be the arithmetic mean (rounded upward to the
nearest 1/16th of 1%) of the rates of interest per annum at
which dollar deposits in the approximate amount of the amount of
the Loan to be made or continued as, or converted into, an
Offshore Rate Loan by the Bank and having a maturity comparable
to such Interest Period would be offered to major banks in the
London interbank market at their request at or about 11:00 a.m.
(London time) on the second Business Day prior to the
commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as of the
effective date of any change in the Eurodollar Reserve Percentage.
"Offshore Rate Loan" means a Loan that bears interest based on
the Offshore Rate.
"Operating Lease" means, as applied to any Person, any lease of
Property which is not a Capital Lease.
"Ordinary Course of Business" means, in respect of any
transaction involving the Company or any Subsidiary of the Company,
the ordinary course of such Person's business, as conducted by any
such Person in accordance with past practice and undertaken by such
Person in good faith and not for purposes of evading any covenant or
restriction in any Loan Document.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement,
and all applicable resolutions of the board of directors (or any
committee thereof) of such corporation.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any of its principal functions under ERISA.
"Participant" has the meaning specified in subsection 9.08(b).
"Permitted Liens" has the meaning specified in Section 7.01.
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<PAGE> 25
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Company or any member of the Controlled
Group sponsors or maintains or to which the Company or any member of
the Controlled Group makes, is making or is obligated to make
contributions, and includes any Multiemployer Plan or Qualified Plan.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
"Qualified Plan" means a pension plan (as defined in Section
3(2) of ERISA) intended to be tax-qualified under Section 401(a) of
the Code and which any member of the Controlled Group sponsors,
maintains, or to which it makes, is making or is obligated to make
contributions, or in the case of a multiple employer plan (as
described in Section 4064(a) of ERISA) has made contributions at any
time during the immediately preceding period covering at least five
(5) plan years, but excluding any Multiemployer Plan.
"Rate Contracts" means swap agreements (as such term is defined in
Section 101 of the Bankruptcy Code) and any other agreements or
arrangements designed to provide protection against fluctuations in
interest or currency exchange rates.
"Reportable Event" means, as to any Plan, (a) any of the events
set forth in Section 4043(b) of ERISA or the regulations thereunder,
other than any such event for which the 30-day notice requirement
under ERISA has been waived in regulations issued by the PBGC, (b) a
withdrawal from a Plan described in Section 4063 of ERISA, or (c) a
cessation of operations described in Section 4062(e) of ERISA.
"Requirement of Law" means, as to any Person, any law (statutory
or common), treaty, rule or regulation or determination of an
arbitrator or of a Governmental Authority, in each case applicable to
or binding upon the Person or any of its property or to which the
Person or any of its property is subject.
"Responsible Officer" means the chief executive officer or the
president of the Company, or any other officer having substantially
the same authority and responsibility; or, with respect to compliance
with financial covenants, the chief financial officer or the
treasurer of the Company, or any other officer having substantially
the same authority and responsibility.
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<PAGE> 26
"SEC" means the Securities and Exchange Commission, or any
entity succeeding to any of its principal functions.
"September Agreement" means the Credit Agreement dated as of
September 20, 1993 among CPC, THC and the Bank, as the same may be
amended, modified or supplemented from time to time.
"Shareholders' Equity" means, as of any date of determination
and with respect to any Person, the consolidated shareholders' equity
of the Person as of that date determined in accordance with GAAP.
"Solvent" means, as to any Person at any time, that (a)
the fair value of the Property of such Person is greater than the
amount of such Person's liabilities (including disputed, contingent
and unliquidated liabilities) as such value is established and
liabilities evaluated for purposes of Section 101(31) of the
Bankruptcy Code and, in the alternative, for purposes of the
California Uniform Fraudulent Transfer Act; (b) the present fair
saleable value of the Property of such Person is not less than the
amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured; (c) such
Person is able to realize upon its Property and pay its debts and
other liabilities (including disputed, contingent and unliquidated
liabilities) as they mature in the normal course of business; (d) such
Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts
and liabilities mature; and (e) such Person is not engaged in business
or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute
unreasonably small capital.
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than
50% of the voting stock or other equity interests (in the case of
Persons other than corporations), is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of the
Person, or a combination thereof.
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"Tangible Net Worth" means, as of any date of determination,
the Shareholders' Equity of the Company and its Subsidiaries on that
date minus the aggregate Intangible Assets of the Company and its
Subsidiaries on that date.
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<PAGE> 27
"Termination Date" means the earliest to occur of:
(a) December 31, 1994; or
(b) the date on which the Commitment shall
terminate in accordance with the provisions of this Agreement.
"Total Liabilities" means the total liabilities of the Company
and its Subsidiaries on a consolidated basis as calculated in
accordance with GAAP.
"Transferee" has the meaning specified in subsection 9.08(c).
"Unfunded Pension Liabilities" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance with the
assumptions used by the Plan's actuaries for funding the Plan pursuant
to section 412 for the applicable plan year.
"United States" and "U.S." each means the United States of
America.
"Wholly-Owned Subsidiary" means any corporation in which
(other than directors' qualifying shares required by law) 100% of the
capital stock of each class having ordinary voting power, and 100% of
the capital stock of every other class, in each case, at the time as
of which any determination is being made, is owned, beneficially and
of record, by the Company, or by one or more of the other Wholly-Owned
Subsidiaries, or both.
"Withdrawal Liabilities" means, as of any determination date,
the aggregate amount of the liabilities, if any, pursuant to Section
4201 of ERISA if the Controlled Group made a complete withdrawal from
all Multiemployer Plans and any increase in contributions pursuant to
Section 4243 of ERISA.
1.02 Other Interpretive Provisions.
(a) Defined Terms. Unless otherwise specified herein or
therein, all terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto. The meaning of defined terms shall be equally applicable to the
singular and plural forms of the defined terms. Terms (including uncapitalized
terms) not otherwise defined herein and that are defined in the UCC shall have
the meanings therein described.
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<PAGE> 28
(b) The Agreement. The words "hereof", "herein",
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, section, schedule and exhibit references are to this
Agreement unless otherwise specified.
(c) Certain Common Terms.
(i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices
and other writings, however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(d) Performance; Time. Whenever any performance
obligation hereunder (other than a payment obligation) shall be stated to be
due or required to be satisfied on a day other than a Business Day, such
performance shall be made or satisfied on the next succeeding Business Day. In
the computation of periods of time from a specified date to a later specified
date or the date on or as of which performance is due or an act is to be
performed or a computation is to be made, the word "from" means "from and
including"; the words "to," "before", "in advance of", "prior" and "prior to",
"actual days elapsed" and "until" each mean "to but excluding", and the word
"through" means "to and including." If any provision of this Agreement refers
to any action taken or to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be interpreted to encompass any
and all means, direct or indirect, of taking, or not taking, such action.
(e) Contracts. Unless otherwise expressly provided
herein, references to agreements and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document.
(f) Laws. References to any statute or regulation are to
be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute
or regulation.
(g) Captions. The captions and headings of this Agreement
are for convenience of reference only and shall not affect the interpretation
of this Agreement.
(h) Independence of Provisions. The parties acknowledge
that this Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters, and
that such limitations, tests and
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<PAGE> 29
measurements are cumulative and must each be performed, except as expressly
stated to the contrary in this Agreement.
1.03 Accounting Principles.
(a) Unless the context otherwise clearly requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer
to such fiscal periods of the Company from time to time in effect.
ARTICLE II
THE CREDIT
2.01 Amounts and Terms of the Commitment. The Bank agrees, on the
terms and conditions hereinafter set forth, to make Loans to the Company from
time to time on any Business Day during the period from the Closing Date to the
Termination Date, in an aggregate amount not to exceed at any time outstanding
the amount of Fifty Million Dollars ($50,000,000) (such amount as the same may
be reduced pursuant to Section 2.05 or as a result of one or more assignments
pursuant to Section 9.08(a), the Bank's "Commitment"). Within the limits of
the Bank's Commitment, and subject to the other terms and conditions hereof,
the Company may borrow under this subsection 2.01, prepay pursuant to Section
2.06 and reborrow pursuant to this subsection 2.01.
2.02 Loan Accounts. The Loans made by the Bank shall be evidenced
by one or more loan accounts maintained by the Bank in the ordinary course of
business. The loan accounts or records maintained by the Bank shall be
conclusive evidence absent manifest error of the amount of the Loans made by
the Bank to the Company and the interest and payments thereon. Any failure so
to record or any error in doing so shall not, however, limit or otherwise
affect the obligation of the Company hereunder to pay any amount owing with
respect to the Loans.
2.03 Procedure for Borrowing.
(a) Each Borrowing of Loans shall be made upon the Company's
irrevocable written notice delivered to the Bank in accordance with Section
9.02 in the form of a Notice of Borrowing (which notice must be received by the
Bank prior to 10:00 a.m. Los Angeles time) (i) three Business Days prior to the
requested Borrowing date, in the case of Offshore Rate Loans; and (ii) on the
day of the requested Borrowing date, in the case of Base Rate Loans,
specifying:
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(A) the amount of the Borrowing, which
shall be in an aggregate minimum principal amount of five
million dollars ($5,000,000) or any multiple of one million
dollars ($1,000,000) in excess thereof;
(B) the requested Borrowing date, which
shall be a Business Day;
(C) whether the Borrowing is to be
comprised of Offshore Rate Loans or Base Rate Loans;
(D) the duration of the Interest Period
applicable to such Loans included in such notice. If the
Notice of Borrowing shall fail to specify the duration of the
Interest Period for any Borrowing comprised of Offshore Rate
Loans, such Interest Period shall be three months.
provided, however, that with respect to the Borrowing to be made on the
Closing Date, the Notice of Borrowing shall be delivered to the Bank not later
than 11:00 a.m. (Los Angeles time) one Business Day before the Closing Date and
such Borrowing will consist of Base Rate Loans only; and further provided that
if so requested by the Bank, all Borrowings during the first 60 days following
the Closing Date shall have the same Interest Period and shall be Base Rate or
Offshore Rate Loans for Interest Periods no longer than 30 days.
(b) The Bank will make the amount of the Borrowing available for
the account of the Company at the Bank's Payment Office by 11:00 a.m. (Los
Angeles time) on the Borrowing date requested by the Company in funds
immediately available. The proceeds of all such Loans will be made available
to the Company by the Bank at such office by crediting the account of the
Company on the books of the Bank with the aggregate of the amounts made
available.
(c) Unless the Bank shall otherwise agree, during the existence of
a Default or an Event of Default, the Company may not elect to have a Loan be
made, converted into or continued as an Offshore Rate Loan.
(d) After giving effect to any Borrowing, there shall not be more
than three different Interest Periods in effect.
2.04 Conversion and Continuation Elections.
(a) The Company may upon irrevocable written notice to the Bank
in accordance with subsection 2.04(b):
(i) elect to convert on any Business Day, any
Base Rate Loans (or any part thereof in an amount not less
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than $1,000,000, or that is in an integral multiple of $1,000,000
in excess thereof) into Offshore Rate Loans or;
(ii) elect to convert on any Interest Payment Date
any Offshore Rate Loans maturing on such Interest Payment Date (or any
part thereof in an amount not less than $1,000,000, or that is in an
integral multiple of $1,000,000 in excess thereof) into Base Rate
Loans; or
(iii) elect to renew on any Interest Payment Date
any Offshore Rate Loans maturing on such Interest Payment Date (or any
part thereof in an amount not less than $1,000,000 or that is in an
integral multiple of $1,000,000 in excess thereof);
provided, that if the aggregate amount of Offshore Rate Loans in respect of any
Borrowing shall have been reduced, by payment, prepayment, or conversion of
part thereof to be less than $1,000,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the
right of the Company to continue such Loans as, and convert such Loans into,
Offshore Rate Loans, as the case may be, shall terminate.
(b) The Company shall deliver a Notice of Conversion/
Continuation in accordance with Section 9.02 to be received by the Bank not
later than 9:00 a.m. Los Angeles time at least (i) three Business Days in
advance of the Conversion Date or continuation date, if the Loans are to be
converted into or continued as Offshore Rate Loans; and (ii) one Business Day
in advance of the Conversion Date, if the Loans are to be converted into Base
Rate Loans; specifying:
(A) the proposed Conversion Date or continuation
date;
(B) the aggregate amount of Loans to be converted
or renewed;
(C) the nature of the proposed conversion or
continuation; and
(D) the duration of the requested Interest
Period.
(c) If upon the expiration of any Interest Period
applicable to Offshore Rate Loans, the Company has failed to select timely a
new Interest Period to be applicable to such Offshore Rate Loans, or if any
Default or Event of Default shall then exist, the Company shall be deemed to
have elected to convert such Offshore Rate Loans into Base Rate Loans effective
as of the expiration date of such current Interest Period.
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(d) Unless the Bank shall otherwise agree, during the
existence of a Default or Event of Default, the Company may not elect to have a
Loan converted into or continued as an Offshore Rate Loan.
(e) Notwithstanding any other provision contained in this
Agreement, after giving effect to any conversion or continuation of any Loans,
there shall not be more than six different Interest Periods in effect.
2.05 Voluntary Termination or Reduction of the Commitment. The
Company may, upon not less than five Business Days' prior notice to the Bank,
terminate the Commitment or permanently reduce the Commitment by an aggregate
minimum amount of $5,000,000 or any multiple of $1,000,000 in excess thereof;
provided that no such reduction or termination shall be permitted if, after
giving effect thereto and to any prepayments of the Loans made on the effective
date thereof, the then outstanding principal amount of the Loans would exceed
the Commitment then in effect and, provided, further, that once reduced in
accordance with this Section 2.05, the Commitment may not be increased. All
accrued commitment fees to, but not including the effective date of any
reduction or termination of the Commitment, shall be paid on the effective date
of such reduction or termination.
2.06 Optional Prepayments. Subject to Section 3.04, the Company
may, at any time or from time to time, upon at least one Business Days' prior
notice to the Bank, ratably prepay Loans in whole or in part, in amounts of
$2,000,000 or any multiple of $1,000,000 in excess thereof. Such notice of
prepayment shall specify the date and amount of such prepayment and whether
such prepayment is of Base Rate Loans or Offshore Rate Loans, or any
combination thereof. Such notice shall not thereafter be revocable by the
Company. If such notice is given by the Company, the Company shall make such
prepayment and the payment amount specified in such notice shall be due and
payable on the date specified therein, together with accrued interest to each
such date on the amount prepaid and any amounts required pursuant to Section
3.04.
2.07 Repayment. On the Termination Date the aggregate principal
amount of the Loans outstanding shall be due and payable.
2.08 Interest.
(a) Subject to the provisions below, each Loan shall bear
interest on the outstanding principal amount thereof from the date when made at
a rate per annum equal to the Offshore Rate or the Base Rate, as the case may
be, plus the Applicable Margin.
(b) Interest on each Loan shall be paid in arrears on
each Interest Payment Date. Interest shall also be paid on the
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date of any prepayment of Loans pursuant to Section 2.06 for the portion of the
Loans so prepaid and upon payment (including prepayment) in full thereof and,
during the existence of any Event of Default, interest shall be paid on demand.
(c) While any Event of Default described in Section 8.01(a) has
occurred and is continuing, and following any other Event of Default, after,
but only after, acceleration pursuant to paragraph 8.02(b), the Company shall
pay interest (after as well as before entry of judgment thereon to the extent
permitted by law) on the principal amount of all Loans due and unpaid, at a
rate per annum which is equal to the sum of (i) the Base Rate or the Offshore
Rate, as the case may be, plus (ii) 2% of the principal thereof plus (iii) the
Applicable Margin then in effect for such Loans and, in the case of Obligations
not subject to an Applicable Margin or as to which the Applicable Margin is 0%
or less, at a rate per annum equal to the Base Rate plus 2% per annum of the
principal thereof; provided, however, that, on and after the expiration of any
Interest Period applicable to any Offshore Rate Loan outstanding on the date
of occurrence of such Event of Default or acceleration, the principal amount of
such Loan shall, during the continuation of such Event of Default or after
acceleration, bear interest at a rate per annum equal to the Base Rate plus 2%
per annum of the principal thereof.
If any amount of principal of or interest on any Loan, or any other
amount payable hereunder or under any of the other Loan Documents is not paid
in full when due (whether at stated maturity, by acceleration, demand or
otherwise), the Company agrees to pay interest on such unpaid principal or
other amount, from the date such amount becomes due until the date such amount
is paid in full, and after as well as before any entry of judgment thereon to
the extent permitted by law, payable on demand, at a rate per annum equal to
the Base Rate plus 2%.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Company hereunder shall be subject to the limitation that
payments of interest shall not be required, for any period for which interest
is computed hereunder, to the extent (but only to the extent) that contracting
for or receiving such payment by the Bank would be contrary to the provisions
of any law applicable to the Bank limiting the highest rate of interest which
may be lawfully contracted for, charged or received by the Bank, and in such
event the Company shall pay the Bank interest at the highest rate permitted by
applicable law.
2.09 Fees.
(a) Facility Fee. The Company shall pay to the Bank for the
Bank's own account on the Closing Date a facility fee equal to five-tenths
percent (0.5%) of the Commitment. The fee of $100,000 referred to in the
Summary of Terms and Conditions
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dated December 30, 1993 and executed on January 5, 1994 will, on the Closing
Date, be credited to the facility fee.
(b) Commitment Fees. The Company shall pay to the Bank a
commitment fee on the average daily unused portion of the Commitment, computed
on a quarterly basis in arrears on the last Business Day of each calendar
quarter based upon the daily utilization for that quarter as calculated by the
Bank, equal to five-tenths percent (0.5%) per annum. Such commitment fee shall
accrue from the Closing Date to the Termination Date and shall be due and
payable quarterly in arrears on the last Business Day of each quarter through
the Termination Date, with the final payment to be made on the Termination
Date; provided that, in connection with any reduction or termination of the
Commitment pursuant to Section 2.05, the accrued commitment fee calculated for
the period ending on such date shall also be paid on the date of such reduction
or termination, with the next succeeding quarterly payment being calculated on
the basis of the period from the reduction or termination date to such
quarterly payment date. The commitment fees provided in this subsection shall
accrue at all times after the above-mentioned commencement date, including at
any time during which one or more conditions in Article IV are not met.
2.10 Computation of Fees and Interest.
(a) All computations of interest payable in respect of
Base Rate Loans at all times as the Base Rate is determined by the Bank's
"reference rate" shall be made on the basis of a year of 365 or 366 days, as
the case may be, and actual days elapsed. All other computations of fees and
interest under this Agreement shall be made on the basis of a 360-day year and
actual days elapsed, which results in more interest being paid than if computed
on the basis of a 365-day year. Interest and fees shall accrue during each
period during which interest or such fees are computed from the first day
thereof to the last day thereof.
(b) The Bank will, with reasonable promptness, notify the
Company of each determination of an Offshore Rate; provided that any failure to
do so shall not relieve the Company of any liability hereunder or provide the
basis for any claim against the Bank. Any change in the interest rate on a
Loan resulting from a change in the Eurodollar Reserve Percentage shall become
effective as of the opening of business on the day on which such change in the
Eurodollar Reserve Percentage becomes effective. The Bank will with reasonable
promptness notify the Company of the effective date and the amount of each such
change, provided that any failure to do so shall not relieve the Company of any
liability hereunder or provide the basis for any claim against the Bank.
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(c) Each determination of an interest rate by the Bank
shall be conclusive and binding on the Company in the absence of manifest
error.
2.11 Payments by the Company.
(a) All payments (including prepayments) to be made by
the Company on account of principal, interest, fees and other amounts required
hereunder shall be made without set-off, recoupment or counterclaim; shall,
except as otherwise expressly provided herein, be made to the Bank at the
Bank's Payment Office, and shall be made in dollars and in immediately
available funds, no later than 10:00 a.m. (Los Angeles time) on the date
specified herein. Any payment which is received by the Bank later than 10:00
a.m. (Los Angeles time) shall be deemed to have been received on the
immediately succeeding Business Day and any applicable interest or fee shall
continue to accrue.
(b) Whenever any payment hereunder shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of interest or fees, as the case may be; subject to
the provisions set forth in the definition of "Interest Period" herein.
2.12 Security and Guaranty. All obligations of the Company under
this Agreement and all other Loan Documents shall be unconditionally guaranteed
by the Guarantors pursuant to the Guaranty.
2.13 Alternate Borrower. THC, as long as it remains a Wholly Owned
Subsidiary, may borrow hereunder. The Company (and each Subsidiary other than
THC) shall execute a Guaranty with respect to all such Borrowings and all terms
and conditions herein applicable to Borrowing by the Company shall be
applicable to Borrowing by THC and all commitment limits shall apply to the
aggregate amount of Borrowing by the Company and THC. When THC borrows
hereunder, references in this Agreement to the Company in its capacity as a
borrower shall be deemed to be references to THC as well.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes.
(a) (i) If any taxes (other than taxes on net income (A)
imposed by the country or any subdivision of the country in which the Bank's
principal office or actual lending office is located and (B) measured by the
United States taxable income the Bank would have received if all payments under
or in respect of
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this Agreement and any instrument or agreement required hereunder were exempt
from taxes levied by the Company's country) are at any time imposed on any
payments under or in respect of this Agreement or any instrument or agreement
required hereunder including, but not limited to, payments made pursuant to
this Section 3.01, the Company shall pay all such taxes and shall also pay to
the Bank, at the time interest is paid, all additional amounts which the Bank
specifies as necessary to preserve the after-tax yield the Bank would have
received if such taxes had not been imposed.
(ii) The additional amounts necessary to preserve the after-
tax yield the Bank would have received if such taxes had not been
imposed shall be calculated pursuant to the formula:
(w)(t)(i)
y = ----------------
1-w-t
where the terms are defined as follows:
y = additional payment to be made to Bank
w = withholding tax rate levied by foreign government
t = the Bank's combined Federal and state tax rate
i = stated interest to be paid on credit (base rate plus quoted
spread)
1 = one
(b) The Bank will provide the Company with original tax
receipts, notarized copies of tax receipts, or such other documentation as will
prove payment of tax in a court of law applying the United States Federal Rules
of Evidence, for all taxes paid by the Company pursuant to subsection 3.01(a).
The Bank will deliver receipts to the Company within 30 days after the due
date for the related tax.
3.02 Illegality.
(a) If the Bank determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law or in the
interpretation or administration thereof, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for the Bank or its Lending Office to make Offshore Rate Loans, then, on notice
thereof by the Bank to the Company, the obligation of the Bank to make Offshore
Rate Loans shall be suspended until the Bank shall have notified the Company
that the circumstances giving rise to such determination no longer exists.
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(b) If the Bank reasonably determines that it is
unlawful to maintain any Offshore Rate Loan, the Company shall prepay
in full all such unlawful Offshore Rate Loans then outstanding,
together with interest accrued thereon, either on the last day of the
Interest Period thereof if the Bank may lawfully continue to maintain
such Offshore Rate Loans to such day, or immediately, if the Bank may
not lawfully continue to maintain such Offshore Rate Loans, together
with any amounts required to be paid in connection therewith pursuant
to Section 3.04.
(c) If the Company is required to prepay any Offshore
Rate Loan immediately pursuant to subsection 3.02(b), then concurrently with
such prepayment, the Company shall borrow from the Bank, in the amount of such
repayment, a Base Rate Loan.
3.03 Increased Costs and Reduction of Return.
(a) If the Bank determines that, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any
Governmental Authority (whether or not having the force of law), there is or
will be any increase in the cost to the Bank of agreeing to make or making,
funding or maintaining any Offshore Rate Loans, then the Company shall be
liable for, and shall from time to time, upon demand therefor by the Bank pay
to the Bank additional amounts as are sufficient to compensate the Bank for
such increased costs.
(b) If the Bank determines that (i) the introduction of any
Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv) compliance
by the Bank (or its Lending Office) or any corporation controlling the Bank,
with any Capital Adequacy Regulation; affects or would affect the amount of
capital required or expected to be maintained by the Bank or any corporation
controlling the Bank and (taking into consideration the Bank's or such
corporation's policies with respect to capital adequacy and the Bank's desired
return on capital) determines that the amount of such capital is increased as a
consequence of its loans, credits or obligations under this Agreement, then,
upon demand of the Bank the Company shall immediately pay to the Bank, from
time to time as specified by the Bank, additional amounts sufficient to
compensate the Bank for such increase.
3.04 Funding Losses. The Company agrees to reimburse the Bank and
to hold the Bank harmless from any loss or expense which the Bank may sustain
or incur as a consequence of:
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(a) the failure of the Company to make any payment or
prepayment of principal of any Offshore Rate Loan (including payments made
after any acceleration thereof);
(b) the failure of the Company to borrow, continue or
convert a Loan after the Company has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/Continuation;
(c) the failure of the Company to make any prepayment
after the Company has given a notice in accordance with Section 2.06;
(d) the prepayment (including pursuant to Section 2.07)
of an Offshore Rate Loan on a day which is not the last day of the Interest
Period with respect thereto; or
(e) the conversion pursuant to subsection 2.04 of any
Offshore Rate Loan to a Base Rate Loan on a day that is not the last day of
the respective Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans hereunder or from
fees payable to terminate the deposits from which such funds were obtained.
Solely for purposes of calculating amounts payable by the Company to the Bank
under this Section 3.04, each Offshore Rate Loan (and each related reserve,
special deposit or similar requirement) shall be conclusively deemed to have
been funded at the LIBOR used in determining the Offshore Rate for such
Offshore Rate Loan by a matching deposit or other borrowing in the interbank
eurodollar market for a comparable amount and for a comparable period, whether
or not such Offshore Rate Loan is in fact so funded.
3.05 Inability to Determine Rates. If the Bank determines
that for any reason adequate and reasonable means do not exist for ascertaining
the Offshore Rate for any requested Interest Period with respect to a proposed
Offshore Rate Loan or that the Offshore Rate applicable pursuant to subsection
2.08(a) for any requested Interest Period with respect to a proposed Offshore
Rate Loan does not adequately and fairly reflect the cost to the Bank of
funding such Loan, the Bank will forthwith give notice of such determination to
the Company. Thereafter, the obligation of the Bank to make or maintain
Offshore Rate Loans, hereunder shall be suspended until the Bank revokes such
notice in writing. Upon receipt of such notice, the Company may revoke any
Notice of Borrowing or Notice of Conversion/Continuation then submitted by it.
If the Company does not revoke such notice, the Bank shall make, convert or
continue the Loans, as proposed by the Company, in the amount specified in the
applicable notice submitted by the Company, but such Loans shall be made,
converted or continued as Base Rate Loans instead of Offshore Rate Loans.
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3.06 Reserves on Offshore Rate Loans. The Company shall pay to the
Bank, as long as the Bank shall be required under regulations of the Federal
Reserve Board to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency funds or deposits (currently known as
"Eurocurrency liabilities"), additional costs on the unpaid principal amount of
each Offshore Rate Loan equal to actual costs of such reserves allocated to
such Loan by the Bank (as determined by the Bank in good faith, which
determination shall be conclusive), payable on each date on which interest is
payable on such Loan provided the Company shall have received at least 15 days'
prior written notice of such additional interest from the Bank. If the Bank
fails to give notice fifteen days prior to the relevant Interest Payment Date,
such additional interest shall be payable fifteen days from receipt of such
notice. This covenant shall survive payment of all other Obligations.
3.07 Certificates of the Bank. When the Bank claims reimbursement
or compensation pursuant to this Article III, it shall deliver to the Company
a certificate setting forth in reasonable detail the amount payable to the Bank
hereunder and such certificate shall be conclusive and binding on the Company
in the absence of manifest error.
3.08 Survival. The agreements and obligations of the Company in
this Article III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
4.01 Conditions of Initial Loans. The obligation of the Bank to
make its initial Loan hereunder is subject to the condition that the Bank shall
have received on or before the Closing Date all of the following, in form and
substance satisfactory to the Bank and in sufficient copies for the Bank:
(a) Credit Agreement. This Agreement executed by the
Company and the Bank;
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of
directors of the Company approving and authorizing the
execution, delivery and performance by the Company of this
Agreement and the other Loan Documents to be delivered
hereunder, and authorizing the borrowing of the Loans,
certified as of the Closing Date by the Secretary or an
Assistant Secretary of the Company;
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(ii) Certified copies of the resolutions of the
board of directors of each Subsidiary of the Company approving
the Loan Documents to be delivered by it hereunder; and
(iii) A certificate of the Secretary or Assistant
Secretary of the Company, and each Subsidiary of the Company
certifying the names and true signatures of the officers of the
Company authorized to execute, deliver and perform, as
applicable, this Agreement, and all other Loan Documents to
be delivered hereunder;
(c) Articles of Incorporation; By-laws and Good Standing.
Each of the following documents:
(i) a certificate of the Secretary or Assistant
Secretary of the Company dated the Closing Date certifying
that the articles or certificate of incorporation and the
bylaws of the Company as in effect on September 20, 1993 and
provided to the Bank pursuant to Section 4.01(c) of the
September Agreement, have not been amended, restated or
rescinded in any way since September 20, 1993 or, if any such
articles of incorporation or bylaws have been amended,
restated or rescinded, a copy of such articles of
incorporation or bylaws as in effect on the Closing Date,
certified by the Secretary or Assistant Secretary of the
Company as of the Closing Date.
(ii) a good standing and tax good standing
certificate for the Company from the Secretary of State (or
similar, applicable Governmental Authority) of its state of
incorporation and each state where the Company is qualified to
do business as a foreign corporation as of a recent date,
together with, in the case of any such certificate which is
dated a date earlier than three weeks prior to the Closing
Date, a bring-down certificate by facsimile, dated a recent
date;
(d) Guaranties. A Guaranty substantially in the form of Exhibit A
hereto with appropriate insertions executed by each Domestic Subsidiary with
respect to obligations of the Company and executed by the Company and each
Domestic Subsidiary other than THC with respect to obligations of THC, all with
such evidence of corporate approval as the Bank may request.
(e) Legal Opinions. (i) An opinion of Fleischmann & Fleischmann,
counsel to the Company and addressed to the Bank, in form and substance similar
to the opinion of Fleischmann & Fleischmann addressed to the Bank in connection
with the execution of the September Agreement and (ii) an opinion of General
Counsel to the Company addressed to the Bank in form and substance similar to
the opinion of General Counsel addressed to
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the Bank in connection with the execution of the September Agreement.
(f) Payment of Fees. The Company shall have paid all accrued and
unpaid fees, costs and expenses to the extent then due and payable on the
Closing Date, together with Attorney Costs of the Bank to the extent invoiced
prior to or on the Closing Date, together with such additional amounts of
Attorney Costs as shall constitute the Bank's reasonable estimate of Attorney
Costs incurred or to be incurred through the closing proceedings, provided that
such estimate shall not thereafter preclude final settling of accounts between
the Company and the Bank; including any such costs, fees and expenses arising
under or referenced in this Agreement.
(g) Certificate. A certificate signed by a Responsible Officer,
dated as of the Closing Date, stating that:
(i) the representations and warranties contained in
Article V are true and correct on and as of such date, as though made
on and as of such date;
(ii) no Default or Event of Default exists or would
result from the initial Borrowing; and
(iii) there has occurred since February 28, 1994, no event
or circumstance not previously disclosed in writing to the Bank that
has resulted or could reasonably be expected to result in a Material
Adverse Effect (neither the restructuring already disclosed in the
Form 10Q of the Company for the quarter ended February 28, 1993 nor
the restructuring already disclosed in the Form 10Q of the Company for
the quarter ended February 28, 1994 shall be deemed to be a subsequent
Material Adverse Effect); and
(iv) Except as specifically disclosed in Schedule 4.01,
no claim, complaint, notice or request for information has been
received by the Company or its Subsidiaries with respect to compliance
or non-compliance with health care regulatory requirements relating to
the delivery of health care services of the type provided by the
Company and payment therefor (excluding malpractice claims but
including claims relating to patient dumping with respect to the
operation of any emergency department), including, but not limited to,
any violation or alleged violation of any federal, state or local
statute, regulation or ordinance relating to the delivery of medical
services and payment therefor, including, but not limited to, the
requirements set forth in federal Medicare and Medi-Cal (or Medicaid)
statutes, 42 U.S.C. Sections 1320a-7, 1320a-7(a) and 1320a-7b, and the
regulations promulgated thereunder and state and local statutes and
any regulations promulgated thereunder having the same purpose and
effect.
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(h) Financial Statements.
(i) A copy of financial statements of the Company and its
Subsidiaries referred to in Section 5.11 certified by an appropriate
Responsible Officer as to the matters set forth in Section 5.11;
(i) Due Diligence. Completion to the satisfaction of the Bank of
such investigations, reviews and audits with respect to the Company as the Bank
may deem appropriate; and
(j) Other Documents. Such other approvals, opinions, documents or
materials as the Bank may request.
(k) No Material Adverse Change. No event shall have occurred
since January 5, 1994 which, in the opinion of the Bank (i) has resulted or
could result in a material and adverse change in the financial markets of the
United States of America or (ii) could result in a material and adverse change
in the operations, business, properties, condition (financial or otherwise) or
prospects of the Company or the Company and its Subsidiaries taken as a whole.
(l) Amendment to September Agreement. Simultaneously with the
execution and delivery of this Agreement, the parties shall enter into an
amendment to the September Agreement reflecting certain changes to the
September Agreement required in order to substantially conform the September
Agreement to the terms of this Agreement.
4.02 Conditions to All Borrowings. The obligation of the Bank to
make any Loan to be made by it hereunder (including its initial Loan) or to
continue or convert any Loan pursuant to Section 2.04 is subject to the
satisfaction of the following conditions precedent on the relevant borrowing,
continuation or conversion date:
(a) Notice of Borrowing or Continuation/Conversion. The Bank shall
have received a Notice of Borrowing or a Notice of Continuation/Conversion,
as applicable;
(b) Continuation of Representations and Warranties. The
representations and warranties made by the Company contained in Article V shall
be true and correct on and as of such borrowing, continuation or conversion
date with the same effect as if made on and as of such borrowing, continuation
or conversion date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and
correct as of such earlier date); and
(c) No Existing Default. No Default or Event of Default shall
exist or shall result from such Borrowing or continuation or conversion.
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Each Notice of Borrowing and Notice of Continuation/Conversion submitted by the
Company hereunder shall constitute a representation and warranty by the Company
hereunder, as of the date of each such notice or application and as of the date
of each Borrowing, continuation or conversion, as applicable, that the
conditions in Section 4.02 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Bank that:
5.01 Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental
licenses, authorizations, consents and approvals to own its assets, carry on
its business and execute, deliver, and perform its obligations under, the Loan
Documents;
(c) is duly qualified as a foreign corporation, and
licensed and in good standing, under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification or license, except to the extent that the failure
to do so could not reasonably be expected to have a Material Adverse Effect;
and
(d) is in compliance with all Requirements of Law
including but not limited to all federal, state and local statutes, regulations
and ordinances relating to the delivery of healthcare services of the type
provided by the Company and payment therefor, except to the extent that the
failure to do so could not reasonably be expected to have a Material Adverse
Effect.
5.02 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Company and its Subsidiaries of this Agreement,
and any other Loan Document to which such Person is party, have been duly
authorized by all necessary corporate action, and do not and will not:
(a) contravene the terms of any of that Person's
Organization Documents;
(b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document evidencing
any Contractual Obligation to which such Person is a
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party or any order, injunction, writ or decree of any Governmental Authority to
which such Person or its Property is subject; or
(c) violate any Requirement of Law.
5.03 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company or
any of its Subsidiaries of the Agreement or any other Loan Document.
5.04 Binding Effect. This Agreement and each other Loan Document
to which the Company is a party constitute the legal, valid and binding
obligations of the Company and any of its Subsidiaries to the extent it is a
party thereto, enforceable against such Person in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
5.05 Litigation. Except as specifically disclosed in Schedule
5.05, there are no actions, suits, proceedings, claims or disputes pending, or
to the best knowledge of the Company, threatened or contemplated, at law, in
equity, in arbitration or before any Governmental Authority, against the
Company or any of its Properties which:
(a) purport to affect or pertain to this Agreement or any
other Loan Document, or any of the transactions contemplated hereby or thereby;
or
(b) if determined adversely to the Company or its
Subsidiaries, would reasonably be expected to have a Material Adverse Effect.
No injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin
or restrain the execution, delivery or performance of this Agreement or any
other Loan Document, or directing that the transactions provided for herein or
therein not be consummated as herein or therein provided.
5.06 No Default. No Default or Event of Default exists or would
result from the incurring of any Obligations by the Company. Neither the
Company nor any of its Subsidiaries is in default under or with respect to any
Contractual Obligation in any respect which, individually or together with all
such defaults, could reasonably be expected to have a Material Adverse Effect
or that would, if such default had occurred after the Closing Date, create an
Event of Default under subsection 8.01(e).
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5.07 ERISA Compliance.
(a) Schedule 5.07 lists all Plans and separately identifies
Plans intended to be Qualified Plans and Multiemployer Plans. All written
descriptions thereof provided to the Bank are true and complete in all
material respects.
(b) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Federal or state law,
including all requirements under the Code or ERISA for filing reports (which
are true and correct in all material respects as of the date filed), and
benefits have been paid in accordance with the provisions of the Plan.
(c) Each Qualified Plan and Multiemployer Plan has been
determined by the IRS to qualify under Section 401 of the Code, and the trusts
created thereunder have been determined to be exempt from tax under the
provisions of Section 501 of the Code, and to the best knowledge of the Company
nothing has occurred which would cause the loss of such qualification or
tax-exempt status.
(d) Except as specifically disclosed in Schedule 5.07, there is
no outstanding liability under Title IV of ERISA with respect to any Plan
maintained or sponsored by the Company or any ERISA Affiliate, nor with respect
to any Plan to which the Company or any ERISA Affiliate contributes or is
obligated to contribute.
(e) Except as specifically disclosed in Schedule 5.07, no Plan
subject to Title IV of ERISA has any Unfunded Pension Liability.
(f) Except as specifically disclosed in Schedule 5.07 and in the
Ordinary Course of Business for periods of less than one year, no member of the
Controlled Group has ever represented, promised or contracted (whether in oral
or written form) to any current or former employee (either individually or to
employees as a group) that such current or former employee(s) would be provided,
at any cost to any member of the Controlled Group, with life insurance or
employee welfare plan benefits (within the meaning of section 3(1) of ERISA)
following retirement or termination of employment. To the extent that any
member of the Controlled Group has made any such representation, promise or
contract, such member has expressly reserved the right to amend or terminate
such life insurance or employee welfare plan benefits with respect to claims
not yet incurred.
(g) Members of the Controlled Group have complied in all material
respects with the notice and continuation coverage requirements of Section
4980B of the Code.
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(h) Except as specifically disclosed in Schedule 5.07, no ERISA
Event has occurred or is reasonably expected to occur with respect to any Plan.
(i) There are no pending or, to the best knowledge of the Company,
threatened claims, actions or lawsuits, other than routine claims for benefits
in the usual and ordinary course, asserted or instituted against (i) any Plan
maintained or sponsored by the Company or its assets, (ii) any member of the
Controlled Group with respect to any Qualified Plan, or (iii) any fiduciary
with respect to any Plan for which the Company may be directly or indirectly
liable, through indemnification obligations or otherwise.
(j) Except as specifically disclosed in Schedule 5.07, neither the
Company nor any ERISA Affiliate has incurred nor reasonably expects to incur
(i) any liability (and no event has occurred which, with the giving of notice
under Section 4219 of ERISA, would result in such liability) under Section 4201
or 4243 of ERISA with respect to a Multiemployer Plan or (ii) any liability
under Title IV of ERISA (other than premiums due and not delinquent under
Section 4007 of ERISA) with respect to a Plan.
(k) Except as specifically disclosed in Schedule 5.07, neither the
Company nor any ERISA Affiliate has transferred any Unfunded Pension Liability
to a Person other than the Company or an ERISA Affiliate or otherwise engaged
in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.
(l) No member of the Controlled Group has engaged, directly or
indirectly, in a non-exempt prohibited transaction (as defined in Section 4975
of the Code or Section 406 of ERISA) in connection with any Plan which could
reasonably be expected to have a Material Adverse Effect.
5.08 Use of Proceeds; Margin Regulations. The proceeds of the
Loans are intended to be and shall be used solely for the purposes set forth in
and permitted by Section 6.11, and are intended to be and shall be used in
compliance with Section 7.07. Neither the Company nor any of its Subsidiaries
is generally engaged in the business of purchasing or selling Margin Stock or
extending credit for the purpose of purchasing or carrying Margin Stock.
5.09 Title to Properties. The Company has good record and
marketable title in fee simple to, or valid leasehold interests in, all real
Property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title as could not, individually or in
the aggregate, have a Material Adverse Effect. As of the Closing Date, the
Property of the Company is subject to no Liens, other than Permitted Liens.
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5.10 Taxes. The Company has filed all Federal and other material
tax returns and reports required to be filed, and has paid all Federal and
other material taxes, assessments, fees and other governmental charges levied
or imposed upon them or their Properties, income or assets otherwise due and
payable, except those which are being contested in good faith by appropriate
proceedings and for which adequate reserves have been provided in accordance
with GAAP and no Notice of Lien has been filed or recorded. There is no
proposed tax assessment against the Company or any of its Subsidiaries which
would, if the assessment were made, have a Material Adverse Effect.
5.11 Financial Condition.
(a) The audited consolidated financial statements of financial
condition of the Company and its Subsidiaries dated November 30, 1993, and the
related consolidated statements of income or operations, shareholders' equity
and cash flows for the fiscal year ended on that date:
(i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise
expressly noted therein;
(ii) fairly present the financial condition of the Company
and its Subsidiaries as of the date thereof and results of operations
for the period covered thereby; and
(iii) except as specifically disclosed in Schedule 5.11,
show all material indebtedness and other liabilities, direct or
contingent of the Company and its consolidated Subsidiaries as of the
date thereof, including liabilities for taxes, material commitments
and Contingent Obligations.
(b) Since February 28, 1994, there has been no Material Adverse
Effect.
5.12 Environmental Matters.
(a) Except as specifically disclosed in Schedule 5.12, the
on-going operations of the Company and each of its Subsidiaries comply in all
respects with all Environmental Laws, except such non-compliance which would
not (if enforced in accordance with applicable law) result in liability in
excess of $500,000 in the aggregate.
(b) Except as specifically disclosed in Schedule 5.12, the Company
has obtained all licenses, permits, authorizations and registrations required
under any Environmental Law ("Environmental Permits") and necessary for their
respective ordinary course operations, all such Environmental Permits are in
good standing, and the Company and each of its Subsidiaries are
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in compliance with all material terms and conditions of such Environmental
Permits.
(c) Except as specifically disclosed in Schedule 5.12, none of the
Company, any of its Subsidiaries or any of their respective present Property or
operations, is subject to any outstanding written order from or agreement with
any Governmental Authority, nor subject to any judicial or docketed
administrative proceeding, respecting any Environmental Law, Environmental
Claim or Hazardous Material.
(d) Except as specifically disclosed in Schedule 5.12, there are
no Hazardous Materials or other conditions or circumstances existing with
respect to any Property, or arising from operations prior to the Closing Date,
of the Company or any of its Subsidiaries that would reasonably be expected to
give rise to Environmental Claims with a potential liability of the Company and
its Subsidiaries in excess of $1,000,000 in the aggregate for any such
condition, circumstance or Property. In addition, (i) neither the Company nor
any of its Subsidiaries has any underground storage tanks (x) that are not
properly registered or permitted under applicable Environmental Laws, or (y)
that are leaking or disposing of Hazardous Materials off-site, and (ii) the
Company and its Subsidiaries have notified all of their employees of the
existence, if any, of any health hazard arising from the conditions of their
employment and have met all notification requirements under Title III of CERCLA
and all other Environmental Laws.
5.13 Guaranty. All representations and warranties of the Company
and any of its Domestic Subsidiaries party thereto contained in the Guaranty
are true and correct.
5.14 Regulated Entities. None of the Company, any Person
controlling the Company, or any Subsidiary of the Company, is (a) an
"Investment Company" within the meaning of the Investment Company Act of 1940;
or (b) subject to regulation under the Public Utility Holding Company Act of
1935, the Federal Power Act, the Interstate Commerce Act, any state public
utilities code, or any other Federal or state statute or regulation limiting
its ability to incur Indebtedness.
5.15 No Burdensome Restrictions. The Company is not a party to or
bound by any Contractual Obligation, or subject to any charter or corporate
restriction, or any Requirement of Law, which could reasonably be expected to
have a Material Adverse Effect.
5.16 Solvency. On a consolidated basis, the Company is Solvent.
5.17 Labor Relations. There are no significant strikes, lockouts
or other labor disputes against the Company or, to the
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best of the Company's knowledge, threatened against or affecting the Company,
and no significant unfair labor practice complaint is pending against the
Company or, to the best knowledge of the Company, threatened against any of
them before any Governmental Authority.
5.18 Copyrights, Patents, Trademarks and Licenses, etc. The
Company owns or is licensed or otherwise has the right to use all of the
patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary for
the operation of its businesses, without conflict with the rights of any other
Person. To the best knowledge of the Company, no slogan or other advertising
device, product, process, method, substance, part or other material now
employed, or now contemplated to be employed, by the Company infringes upon any
rights held by any other Person; except as specifically disclosed in Schedule
5.05, no claim or litigation regarding any of the foregoing is pending or
threatened, and no patent, invention, device, application, principle or any
statute, law, rule, regulation, standard or code is pending or, to the
knowledge of the Company, proposed, which, in either case, could reasonably be
expected to have a Material Adverse Effect.
5.19 Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
5.19 hereto and has no equity investments in any other corporation or entity
other than those specifically disclosed in part (b) of Schedule 5.19.
5.20 Broker's; Transaction Fees. Neither the Company nor any of its
Subsidiaries has any obligation to any Person in respect of any finder's,
broker's or investment banker's fee in connection with the transactions
contemplated hereby.
5.21 Insurance. The Properties of the Company and its Subsidiaries
are insured with financially sound and reputable insurance companies not
Affiliates of the Company, in such amounts, with such deductibles and covering
such risks as are customarily carried by companies engaged in similar
businesses and owning similar Properties in localities where the Company or
such Subsidiary operates.
5.22 Full Disclosure. None of the representations or warranties
made by the Company or any of its Subsidiaries in the Loan Documents as of the
date such representations and warranties are made or deemed made, and none of
the statements contained in each exhibit, report, statement or certificate
furnished by or on behalf of the Company or any of its Subsidiaries in
connection with the Loan Documents (including the offering and disclosure
materials delivered by or on behalf of the Company to the Bank prior to the
Closing Date), contains any untrue statement of a material fact or omits any
material fact required to be stated
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therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when
made or delivered.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, so long as the Bank shall have
any Commitment hereunder, or any Loan or other Obligation shall remain unpaid
or unsatisfied, unless the Bank waives compliance in writing:
6.01 Financial Statements. The Company shall deliver to the Bank
in form and detail satisfactory to the Bank and as soon as available, but not
later than forty-five days after the end of each of the first three fiscal
quarters of each year, a copy of the unaudited consolidated and consolidating
balance sheet of the Company as of the end of such quarter and the related
consolidated and consolidating statements of income, shareholders' equity and
cash flows for the period commencing on the first day and ending on the last
day of such quarter, and certified by an appropriate Responsible Officer as
being materially complete and correct and fairly presenting, in accordance with
GAAP, the financial position and the results of operations of the Company and
the Subsidiaries.
6.02 Certificates; Other Information. The Company shall furnish to
the Bank:
(a) concurrently with the delivery of the financial
statements referred to in subsection 6.01 a Compliance Certificate of a
Responsible Officer (i) stating that, to the best of such officer's knowledge,
the Company, during such period, has observed and performed all of its
covenants and other agreements, and satisfied every condition contained in this
Agreement to be observed, performed or satisfied by it, and that such officer
has obtained no knowledge of any Default or Event of Default except as
specified (by applicable subsection reference) in such certificate, and
(ii) showing in detail the calculations supporting such statement in respect
of all financial covenants hereunder, all substantially in the form of Exhibit B
attached hereto with appropriate insertions;
(b) promptly after they are sent, copies of all financial
statements and reports which the Company sends to its shareholders; and
promptly after they are filed, copies of all financial statements and regular,
periodical or special reports which the Company may make to, or file with, the
Securities and Exchange Commission or any successor or similar Governmental
Authority; and
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(c) promptly, such additional business, financial,
corporate affairs and other information as the Bank may from time to time
reasonably request; and
6.03 Notices. The Company shall promptly notify the Bank:
(a) (i) of the occurrence of any Default or Event of
Default; or (ii) of the occurrence or existence of any event or circumstance
that is reasonably likely to result in a violation of any covenant contained in
Article VII of this Agreement.
(b) of any material dispute, litigation, investigation,
proceeding or suspension which may exist at any time between the Company or any
of its Subsidiaries and any Governmental Authority;
(c) of the commencement of, or any material development
in, any litigation or proceeding affecting the Company (i) in which the amount
of damages claimed is $1,000,000 (or its equivalent in another currency or
currencies) or more, (ii) in which injunctive or similar relief is sought and
which, if adversely determined, would reasonably be expected to have a Material
Adverse Effect, or (iii) in which the relief sought is an injunction or other
stay of the performance of this Agreement or any Loan Document;
(d) upon, but in no event later than 10 days after,
becoming aware of (i) any and all enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or threatened against
the Company or any of its Properties pursuant to any applicable Environmental
Laws, (ii) all other material Environmental Claims, and (iii) any Environmental
Claims relating to any real property adjoining or in the vicinity of any
material Property of the Company that can reasonably be anticipated to cause
such Property or any part thereof to be subject to any restrictions on its
ownership, occupancy, transferability or use under any Environmental Laws;
(e) of any other litigation or proceeding affecting the
Company which the Company would be required to report to the SEC pursuant to
the Exchange Act, within four days after reporting the same to the SEC;
(f) of any of the following ERISA events affecting the
Company or any member of its Controlled Group (but in no event more than 10
days after such event), together with a copy of any notice with respect to such
event that may be required to be filed with a Governmental Authority and any
notice delivered by a Governmental Authority to the Company or any member or
its Controlled Group with respect to such event:
(i) an ERISA Event;
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(ii) the adoption of any new Plan that is subject
to Title IV of ERISA or section 412 of the Code by any member
of the Controlled Group;
(iii) the adoption of any amendment to a Plan that
is subject to Title IV of ERISA or section 412 of the Code, if
such amendment results in a material increase in benefits or
unfunded liabilities; or
(iv) the commencement of contributions by any
member of the Controlled Group to any Plan that is subject to
Title IV of ERISA or section 412 of the Code;
(g) of any Material Adverse Effect subsequent to
February 28, 1994;
(h) of any change in accounting policies or financial
reporting practices by the Company or any of its Subsidiaries;
(i) of any labor controversy resulting in or threatening
to result in any strike, work stoppage, boycott, shutdown or other labor
disruption against or involving the Company or any of its Subsidiaries; and
(j) of any claim, complaint, notice or request for
information received by the Company or any of its Subsidiaries with respect to
compliance with health care regulatory requirements relating to the delivery of
health care services of the type provided by the Company and payment therefor
(excluding malpractice claims but including claims relating to patient dumping
in the case of the operation of an emergency department), including, but not
limited to, any violation or alleged violation of any federal, state or local
statute, regulation, or ordinance relating to the delivery of medical services
and payment therefor, including, but not limited to, the requirements set forth
under federal Medicare and Medi-Cal (or Medicaid) statutes, 42 U.S.C. Sections
1320a-7, 1320a-7(a) and 1320a-7b, and the regulations promulgated thereunder
and related state or local statutes or regulations.
Each notice pursuant to this Section shall be accompanied by a
written statement by a Responsible Officer of the Company setting forth details
of the occurrence referred to therein, and stating what action the Company
proposes to take with respect thereto and at what time. Each notice under
subsection 6.03(a) shall describe with particularity any and all clauses or
provisions of this Agreement or other Loan Document that have been breached or
violated.
6.04 Preservation of Corporate Existence, Etc. The Company shall,
and shall cause each of its Subsidiaries to:
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(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state or
jurisdiction of incorporation, except for Subsidiaries not necessary to the
Ordinary Course of the Company's Business and dispositions permitted pursuant
to Section 7.02 of this Agreement;
(b) preserve and maintain in full force and effect all
rights, privileges, qualifications, permits, licenses and franchises necessary
or desirable in the Ordinary Course of Business;
(c) use its reasonable efforts, in the Ordinary Course of
Business, to preserve its business organization and preserve the goodwill and
business of the customers, suppliers and others having material business
relations with it; and
(d) preserve or renew all of its registered trademarks,
trade names and service marks, the non-preservation of which could reasonably
be expected to have a Material Adverse Effect.
6.05 Maintenance of Property. The Company shall maintain, and
shall cause each of its Subsidiaries to maintain, and preserve all its Property
which is used or useful in its business in good working order and condition,
ordinary wear and tear excepted and make all necessary repairs thereto and
renewals and replacements thereof except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect. The Company shall
use the standard of care typical in the industry in the operation and
maintenance of its facilities.
6.06 Insurance. The Company shall maintain, and shall cause each of
its Subsidiaries to maintain, with financially sound and reputable independent
insurers, insurance with respect to their respective Properties and businesses
against loss or damage of the kinds customarily insured against by Persons
engaged in the same or similar business, of such types and in such amounts as
are customarily carried under similar circumstances by such other Persons;
including workers' compensation insurance. Upon request of the Bank, the
Company shall furnish the Bank, at reasonable intervals (but not more than once
per calendar year) a certificate of a Responsible Officer of the Company (and,
if requested by the Bank, any insurance broker of the Company) setting forth
the nature and extent of all insurance maintained by the Company and its
Subsidiaries in accordance with this Section 6.06.
6.07 Payment of Obligations. The Company shall, and shall cause
its Subsidiaries to, pay and discharge as the same shall become due and
payable, all their respective obligations and liabilities, including:
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(a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same are
being contested in good faith by appropriate proceedings and adequate reserves
in accordance with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law
become a Lien upon its Property; and
(c) all Indebtedness, as and when due and payable, but
subject to any subordination provisions contained in any instrument or
agreement evidencing such Indebtedness.
6.08 Compliance with Laws. The Company shall comply, and shall
cause each of its Subsidiaries to comply, in all material respects with all
Requirements of Law of any Governmental Authority having jurisdiction over it
or its business (including the Federal Fair Labor Standards Act), except such
as may be contested in good faith or as to which a bona fide dispute may exist.
6.09 Inspection of Property and Books and Records. The Company
shall maintain and shall cause each of its Subsidiaries to maintain proper
books of record and account, in which full, true and correct entries in
conformity with GAAP consistently applied shall be made of all financial
transactions and matters involving the assets and business of the Company and
such Subsidiaries. The Company shall permit, and shall cause each of its
Subsidiaries to permit, representatives and independent contractors of the Bank
to visit and inspect any of their respective Properties, to examine their
respective corporate, financial and operating records, and make copies thereof
or abstracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective directors, officers, and independent public
accountants, all at the expense of the Company and at such reasonable times
during normal business hours and as often as may be reasonably desired, upon
reasonable advance notice to the Company; provided, however, when an Event of
Default exists the Bank may do any of the foregoing at the expense of the
Company at any time during normal business hours and without advance notice.
6.10 Environmental Laws.
(a) The Company shall, and shall cause each of its
Subsidiaries to, conduct its operations and keep and maintain its Property in
compliance with all Environmental Laws.
(b) Upon the written request of the Bank, the Company
shall submit and cause each of its Subsidiaries to submit, to the Bank, at the
Company's sole cost and expense, at reasonable intervals, a report providing an
update of the status of any environmental, health or safety compliance, hazard
or liability
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issue identified in any notice or report required pursuant to subsection
6.03(d), that could, individually or in the aggregate, result in liability
in excess of $1,000,000.
6.11 Use of Proceeds. The Company shall use the proceeds of the
Loans solely for working capital and Capital Expenditures (subject to the
limitations of Section 7.13 of the September Agreement).
6.12 Solvency. On a consolidated basis, the Company shall at all
times be Solvent.
6.13 Further Assurances.
(a) The Company shall ensure that all written
information, exhibits and reports furnished to the Bank do not and will not
contain any untrue statement of a material fact and do not and will not omit to
state any material fact or any fact necessary to make the statements contained
therein not misleading in light of the circumstances in which made, and will
promptly disclose to the Bank and correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgement
or recordation thereof.
(b) Promptly upon request by the Bank, the Company shall
(and shall cause any of its Subsidiaries to) do, execute, acknowledge, deliver,
record, re-record, file, re-file, register and re-register, any and all such
further acts the Bank, as the case may be, may reasonably require from time to
time in order to carry out more effectively the purposes of this Agreement or
any other Loan Document.
6.14 Licensing. The Company will and will cause each of its
Subsidiaries to be operated at all times in compliance in all material respects
with all federal, state and local statutes, regulations and ordinances relating
to the licensing of healthcare services of the type provided by the Company.
ARTICLE VII
NEGATIVE COVENANTS
The Company hereby covenants and agrees that, so long as the Bank
shall have any Commitment hereunder, or any Loan or other Obligation shall
remain unpaid or unsatisfied, unless the Bank waives compliance in writing:
7.01 Limitation on Liens. The Company shall not, and shall not
suffer or permit any of its Subsidiaries to, directly or indirectly, make,
create, incur, assume or suffer to exist any Lien upon or with respect to any
part of its Property, whether
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now owned or hereafter acquired, other than the following ("Permitted Liens"):
(a) any Lien existing on the Property of the Company or
its Subsidiaries on the Closing Date and set forth in Schedule 7.01 securing
Indebtedness outstanding on such date;
(b) any Lien created under any Loan Document and under
any "Loan Document" under the September Agreement.
(c) Liens for taxes, fees, assessments or other
governmental charges which are not delinquent or remain payable without
penalty, or to the extent that non-payment thereof is permitted by Section
6.07, provided that no Notice of Lien has been filed or recorded under the
Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the Ordinary
Course of Business which are not delinquent or remain payable without penalty
or which are being contested in good faith and by appropriate proceedings,
which proceedings have the effect of preventing the forfeiture or sale of the
Property subject thereto;
(e) Liens (other than any Lien imposed by ERISA)
consisting of pledges or deposits required in the Ordinary Course of Business
in connection with workers' compensation, unemployment insurance and other
social security legislation;
(f) Liens on the Property of the Company or any of its
subsidiaries securing (i) the non-delinquent performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, (ii)
contingent obligations on surety and appeal bonds, and (iii) other
non-delinquent obligations of a like nature; in each case, incurred in the
Ordinary Course of Business, provided all such Liens in the aggregate would not
(even if enforced) cause a Material Adverse Effect;
(g) Liens consisting of judgment or judicial attachment
liens, provided that the enforcement of such Liens is effectively stayed and
all such Liens in the aggregate at any time outstanding for the Company and its
Subsidiaries do not exceed $1,000,000;
(h) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the Ordinary Course of Business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the Property subject thereto or interfere
with the ordinary conduct of the businesses of the Company and its
Subsidiaries;
(i) Liens on assets of corporations which become
Subsidiaries after the date of this Agreement, provided, however,
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that such Liens existed at the time the respective corporations became
Subsidiaries and were not created in anticipation thereof;
(j) Purchase money security interests existing on the
date of this Agreement on any Property acquired or held by the Company or its
Subsidiaries in the Ordinary Course of Business in favor of the seller thereof,
securing Indebtedness incurred or assumed for the purpose of financing all or
any part of the cost of acquiring such Property;
(k) Liens securing Capital Lease Obligations on assets
subject to such Capital Leases, provided that such Capital Leases are permitted
under subsection 7.11;
(l) Liens arising solely by virtue of any statutory or
common law provision relating to banker's liens, rights of setoff or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; provided that (i) such deposit account is not
a dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated
by the Federal Reserve Board, and (ii) such deposit account is not intended by
the Company or any of its Subsidiaries to provide collateral to the depository
institution;
(m) Security interests arising out of Acquisitions by
THC of Property acquired or held by THC in the Ordinary Course of Business,
securing Indebtedness incurred or assumed for the purpose of financing all or
any part of the cost of acquiring such Property, provided that such
Indebtedness does not exceed in the aggregate five percent (5%) of the amount
of the Company's Consolidated Assets; and
(n) Other Liens in the ordinary course of business
securing obligations not exceeding $1,000,000 in the aggregate securing
Indebtedness permitted to be incurred pursuant to Section 7.05(g).
7.02 Disposition of Assets. Except for dispositions identified in
Schedule 7.02, the Company shall not, and shall not suffer or permit any of its
Subsidiaries to, directly or indirectly, sell, assign, lease, convey, transfer
or otherwise dispose of (whether in one or a series of transactions) any
Property (including accounts and notes receivable, with or without recourse) or
enter into any agreement to do any of the foregoing, except:
(a) dispositions of inventory, or used, worn-out or
surplus equipment, all in the Ordinary Course of Business;
(b) the sale of equipment to the extent that such
equipment is exchanged for credit against the purchase price of replacement
equipment, or the proceeds of such sale are
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reasonably promptly applied to the purchase price of such replacement
equipment;
(c) dispositions of inventory or equipment by the
Company to any of its Subsidiaries to the Company or by any of its Subsidiaries
to the Company pursuant to reasonable business requirements;
(d) dispositions of accounts receivable in the Ordinary
Course of Business on a non-recourse basis; and
(e) sales of restructured Properties and surplus real
property described in Schedule 7.02 hereto.
(f) other dispositions of assets not exceeding
$5,000,000 in the aggregate of gross book value of the assets so disposed.
7.03 Consolidations and Mergers. The Company shall not, and shall
not suffer or permit any of its Subsidiaries to, merge, consolidate with or
into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to or in favor of any Person,
except:
(a) any Subsidiary of the Company may merge with the
Company, provided that the Company shall be the continuing or surviving
corporation, or with any one or more Subsidiaries of the Company, provided that
if any transaction shall be between a Subsidiary and a Wholly-Owned Subsidiary,
the Wholly-Owned Subsidiary shall be the continuing or surviving corporation;
(b) any Subsidiary of the Company may sell or lease all
or substantially all of its assets (upon voluntary liquidation or otherwise),
to the Company or another Wholly-Owned Subsidiary of the Company; and
(c) any such transaction after the Closing Date in which
the consideration is limited to an exchange of the Company's stock having a
market value not more than two and one half percent (2-1/2%) of amount of the
Company's Consolidated Assets.
7.04 Loans and Investments. The Company shall not purchase or
acquire, or suffer or permit any of its Subsidiaries to purchase or acquire, or
make any commitment therefor, any capital stock, equity interest, or any
obligations or other securities of, or any interest in, any Person, or make or
commit to make any Acquisitions, or make or commit to make any advance, loan,
extension of credit or capital contribution to or any other investment in, any
Person including any Affiliate of the Company, except for:
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(a) investments in Cash Equivalents;
(b) extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of goods or
services in the Ordinary Course of Business; and
(c) extensions of credit by the Company to any of its
Wholly-Owned Subsidiaries or by any of its Wholly-Owned Subsidiaries to another
of its Wholly-Owned Subsidiaries of the Company.
(d) any transaction not exceeding two and one half
percent (2-1/2%) of the amount of the Company's Consolidated Assets; and
(e) loans to the Company's employees not exceeding
$5,000,000 in the aggregate.
7.05 Limitation on Indebtedness. The Company shall not, and shall
not suffer or permit any of its Subsidiaries to, create, incur, assume, suffer
to exist, or otherwise become or remain directly or indirectly liable with
respect to, any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and
the September Agreement;
(b) Indebtedness consisting of Contingent Obligations
permitted pursuant to Section 7.08;
(c) Indebtedness existing on the Closing Date and set
forth in Schedule 7.05;
(d) Indebtedness secured by Liens permitted by Section
7.01(h), (i), (j) and (m);
(e) Indebtedness incurred in connection with leases
permitted pursuant to Section 7.11;
(f) Indebtedness in the Ordinary Course of Business in
connection with corporate credit cards;
(g) Indebtedness secured by Liens permitted by Section
7.01(n) under terms that are not more restrictive than this Agreement and on
which no principal payment shall be made prior to the Termination Date; and
(h) Indebtedness of Priory Hospitals Group to the Bank in
the amount of 10 million pounds.
7.06 Transactions with Affiliates. The Company shall not, and
shall not suffer or permit any of its Subsidiaries to, enter into any
transaction with any Affiliate of the Company or of any
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such Subsidiary, except (a) as expressly permitted by this Agreement, or (b) in
the Ordinary Course of Business and pursuant to the reasonable requirements of
the business of the Company or such Subsidiary; in each case (a) and (b), upon
fair and reasonable terms no less favorable to the Company or such Subsidiary
than would obtain in a comparable arm's-length transaction with a Person not an
Affiliate of the Company or such Subsidiary.
7.07 Use of Proceeds. The Company shall not and shall not suffer
or permit any of its Subsidiaries to use any portion of the Loan proceeds,
directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or
otherwise refinance indebtedness of the Company or others incurred to purchase
or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or
carrying any Margin Stock, or (iv) to acquire any security in any transaction
that is subject to Section 13 or 14 of the Exchange Act, provided that the
Company may use Loan proceeds to purchase its own stock for holding as treasury
stock as long as no violation of Regulation G, T, U or X of the Federal Reserve
Board results.
7.08 Contingent Obligations. The Company shall not, and shall not
suffer or permit any of its Subsidiaries to, create, incur, assume or suffer to
exist any Contingent Obligations except:
(a) endorsements for collection or deposit in the
Ordinary Course of Business;
(b) Rate Contracts entered into in the Ordinary Course of
Business;
(c) Contingent Obligations of the Company and its
Subsidiaries existing as of the Closing Date and listed in Schedule 7.08; and
(d) performance guaranties by the Company of obligations
of THC, incurred for the acquisition by THC of facilities.
7.09 Joint Ventures. The Company shall not, and shall not suffer
or permit any of its Subsidiaries to enter into any Joint Venture, other than
in the Ordinary Course of Business.
7.10 Compliance with ERISA. The Company shall not, and shall not
suffer or permit any of its Subsidiaries to, (i) terminate any Plan subject to
Title IV of ERISA so as to result in any material (in the opinion of the Bank)
liability to the Company or any ERISA Affiliate, (ii) permit to exist any ERISA
Event or any other event or condition, which presents the risk of a material
(in the opinion of the Bank) liability to any member of the Controlled Group,
(iii) make a complete or partial
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withdrawal (within the meaning of ERISA Section 4201) from any Multiemployer
Plan so as to result in any material (in the opinion of the Bank) liability to
the Company or any ERISA Affiliate, (iv) enter into any new Plan or modify any
existing Plan so as to increase its obligations thereunder which could result
in any material (in the opinion of the Bank) liability to any member of the
Controlled Group, or (v) permit the present value of all nonforfeitable accrued
benefits under any Plan (using the actuarial assumptions utilized by the PBGC
upon termination of a Plan) materially (in the opinion of the Bank) to exceed
the fair market value of Plan assets allocable to such benefits, all determined
as of the most recent valuation date for each such Plan.
7.11 Lease Obligations. The Company shall not, and shall not
suffer or permit any of its Subsidiaries to, create or suffer to exist any
obligations for the payment of rent for any Property under lease or agreement
to lease, except for:
(a) leases of the Company and its Subsidiaries in
existence on the Closing Date;
(b) Operating Leases entered into by the Company or any
of its Subsidiaries after the Closing Date in the Ordinary Course of Business;
and
(c) Capital Leases, entered into by the Company or any of
its Subsidiaries after the Closing Date to finance the acquisition of
equipment; provided that the aggregate annual rental payments for all such
Capital Leases shall not exceed in any fiscal year $1,000,000; and
(d) Capital Leases for real estate where the related
obligations constitute Capital Expenditures.
7.12 Restricted Payments. The Company shall not, and shall not
suffer or permit any of its Subsidiaries to, declare or make any dividend
payment or other distribution of assets, properties, cash, rights, obligations
or securities on account of any shares of any class of its capital stock, or
purchase, redeem or otherwise acquire for value any shares of its capital stock
or any warrants, rights or options to acquire such shares, now or hereafter
outstanding; except that the Company and any Wholly-Owned Subsidiary of the
Company may:
(a) declare and make dividend payments or other
distributions payable solely in its common stock;
(b) purchase, redeem or otherwise acquire shares of its
common stock or warrants or options to acquire any such shares with the
proceeds received from the substantially concurrent issue of new shares of its
common stock; and
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(c) declare or pay cash dividends to its stockholders and
purchase, redeem or otherwise acquire shares of its capital stock or warrants,
rights or options to acquire any such shares for cash solely out of 25% of net
income of the Company and its Subsidiaries arising after the date hereof and
computed on a cumulative consolidated basis, provided, that, immediately after
giving effect to such proposed action, no Default or Event of Default would
exist.
7.13 Net Funded Debt to EBITDA Ratio. The Company shall not permit
its Net Funded Debt to EBITDA Ratio to be more than the applicable maximum
amount set forth opposite such consecutive 12-month period below:
Each Consecutive 12-Month
Period Ending Maximum
------------------------- -------
May 31, 1994 1.80 to 1.00
August 31, 1994 2.50 to 1.00
7.14 EBITDA to Consolidated Net Interest Expense Ratio. The
Company shall not permit its EBITDA to Consolidated Net Interest Expense Ratio
to be less than the applicable minimum amount set forth opposite such
consecutive 12-month period below:
Each Consecutive 12-Month
Period Ending Ratio
------------------------- -----
May 31, 1994 15.00 to 1.00
August 31, 1994 9.50 to 1.00
7.15 Tangible Net Worth. The Company shall not permit (as of the
end of any fiscal quarter) its Tangible Net Worth to be less than 95% of the
Tangible Net Worth as of the last fiscal quarter end prior to the Closing Date
hereof plus 75% of the Company's net income (not to be reduced by losses)
earned in each fiscal quarter plus 75% of the Net Issuance Proceeds since the
date hereof.
7.16 Change in Business. The Company shall not, and shall not
permit any of its Subsidiaries to, engage in any material line of business
substantially different from those lines of business carried on by it on the
date hereof.
7.17 Accounting Changes. The Company shall not, and shall not
suffer or permit any of its Subsidiaries to, make any significant change in
accounting treatment or reporting practices, except as required by GAAP, or
change the fiscal year of the Company or of any of its consolidated
Subsidiaries.
7.18 Use of Proceeds - Ineligible Securities. The Company shall
not, directly or indirectly, use any portion of the Loan proceeds (i) knowingly
to purchase Ineligible Securities from the
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Arranger during any period in which the Arranger makes a market in such
Ineligible Securities, (ii) knowingly to purchase during the underwriting or
placement period Ineligible Securities being underwritten or privately placed
by the Arranger, or (iii) to make payments of principal or interest on
Ineligible Securities underwritten or privately placed by the Arranger and
issued by or for the benefit of the Company or any Affiliate of the Company.
ARTICLE VIII
EVENTS OF DEFAULT
8.01 Event of Default. Any of the following shall constitute an
"Event of Default":
(a) Non-Payment. The Company or THC fails to pay, (i)
when and as required to be paid herein, any amount of principal of any Loan, or
(ii) within two days after the same shall become due, any interest, fee or any
other amount payable hereunder or pursuant to any other Loan Document; or
(b) Representation or Warranty. Any representation or
warranty by the Company or any of its Subsidiaries made or deemed made herein,
in any Loan Document, or which is contained in any certificate, document or
financial or other statement by the Company, any of its Subsidiaries, or their
respective Responsible Officers, furnished at any time under this Agreement, or
in or under any Loan Document, shall prove to have been incorrect in any
material respect on or as of the date made or deemed made; or
(c) Specific Defaults. The Company fails to perform or
observe any term, covenant or agreement contained in Sections 6.01, 6.02, 6.03
and 6.09 or Article VII; or
(d) Other Defaults. The Company fails to perform or
observe any other term or covenant contained in this Agreement or any Loan
Document, and such default shall continue unremedied for a period of 20 days
after the earlier of (i) the date upon which a Responsible Officer of the
Company knew or should have known of such failure or (ii) the date upon which
written notice thereof is given to the Company by the Bank; or
(e) Cross-Default. (i) The Company or any of its
Subsidiaries (x) fails to make any payment in respect of any Indebtedness or
Contingent Obligation having an aggregate principal amount (including undrawn
committed or available amounts and including amounts owing to all creditors
under any combined or syndicated credit arrangement) of more than $1,000,000
when due (whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise) and such failure continues after the applicable grace or
notice period, if any, specified in the document relating thereto on the date
of such
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failure; or (y) fails to perform or observe any other condition or covenant, or
any other event shall occur or condition exist, under any agreement or
instrument relating to any such Indebtedness or Contingent Obligation, and such
failure continues after the applicable grace or notice period, if any,
specified in the document relating thereto on the date of such failure if the
effect of such failure, event or condition is to cause, or to permit the holder
or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity, or such Contingent Obligation to
become payable or cash collateral in respect thereof to be demanded; or (ii) an
"Event of Default" or "Default" shall occur under the September Agreement; or
(f) Insolvency; Voluntary Proceedings. The Company or
any of its Subsidiaries (i) ceases or fails to be Solvent, or generally fails
to pay, or admits in writing its inability to pay, its debts as they become
due, subject to applicable grace periods, if any, whether at stated maturity or
otherwise; (ii) voluntarily ceases to conduct its business in the ordinary
course; (iii) commences any Insolvency Proceeding with respect to itself; or
(iv) takes any action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary
Insolvency Proceeding is commenced or filed against the Company or any
subsidiary of the Company, or any writ, judgment, warrant of attachment,
execution or similar process, is issued or levied against a substantial part of
the Company's or any of its Subsidiaries' Properties, and any such proceeding
or petition shall not be dismissed, or such writ, judgment, warrant of
attachment, execution or similar process shall not be released, vacated or
fully bonded within 60 days after commencement, filing or levy; (ii) the
Company or any of its Subsidiaries admits the material allegations of a
petition against it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or
(iii) the Company or any of its Subsidiaries acquiesces in the appointment of a
receiver, trustee, custodian, conservator, liquidator, mortgagee in possession
(or agent therefor), or other similar Person for itself or a substantial
portion of its Property or business; or
(h) ERISA. (i) A member of the Controlled Group shall
fail to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under a
Multiemployer Plan; (ii) the Company or an ERISA Affiliate shall fail to
satisfy its contribution requirements under Section 412(c)(11) of the Code,
whether or not it has sought a waiver under Section 412(d) of the Code; (iii)
in the case of an ERISA Event involving the withdrawal from a Plan
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of a "substantial employer" (as defined in Section 4001(a)(2) or Section
4062(e) of ERISA), the withdrawing employer's proportionate share of that
Plan's Unfunded Pension Liabilities is more than $1,000,000; (iv) in the case
of an ERISA Event involving the complete or partial withdrawal from a
Multiemployer Plan, the withdrawing employer has incurred a withdrawal
liability in an aggregate amount exceeding $1,000,000; (v) in the case of an
ERISA Event not described in clause (iii) or (iv), the Unfunded Pension
Liabilities of the relevant Plan or Plans exceed $1,000,000; (vi) a Plan that
is intended to be qualified under Section 401(a) of the Code shall lose its
qualification, and the loss can reasonably be expected to impose on members of
the Controlled Group liability (for additional taxes, to Plan participants, or
otherwise) in the aggregate amount of $1,000,000 or more; (vii) the
commencement or increase of contributions to, or the adoption of or the
amendment of a Plan by, a member of the Controlled Group shall result in a net
increase in unfunded liabilities to the Controlled Group in excess of
$1,000,000; (viii) any member of the Controlled Group engages in or otherwise
becomes liable for a non-exempt prohibited transaction and the initial tax or
additional tax under section 4975 of the Code relating thereto might reasonably
be expected to exceed $1,000,000; (ix) a violation of section 404 or 405 of
ERISA or the exclusive benefit rule under section 401(a) of the Code if such
violation might reasonably be expected to expose a member or members of the
Controlled Group to monetary liability in excess of $1,000,000; (x) any member
of the Controlled Group is assessed a tax under section 4980B of the Code in
excess of $1,000,000; or (xi) the occurrence of any combination of events
listed in clauses (iii) through (x) that involves a potential liability, net
increase in aggregate Unfunded Pension Liabilities, unfunded liabilities, or
any combination thereof, in excess of $1,000,000; or
(i) Monetary Judgments. One or more final judgments,
orders or decrees shall be entered against the Company or any of its
Subsidiaries involving in the aggregate a liability (not fully covered by
independent third-party insurance) as to any single or related series of
transactions, incidents or conditions, of $1,000,000 or more, and the same
shall remain unsatisfied, unvacated and unstayed pending appeal for a period of
30 days after the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment,
order or decree shall be rendered against the Company which does or would
reasonably be expected to have a Material Adverse Effect, and there shall be
any period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(k) Loss of Licenses. Any Governmental Authority shall
finally revoke or fail to renew any material license,
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permit or franchise of the Company or the Company shall for any reason lose any
material license, permit or franchise or the Company or any of its Subsidiaries
shall suffer the imposition of any restraining order, escrow, suspension or
impound of funds in connection with any proceeding (judicial or administrative)
with respect to any material license, permit or franchise; or
(l) Adverse Change. There shall occur a Material Adverse
Effect; or
(m) Guarantor Defaults. Any Guarantor shall fail in any
material respect to perform or observe any term, covenant or agreement in its
Guaranty; or any Guaranty shall for any reason be in material part (including
with respect to future advances) or wholly revoked or invalidated, or otherwise
cease to be in full force and effect, or any Guarantor or any other Person
shall contest in any manner the validity or enforceability thereof or deny that
it has any further liability or obligation thereunder; or any event described
at paragraphs (f) or (g) shall occur with respect to any Guarantor.
8.02 Remedies. If any Event of Default occurs and is not remedied
during any applicable grace period, Bank may:
(a) declare the Commitments of the Bank to make Loans to
be terminated, whereupon such Commitments shall forthwith be terminated;
(b) declare the unpaid principal amount of all
outstanding Loans, all interest accrued and unpaid thereon, and all other
amounts owing or payable hereunder or under any other Loan Document to be
immediately due and payable; without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Company;
and
(c) exercise all rights and remedies available to it under
the Loan Documents or applicable law;
provided, however, that upon the occurrence of any event specified in paragraph
(f) or (g) of Section 8.01 (in the case of clause (i) of paragraph (g) upon the
expiration of the 60-day period mentioned therein), the obligation of the Bank
to make Loans shall automatically terminate and the unpaid principal amount of
all outstanding Loans and all interest and other amounts shall automatically
become due and payable without further act of the Bank.
8.03 Rights Not Exclusive. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other rights, powers, privileges or remedies provided by law or in equity,
or under any other instrument, document or agreement now existing or hereafter
arising.
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ARTICLE IX
MISCELLANEOUS
9.01 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by the Company therefrom, shall be effective unless
the same shall be in writing and signed by the Bank, and then such waiver shall
be effective only in the specific instance and for the specific purpose for
which given.
9.02 Notices.
(a) All notices, requests and other communications
provided for hereunder shall be in writing (including, unless the context
expressly otherwise provides, telegraphic, telex, facsimile transmission or
cable communication) and mailed, telegraphed, telexed or delivered, to the
address or number specified for notices on the applicable signature page
hereof; or to such other address as shall be designated by such party in a
written notice to the other parties, and as to each other party, at such other
address as shall be designated by such party in a written notice to the other
party.
(b) All such notices and communications shall, when
transmitted by overnight delivery, telegraphed, telecopied by facsimile,
telexed or cabled, be effective when delivered for overnight delivery or to the
telegraph company, received by telecopier, confirmed by telex answer-back or
delivered to the cable company, respectively, or if delivered, upon delivery,
except that notices pursuant to Article II shall not be effective until
actually received by the Bank.
(c) The Company acknowledges and agrees that any
agreement of the Bank at Article II herein to receive certain notices by
telephone and facsimile is solely for the convenience and at the request of the
Company. The Bank shall be entitled to rely on the authority of any Person
purporting to be a Person authorized by the Company to give such notice and the
Bank shall not have any liability to the Company or other Person on account of
any action taken or not taken by the Bank in reliance upon such telephonic or
facsimile notice. The obligation of the Company to repay the Loans shall not
be affected in any way or to any extent by any failure by the Bank to receive
written confirmation of any telephonic or facsimile notice or the receipt by
the Bank of a confirmation which is at variance with the terms understood by
the Bank to be contained in the telephonic or facsimile notice.
9.03 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of the Bank, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any
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right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.
9.04 Costs and Expenses. The Company shall, whether or not the
transactions contemplated hereby shall be consummated:
(a) pay or reimburse the Bank within five Business Days
after demand (subject to subsection 4.01(f)) for all costs and expenses
incurred by the Bank in connection with the development, preparation, delivery,
administration and execution of, and any amendment, supplement, waiver or
modification to, this Agreement, any Loan Document and any other documents
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including the reasonable Attorney
Costs incurred by the Bank with respect thereto;
(b) pay or reimburse the Bank within five Business Days
after demand (subject to subsection 4.01(f)) for all costs and expenses
incurred by them in connection with the enforcement, attempted enforcement, or
preservation of any rights or remedies (including in connection with any
"workout" or restructuring regarding the Loans) under this Agreement, any other
Loan Document, and any such other documents, including Attorney Costs incurred
by the Bank; and
(c) pay or reimburse the Bank within five Business Days
after demand (subject to subsection 4.01(f)) for all appraisal (including the
allocated cost of internal appraisal services), audit, environmental inspection
and review (including the allocated cost of such internal services), search and
filing costs, fees and expenses, incurred or sustained by the Bank in
connection with the matters referred to under paragraphs (a) and (b) of this
Section.
9.05 Indemnity. Whether or not the transactions contemplated
hereby shall be consummated:
(a) General Indemnity. The Company shall pay, indemnify,
and hold the Bank and each of its officers, directors, employees, counsel,
agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses or disbursements (including
Attorney Costs) of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement and any
other Loan Documents, or the transactions contemplated hereby and thereby, and
with respect to any investigation, litigation or proceeding related to this
Agreement or the Loans or the use of the proceeds thereof, whether or not any
Indemnified Person is a party thereto (all the foregoing, collectively, the
"Indemnified Liabilities");
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provided, that the Company shall have no obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of such Indemnified Person.
(b) Environmental Indemnity. (i) The Company hereby
agrees to indemnify, defend and hold harmless each Indemnified Person, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses or disbursements (including
Attorney Costs and the allocated cost of internal environmental audit or review
services), which may be incurred by or asserted against such Indemnified Person
in connection with or arising out of any pending or threatened investigation,
litigation or proceeding, or any action taken by any Person, with respect to
any Environmental Claim arising out of or related to this Agreement. No action
taken by legal counsel chosen by the Bank in defending against any such
investigation, litigation or proceeding or requested remedial, removal or
response action shall vitiate or any way impair the Company's obligation and
duty hereunder to indemnify and hold harmless the Bank.
(ii) In no event shall any site visit,
observation, or testing by the Bank be deemed a representation or warranty that
Hazardous Materials are or are not present in, on, or under the site, or that
there has been or shall be compliance with any Environmental Law. Neither the
Company nor any other Person is entitled to rely on any site visit,
observation, or testing by the Bank. The Bank owes no duty of care to protect
the Company or any other Person against, or to inform the Company or any other
party of, any Hazardous Materials or any other adverse condition affecting any
site or Property. The Bank shall not be obligated to disclose to the Company
or any other Person any report or findings made as a result of, or in
connection with, any site visit, observation, or testing by the Bank.
(c) Survival; Defense. The obligations in this Section
9.05 shall survive payment of all other Obligations. At the election of any
Indemnified Person, the Company shall defend such Indemnified Person using
legal counsel satisfactory to such Indemnified Person in such Person's sole
discretion, at the sole cost and expense of the Company. All amounts owing
under this Section 9.05 shall be paid within 30 days after demand.
9.06 Marshalling; Payments Set Aside. The Bank shall be under no
obligation to marshall any assets in favor of the Company or any other Person
or against or in payment of any or all of the Obligations. To the extent that
the Company makes a payment or payments to the Bank, or the Bank enforces its
Liens or exercises its right of set-off, and such payment or payments or the
proceeds of such enforcement or set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid to a trustee,
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receiver or any other party in connection with any Insolvency Proceeding, or
otherwise, then to the extent of such recovery the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
force and effect as if such payment had not been made or such enforcement or
set-off had not occurred.
9.07 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of the Bank.
9.08 Assignments, Participations. etc.
(a) The Bank may at any time, with the consent of the
Company, which consent shall not unreasonably be withheld, assign and delegate
to one or more Persons (each an "Assignee") all, or any ratable part, of the
Loans, the Commitment and the other rights and obligations of the Bank
hereunder; provided, however, that the Company may continue to deal solely and
directly with the Bank in connection with the interest so assigned to an
Assignee until written notice of such assignment, together with payment
instructions, addresses and related information with respect to the Assignee,
shall have been given to the Company by the Bank and the Assignee. Thereupon,
with respect to the assigned portion of the Loans and Commitment, such Assignee
shall be deemed for all purposes to be a Bank under this Agreement, and shall
have all the rights and duties associated therewith.
(b) The Bank may at any time, with the consent of the
Company, which consent shall not unreasonably be withheld, sell to one or more
Persons (a "Participant") participating interests in any Loans, the Commitment
and the other interests of the Bank hereunder and under the other Loan
Documents; provided, however, that (i) the Bank's obligations under this
Agreement shall remain unchanged, (ii) the Bank shall remain solely responsible
for the performance of such obligations, (iii) the Company shall continue to
deal solely and directly with the Bank in connection with the Bank's rights and
obligations under this Agreement and the other Loan Documents, and (iv) the
Participant shall, together with the Bank, be entitled to the nonexclusive
protections of Sections 3.01, 3.03 and 9.09 as though it were also the "Bank"
hereunder. In the case of any such participation, if amounts outstanding under
this Agreement are due and unpaid, or shall have been declared or shall have
become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as an
Assignee under this Agreement.
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(c) The Bank agrees to take normal and reasonable
precautions and exercise due care to maintain the confidentiality of all
non-public information provided to it by the Company or any Subsidiary of the
Company, in connection with this Agreement or any other Loan Document, and
neither it nor any of its Affiliates shall use any such information for any
purpose or in any manner other than pursuant to the terms contemplated by this
Agreement; except to the extent such information (i) was or becomes generally
available to the public other than as a result of a disclosure by the Bank, or
(ii) was or becomes available on a non-confidential basis from a source other
than the Company, provided that such source is not bound by a confidentiality
agreement with the Company known to the Bank; provided further, however, that
the Bank may disclose such information (A) at the request or pursuant to any
requirement of any Governmental Authority to which the Bank is subject or in
connection with an examination of the Bank by any such authority; (B) pursuant
to subpoena or other court process; (C) when required to do so in accordance
with the provisions of any applicable Requirement of Law; and (D) to the Bank's
independent auditors and other professional advisors. Notwithstanding the
foregoing, the Company authorizes the Bank to disclose to any Participant or
Assignee (each, a "Transferee") and to any prospective Transferee, such
financial and other information in the Bank's possession concerning the Company
or its Subsidiaries which has been delivered to the Bank pursuant to this
Agreement or which has been delivered to the Bank by the Company in connection
with the Bank's credit evaluation of the Company prior to entering into this
Agreement; provided that, unless otherwise agreed by the Company, such
Transferee agrees in writing to the Bank to keep such information confidential
to the same extent required of the Bank hereunder.
(d) Notwithstanding any other provision contained in this
Agreement or any other Loan Document to the contrary, the Bank may assign (with
or without the consent of the Company) all or any portion of the Loans held by
it to any Federal Reserve Bank or the United States Treasury as collateral
security pursuant to Regulation A of the Board of Governors of the Federal
Reserve System and any Operating Circular issued by such Federal Reserve Bank,
provided that any payment in respect of such assigned Loans made by the Company
to or for the account of the Bank in accordance with the terms of this
Agreement shall satisfy the Company's obligations hereunder in respect to such
assigned Loans to the extent of such payment. No such assignment shall release
the Bank from its obligations hereunder.
9.09 Set-off. In addition to any rights and remedies of the Bank
provided by law, if an Event of Default exists, the Bank is authorized at any
time and from time to time, without prior notice to the Company, any such
notice being waived by the Company to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
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provisional or final) at any time held by, and other indebtedness at any time
owing to, the Bank to or for the credit or the account of the Company against
any and all Obligations owing to the Bank, now or hereafter existing,
irrespective of whether or not the Bank shall have made demand under this
Agreement or any Loan Document and although such Obligations may be contingent
or unmatured. The Bank agrees promptly to notify the Company after any such
set-off and application made by the Bank; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of the Bank under this Section 9.09 are in addition to
the other rights and remedies (including other rights of set-off) which the
Bank may have.
9.10 Automatic Debits of Fees. With respect to any commitment
fee, facility fee, or other fee, or any other cost or expense (including
Attorney Costs) due and payable to the Bank under the Credit Documents, the
Company hereby irrevocably authorizes the Bank to debit any deposit account of
the Company with the Bank in an amount such that the aggregate amount debited
from all such deposit accounts does not exceed such fee or other cost or
expense. If there are insufficient funds in such deposit accounts to cover the
amount of the fee or other cost or expense then due, such debits will be
reversed (in whole or in part, in the Bank's sole discretion) and such amount
not debited shall be deemed to be unpaid. No such debit under this Section
9.10 shall be deemed a setoff.
9.11 Counterparts. This Agreement may be executed by one or more
of the parties to this Agreement in any number of separate counterparts, each
of which, when so executed, shall be deemed an original, and all of said
counterparts taken together shall be deemed to constitute but one and the same
instrument.
9.12 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
9.13 No Third Parties Benefited. This Agreement is made and
entered into for the sole protection and legal benefit of the Company and the
Bank and their permitted successors and assigns, and no other Person shall be a
direct or indirect legal beneficiary of, or have any direct or indirect cause
of action or claim in connection with, this Agreement or any of the other Loan
Documents. The Bank shall have no obligation to any Person not a party to this
Agreement or other Loan Documents.
9.14 Time. Time is of the essence as to each term or provision of
this Agreement and each of the other Loan Documents.
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9.15 Governing Law and Jurisdiction.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED THAT THE BANK
SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE
UNITED STATES FOR THE CENTRAL DISTRICT OF CALIFORNIA, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY AND THE BANK CONSENTS, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE JURISDICTION OF THOSE COURTS.
EACH OF THE COMPANY AND THE BANK IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. THE COMPANY AND THE BANK EACH WAIVE PERSONAL SERVICE OF ANY
SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY CALIFORNIA LAW.
9.16 Waiver of Jury Trial. THE COMPANY AND THE BANK EACH WAIVE
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE. THE COMPANY AND THE BANK EACH AGREE THAT ANY SUCH
CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE
RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY
ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
9.17 Notice of Claims; Claims Bar. THE COMPANY HEREBY AGREES THAT
IT SHALL GIVE PROMPT WRITTEN NOTICE OF ANY CLAIM OR CAUSE OF ACTION IT BELIEVES
IT HAS, OR MAY SEEK TO ASSERT OR ALLEGE AGAINST THE BANK, WHETHER SUCH CLAIM IS
BASED IN LAW OR EQUITY, ARISING UNDER OR RELATED TO THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS, OR TO THE LOANS, OR ANY ACT OR OMISSION TO ACT BY THE
BANK WITH RESPECT HERETO OR THERETO, AND THAT IF IT SHALL FAIL TO GIVE SUCH
PROMPT NOTICE TO THE BANK WITH REGARD TO ANY SUCH CLAIM OR CAUSE OF ACTION, IT
SHALL BE DEEMED TO HAVE WAIVED, AND SHALL BE FOREVER BARRED FROM BRINGING OR
ASSERTING SUCH CLAIM OR CAUSE OF ACTION IN ANY SUIT, ACTION OR PROCEEDING IN
ANY COURT OR BEFORE ANY GOVERNMENTAL AGENCY.
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9.18 Entire Agreement. This Agreement, together with the other
Loan Documents, embodies the entire Agreement and understanding between the
Company and the Bank, and supersedes all prior or contemporaneous agreements
and understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof, except for any prior arrangements made with respect
to the payment by the Company of (or any indemnification for) any fees, costs
or expenses payable to or incurred (or to be incurred) by or on behalf of the
Bank.
9.19 Interpretation. This Agreement is the result of negotiations
between and has been reviewed by counsel to the Company and the Bank, and is
the product of all parties hereto. Accordingly, this Agreement and the other
Loan Documents shall not be construed against the Bank merely because of the
Bank's involvement in the preparation of such documents and agreements.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in Los Angeles, California by their proper and
duly authorized officers as of the day and year first above written.
COMMUNITY PSYCHIATRIC CENTERS
By: _______________________________________
Title: CHAIRMAN AND CHIEF EXECUTIVE OFFICER
TRANSITIONAL HOSPITALS CORP.
By: _______________________________________
Title: CHIEF FINANCIAL OFFICER AND
TREASURER
Address for notices for Company and
Transitional Hospitals Corp.:
24502 Pacific Park Drive
Laguna Hills, California 92656
Attn: Steven S. Weis
Executive Vice President
and Chief Financial Officer
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BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: ________________________________
Title: VICE PRESIDENT
Address for notices and payments:
Domestic and Offshore
Lending Office:
1850 Gateway Boulevard, 4th Floor
Concord, California 94520
Attn: Carol Schultz
Tel: (510) 675-7186
Fax: (510) 675-5351
Copy to:
555 South Flower Street
Los Angeles, California 90071
Attn: Brad DeSpain
Vice President
Los Angeles Credit
Products #5618
68
