<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
FEBRUARY 29, 1996
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 I-7293
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TENET HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
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Nevada 95-2557091
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2700 COLORADO AVENUE
SANTA MONICA, CA 90404
(Address of principal executive offices)
(310) 998-8000
(Registrant's telephone number, including area code)
-------------------------------
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
----- -----
AS OF MARCH 31, 1996 THERE WERE 215,407,807 SHARES OF $0.075 PAR VALUE
COMMON STOCK OUTSTANDING.
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<PAGE>
TENET HEALTHCARE CORPORATION
INDEX
Page
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets - May 31, 1995
and February 29, 1996. . . . . . . . . . . . . . . . . . . . 2
Condensed Consolidated Statements of Income -
Three Months and Nine Months Ended February 28, 1995
and February 29, 1996. . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended February 28, 1995 and
February 29, 1996. . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 19
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 20
Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
- -----------
Note: Items 2, 3, 4 and 5 of Part II are omitted because they are not
applicable.
1
<PAGE>
TENET HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 29,
1995 1996
--------- ------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 155.0 $ 114.2
Short-term investments, at cost which approximates market . . . . . . 138.5 129.5
Accounts and notes receivable, less allowance for doubtful accounts
($184.0 at May 31 and $154.1 at February 29) . . . . . . . . . . . 564.5 804.6
Inventories of supplies, at cost. . . . . . . . . . . . . . . . . . . 116.4 126.9
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . 410.3 260.1
Assets held for sale. . . . . . . . . . . . . . . . . . . . . . . . . 184.1 22.7
Prepaid expenses and other current assets . . . . . . . . . . . . . . 54.8 58.7
--------- ---------
Total current assets. . . . . . . . . . . . . . . . . . . . . . 1,623.6 1,516.7
--------- ---------
Investments and other assets . . . . . . . . . . . . . . . . . . . . . . 362.8 568.2
Property, plant and equipment, at cost . . . . . . . . . . . . . . . . . 4,142.9 4,547.8
Less accumulated depreciation and amortization. . . . . . . . . . . . 824.4 957.8
--------- ---------
Net property, plant and equipment . . . . . . . . . . . . . . . . . . 3,318.5 3,590.0
--------- ---------
Intangible assets, at cost less accumulated amortization
($58.4 at May 31 and $118.7 at February 29) . . . . . . . . . . . . . 2,613.5 2,647.9
--------- ---------
. . . . . . . . . $ 7,918.4 $ 8,322.8
--------- ---------
--------- ---------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
2
<PAGE>
TENET HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 29,
1995 1996
--------- ------------
(IN MILLIONS)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . $ 252.3 $ 90.3
Short-term borrowings and notes . . . . . . . . . . . . . . . . . . . 34.9 1.8
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . 358.8 287.1
Employee compensation and benefits. . . . . . . . . . . . . . . . . . 162.5 155.3
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . 548.0 492.8
--------- ---------
Total current liabilities . . . . . . . . . . . . . . . . . . . 1,356.5 1,027.3
--------- ---------
Long-term debt, net of current portion . . . . . . . . . . . . . . . . . 3,273.4 3,270.0
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 300.9 394.5
Other long-term liabilities and minority interests . . . . . . . . . . . 1,001.5 975.2
Shareholders' equity:
Common stock, $0.075 par value; authorized 450,000,000
shares; 218,713,406 shares issued at May 31, 1995 and at
February 29, 1996. . . . . . . . . . . . . . . . . . . . . . . . . 16.4 16.4
Other shareholders' equity. . . . . . . . . . . . . . . . . . . . . . 2,241.3 2,697.9
Less common stock in treasury, at cost, 18,775,274 shares at
May 31, 1995 and 4,045,571 at February 29, 1996. . . . . . . . . . (271.6) (58.5)
--------- ---------
Total shareholders' equity. . . . . . . . . . . . . . . . . . . 1,986.1 2,655.8
--------- ---------
$ 7,918.4 $ 8,322.8
--------- ---------
--------- ---------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
3
<PAGE>
TENET HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS AND NINE MONTHS ENDED FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
------------------ ------------------
1995 1996 1995 1996
-------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net operating revenues . . . . . . . . . . . . . . $ 660.5 $1,431.9 $1,962.1 $4,086.7
-------- -------- -------- --------
Operating expenses:
Salaries and benefits . . . . . . . . . . . . . 275.3 569.8 831.5 1,616.7
Supplies. . . . . . . . . . . . . . . . . . . . 84.0 200.0 243.1 564.7
Provision for doubtful accounts . . . . . . . . 22.1 71.9 68.9 208.9
Other operating expenses. . . . . . . . . . . . 152.8 310.6 447.5 888.9
Depreciation. . . . . . . . . . . . . . . . . . 34.0 58.4 101.4 181.1
Amortization. . . . . . . . . . . . . . . . . . 3.6 19.4 11.3 59.4
-------- -------- -------- --------
Operating income . . . . . . . . . . . . . . . . . 88.7 201.8 258.4 567.0
-------- -------- -------- --------
Interest expense, net of capitalized portion . . . (17.9) (79.5) (52.9) (237.9)
Investment earnings. . . . . . . . . . . . . . . . 5.2 5.3 15.6 18.0
Equity in earnings of unconsolidated affiliates. . 6.1 2.9 18.5 16.9
Minority interests . . . . . . . . . . . . . . . . (1.2) (4.2) (5.0) (14.8)
Net gain (loss) on disposals of facilities and
long-term investments . . . . . . . . . . . . . - - (2.5) 294.6
Gain on affiliate's sale of common stock . . . . . - - 32.0 17.3
-------- -------- -------- --------
Income before income taxes . . . . . . . . . . . . 80.9 126.3 264.1 661.1
Taxes on income. . . . . . . . . . . . . . . . . . (32.0) (55.6) (105.0) (289.3)
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . $ 48.9 $ 70.7 $ 159.1 $ 371.8
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per share:
Primary . . . . . . . . . . . . . . . . . . . . $ 0.29 $ 0.33 $ 0.95 $ 1.80
Fully diluted . . . . . . . . . . . . . . . . . $ 0.28 $ 0.33 $ 0.91 $ 1.74
Weighted average shares and share equivalents
outstanding - primary (in thousands). . . . . . 167,902 213,268 168,226 206,322
Weighted average shares, share equivalents and
other dilutive securities outstanding - fully
diluted (in thousands). . . . . . . . . . . . . 182,070 218,003 181,703 215,502
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
4
<PAGE>
TENET HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED FEBRUARY 28, 1995 AND FEBRUARY 29, 1996
<TABLE>
<CAPTION>
1995 1996
--------- ---------
(IN MILLIONS)
<S> <C> <C>
Net cash provided by (used in) operating activities, including net
expenditures for discontinued operations and restructuring
charges of $421.2 in 1995 and $88.1 in 1996 . . . . . . . . . . . . $ (240.6) $ 79.3
--------- ---------
Cash flows from investing activities:
Purchases of property, plant and equipment. . . . . . . . . . . . . (100.5) (235.3)
Purchases of new businesses, net of cash acquired . . . . . . . . . (16.1) (369.9)
Proceeds from sales of facilities and other assets. . . . . . . . . 159.1 424.0
Purchase of AMH zero coupon bonds . . . . . . . . . . . . . . . . . (31.3) -
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8.8) 7.8
--------- ---------
Net cash provided by (used in) investing activities. . . . . . . 2.4 (173.4)
--------- ---------
Cash flows from financing activities:
Proceeds from sale of 8 5/8% Senior Notes . . . . . . . . . . . . . - 487.4
Proceeds from sale of 6% Exchangeable Subordinated Notes. . . . . . - 310.7
Proceeds from other borrowings. . . . . . . . . . . . . . . . . . . 137.3 790.3
Payments of borrowings. . . . . . . . . . . . . . . . . . . . . . . (73.9) (1,744.2)
Proceeds from exercises of stock options. . . . . . . . . . . . . . 5.4 25.2
Proceeds from exercises of performance investment options . . . . . - 179.1
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.7 4.8
--------- ---------
Net cash provided by financing activities. . . . . . . . . . . . 69.5 53.3
--------- ---------
Net decrease in cash and cash equivalents. . . . . . . . . . . . . . . (168.7) (40.8)
Cash and cash equivalents at beginning of year . . . . . . . . . . . . 313.2 155.0
--------- ---------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . $ 144.5 $ 114.2
--------- ---------
--------- ---------
Supplemental disclosures:
Interest paid, net of amounts capitalized . . . . . . . . . . . . . $ 55.7 $ 183.7
Income taxes paid, net of refunds received. . . . . . . . . . . . . 38.9 26.1
Major effects of acquiring new businesses:
Assets acquired, primarily property, plant and equipment . . . . $ 59.1 $ 331.5
Liabilities assumed. . . . . . . . . . . . . . . . . . . . . . . 34.9 31.6
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
5
<PAGE>
TENET HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited financial information furnished herein, in the opinion of
management, reflects all adjustments that are necessary to fairly state the
financial position of Tenet Healthcare Corporation, its cash flows and the
results of its operations for the periods indicated. All the adjustments
affecting net income are of a normal recurring nature.
Readers of this interim financial information should refer to the Company's
audited financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations for the preceding fiscal year
and the adequacy of additional disclosure needed for a fair presentation
should be determined in that context. Accordingly, footnotes and other
disclosures which would substantially duplicate the disclosure contained in
the Company's most recent annual report to security holders have been
omitted. The patient volumes and net operating revenues of the Company's
hospitals are subject to seasonal variations caused by a number of factors,
including but not necessarily limited to, seasonal cycles of illness,
climate and weather conditions, vacation patterns of both hospital patients
and admitting physicians and other factors relating to the timing of
elective hospital procedures. Net income also is not necessarily
representative of operations for a full year for various reasons, including
interest rates, acquisitions and disposals of facilities and long-term
assets, revenue allowances and discount fluctuations, the timing of price
changes and fluctuations in quarterly tax rates. These same considerations
apply to all year-to-year comparisons.
2. On March 1, 1995, the Company, in a transaction accounted for as a
purchase, acquired all of the outstanding common stock of American Medical
Holdings, Inc. ("AMH") for $1.5 billion in cash and 33,156,614 shares of
the Company's common stock valued at approximately $488.0 million.
Accordingly, the results of operations of AMH and its subsidiaries are
included in the accompanying consolidated financial statements of the
Company since the date of acquisition.
The following supplemental pro forma information for the three months and
nine months ended February 28, 1995 is unaudited and assumes that the
merger occurred as of the beginning of the period. The amounts reflect pro
forma adjustments for interest on new and refinanced debt, depreciation on
revalued property, plant and equipment, and the amortization of goodwill.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
------------ -----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net operating revenues $ 1,328.4 $ 3,900.4
Net income $ 60.9 $ 184.2
Fully diluted earnings per share $ 0.29 $ 0.88
</TABLE>
The pro forma information shown above does not purport to present the
results of operations of the Company had the transactions and events
assumed therein occurred on the dates specified, nor are they necessarily
indicative of the results of operations that may be achieved in the future.
In addition, such information does not reflect certain cost savings that
have been realized following the merger.
6
<PAGE>
TENET HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. On March 22, 1996, Bank of America National Trust and Savings Association,
The Bank of New York, Morgan Guaranty Trust Company of New York and other
lenders entered into a new, five-year $1.55 billion unsecured revolving
credit agreement with the Company. The agreement is dated March 1, 1996 and
replaces the Company's $2.3 billion secured bank term loan and revolving
credit agreement dated February 28, 1995. Loans outstanding under the old
agreement as of March 22, 1996 amounted to $1.07 billion. The current
portion of long-term debt decreased to $90.3 million at February 29, 1996,
due to the reclassification of $155.5 million of short-term obligations
which were refinanced with the new agreement. Unamortized costs of
issuance written off in connection with the refinancing were $35.7 million.
The write-off will be reported as an extraordinary charge from early
extinguishment of debt in the quarter ended May 31, 1996 in the amount of
$22.1 million, which is net of tax benefits of $13.6 million.
Borrowings under the new agreement are unsecured and will mature on
March 1, 2001. The Company generally may repay or prepay loans made under
the agreement and may reborrow at any time prior to such maturity date. The
Company's unused borrowing capacity under the new agreement was $480.0
million as of April 10, 1996.
Loans under the new credit agreement generally bear interest at a base rate
equal to the prime rate announced by Morgan Guaranty Trust Company of New
York or, if higher, the federal funds rate plus 0.50%, plus an interest
margin ranging from zero to 25 basis points, or, at the option of the
Company, an adjusted London interbank offered rate ("LIBOR") for 1-, 2-,
3-, or 6-month periods plus an interest margin of from 30 to 87.5 basis
points. The Company has agreed to pay the lenders under the new credit
agreement a facility fee on the total loan commitment at rates ranging from
15 to 37.5 basis points. The interest margins and facility fee rates will
be based on the ratios of the Company's consolidated net earnings before
interest, taxes, depreciation and amortization ("EBITDA") to interest
expense and the ratio of the Company's consolidated total debt to EBITDA.
Presently the base rate margin is zero, the LIBOR margin is 59.375 basis
points and the facility fee rate is 28.125 basis points.
The new credit agreement has, among other requirements, limitations on
other borrowings, liens, investments, the sale of all or substantially all
assets and prepayment of subordinated debt, a prohibition against the
Company declaring or paying a dividend or purchasing its stock unless its
senior long-term unsecured debt securities are rated BBB or higher by
Standard and Poors' Ratings Services and Baa3 or higher by Moody's
Investors Service, Inc., and covenants regarding maintenance of net worth,
debt ratios and fixed charge coverages.
4. The Company's net operating revenues consist primarily of net patient
service revenues, which are based on established billing rates less
applicable allowances and discounts. These allowances and discounts,
primarily for patients covered by Medicare, Medicaid and other contractual
programs, amounted to $692.0 million and $1,654.7 million for the three-
month periods ended February 28, 1995 and February 29, 1996, and $2,019.9
million and $4,505.4 million for the nine-month periods, respectively.
7
<PAGE>
TENET HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. During the three-month and nine-month periods ended February 29, 1996,
actual costs incurred and charged against the Company's reserves for
discontinued operations were approximately $25.2 million and $80.3 million,
respectively. Costs incurred and charged against the restructuring
reserves established during the last three years were approximately $8.5
million for the three months ended February 29, 1996 and $26.9 million for
the nine months then ended. These reserves are included in other current
liabilities or other long-term liabilities in the Company's balance sheets
at May 31, 1995 and February 29, 1996.
6. On September 28, 1995, Vencor, Inc. ("Vencor") acquired all of the
outstanding common stock of The Hillhaven Corporation ("Hillhaven")
pursuant to a transaction approved by the shareholders of each of Vencor
and Hillhaven. As a result of the transaction, the 8,878,147 shares of
Hillhaven common stock that had been owned by the Company were exchanged
for 8,301,067 shares of Vencor common stock (at an exchange ratio of 0.935
Vencor shares for each Hillhaven share). In addition, the Company received
approximately $91.8 million for its Hillhaven Series C and Series D
preferred stock. The exchange resulted in a pre-tax gain, net of costs and
expenses, of approximately $171.1 million. The proceeds from the
redemption of the Hillhaven preferred stock were applied to repay secured
bank loans under the Company's February 28, 1995 credit agreement.
The Company's investment in Hillhaven previously had been accounted for
under the equity method. Following the exchange, the Company owned
approximately 11.8% of Vencor's common stock and began to account for its
investment in Vencor common stock in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 115 "Accounting for Certain Investments
in Debt and Equity Securities." The Company classified such securities as
"available for sale" whereby their carrying value will be adjusted to
market value at the end of each accounting period through a credit or
charge to shareholders' equity. At February 29, 1996 the fair market value
of the investment was approximately $310.3 million.
7. In October 1995, the Company sold $500 million of new Senior Notes due
December 2003. The notes have a coupon of 8 5/8% and were priced at
99.666% of par to yield 8.68%. In January 1996, the Company issued $320
million of 6% Exchangeable Subordinated Notes due 2005 that will be
exchangeable at the option of the holder for shares of common stock of
Vencor at any time on or after November 6, 1997 at an exchange rate of
25.9403 shares per $1,000 principal amount of the notes, subject to the
Company's right to pay an amount in cash equal to the market price of the
shares of Vencor common stock in lieu of delivery of such shares. The
notes will be redeemable at the option of the Company at any time on or
after January 15, 1999 at the redemption prices set forth in the indenture,
plus accrued and unpaid interest. The net proceeds from the notes were
applied to repay secured bank loans under the Company's February 28, 1995
credit agreement.
If the fair market value of the Company's investment in Vencor ever exceeds
the carrying value of the notes, the Company will adjust the carrying value
of the notes to the fair market value of the investment. Management does
not believe that adjustments, if any, to the carrying value of the notes
would have a material effect on the consolidated financial condition of the
Company.
8
<PAGE>
TENET HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. In October 1995, the Company sold its interest in Australian Medical
Enterprises, Limited ("AME") for a net cash consideration of approximately
$68.3 million, and the Company sold its interest in the Subang Jaya Medical
Centre in Malaysia for net cash consideration of approximately $12.0
million. In February 1996, the Company also sold its 40% interest in the
Bumrungrad Medical Center in Thailand for net cash consideration of
approximately $20.6 million.The net proceeds from these sales were used to
repay secured bank loans under the Company's February 28, 1995 credit
agreement.
9. In August 1995, the Company acquired the Mercy Baptist Medical Center, a
not-for-profit system of two general hospitals with an aggregate of 759
licensed beds located in New Orleans, Louisiana and a related physician
practice. In September 1995, the Company acquired the Providence Memorial
Hospital, a not-for-profit general hospital located in El Paso, Texas.
Providence is licensed for 471 general hospital beds (34 of which may be
used as skilled nursing beds) and is licensed for 30 additional
rehabilitation and sub-acute care beds. In October 1995, the Company
entered into a long-term lease of the 49-bed Medical Center of Manchester
in central Tennessee. In November 1995, the Company acquired the 104-bed
not-for-profit Methodist Hospital of Jonesboro, a general hospital located
in Jonesboro, Arkansas. These acquisitions were financed by borrowings
under the Company's February 28, 1995 bank credit agreement.
10. On October 30, 1995, Total Renal Care Holdings, Inc. ("TRC"), an operator
of outpatient renal dialysis centers in which the Company owned an
approximate 23% interest at May 31, 1995, completed a public offering of
6,000,000 shares of its common stock. This transaction resulted in a
reduction of the Company's ownership interest in TRC to approximately 13.6%
and a gain to the Company of approximately $17.3 million.
Because the Company now owns less than 20% of the common shares and does
not exercise significant influence over TRC, the Company no longer accounts
for its investment in TRC by the equity method, but accounts for it in
accordance with SFAS No. 115.
11. SFAS No. 121, titled "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," effective for fiscal years
beginning after December 15, 1995, requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. In addition,
this statement requires that long-lived assets and certain identifiable
intangibles to be disposed of be reported at the lower of carrying amount
or fair value less cost to sell. The Company intends to adopt this
statement in fiscal 1997 and the adoption of SFAS No. 121 is not expected
to have a material impact on the consolidated financial condition of the
Company.
12. There have been no material changes to the description of Professional and
General Liability Insurance set forth in Note 8A of the Notes to
Consolidated Financial Statements of the Company for its fiscal year ended
May 31, 1995. Except as described below, there have been no material
changes to the description of Significant Legal Proceedings - Psychiatric
Business set forth in Note 8B of the Notes to Consolidated Financial
Statements of the Company for its fiscal year ended May 31, 1995 ("Note
9
<PAGE>
TENET HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8B"). The settlement of the shareholder derivative action, referred to in
Note 8B, received final approval in January 1996. The Company received
final approval from the court to settle one of the federal securities class
action lawsuits referred to in Note 8B, In re National Medical Enterprises,
Inc. Securities Litigation I. Both settlements have been paid. The
Company has continued to receive additional lawsuits of the type referred
to under Psychiatric Malpractice Cases in Note 8B, and expects that
additional lawsuits with similar allegations will be filed from time to
time. There have been no material changes to the description of the
litigation relating to the AMH Merger set forth in Note 8C of the Notes to
Consolidated Financial Statements of the Company for its fiscal year ended
May 31, 1995. Although, based upon information currently available to it,
management believes that the amount of damages in excess of the reserves
for unusual litigation costs that may be awarded in any of the unresolved
legal proceedings cannot reasonably be estimated, management does not
believe it is likely that any damages awarded in such legal proceedings
will have a material adverse effect on the Company's results of operations,
liquidity or capital resources.
13. All of the Company's Convertible Floating Rate Debentures due in April 1996
have been redeemed or converted into shares of the Company's common stock
through the exercise of performance investment plan options by employees
and former employees of the Company. The proceeds from the conversions
were used to repay bank loans under the Company's credit agreements. As a
result of these conversions, there are no longer any other potentially
dilutive securities except for employee stock options, which are common
stock equivalents for purposes of earnings per share calculations.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity for the nine months ended February 29, 1996 has
been derived principally from the cash proceeds from operating activities,
disposals of assets and investments, realization of tax benefits associated with
losses from its discontinued psychiatric business, proceeds from the exercises
of performance investment options and borrowings under its February 28, 1995
secured bank credit agreement. On March 22, 1996, the Company entered into a
new, five-year $1.55 billion unsecured revolving credit agreement. The
agreement is dated March 1, 1996 and replaces the Company's $2.3 billion secured
bank term loan and revolving credit agreement dated February 28, 1995. The new
credit agreement eliminates previously required quarterly payments, provides
lower interest margins and generally has less restrictive covenants than the
former agreement. (See Note 3.)
During the nine months ended February 29, 1996, net cash provided by
operating activities was $167.4 million before expenditures of $88.1 million
related to restructuring reserves and discontinued operations. Cash flows from
operating activities in the nine months ended February 29, 1996 were adversely
affected by an increase in net accounts receivable of approximately $71.2
million related to hospitals acquired in the current fiscal year, primarily as a
result of an increase in Medicare receivables due to changes in fiscal
intermediaries at these hospitals. For the prior year's nine-month period cash
provided by operating activities was $180.6 million before expenditures of
$421.2 million for restructuring charges and discontinued operations. Management
believes that cash flows from operations in the future will continue to be
positive.
The Company's cash and cash equivalents at February 29, 1996 were $114.2
million, a decrease of $40.8 million over May 31, 1995. Working capital at
February 29, 1996 was $489.4 million, compared to $267.1 million at May 31,
1995. The increase in working capital is primarily attributable to a decrease
in the current portion of long-term debt. At February 29, 1996 the current
portion of long-term debt decreased to $90.3 million due to the reclassification
of $155.5 million of short-term obligations which were refinanced with the
March 1, 1996 credit agreement.
Management believes that this liquidity, along with the availability of
credit under the Company's new bank credit agreement, will be adequate to
finance planned capital expenditures, acquisitions and other known operating
needs over the short-term (1 to 18 months) and the long-term (18 months to 3
years), including resolution of the unusual legal proceedings referred to herein
as well as all its debt service requirements. The only significant remaining
obligations related to discontinued operations are the unresolved legal
proceedings discussed in the Company's Annual Report to Shareholders on Form 10-
K and Form 10-K/A for the fiscal year ended May 31, 1995, in the Company's
Quarterly Report on Form 10-Q for the quarterly periods ended August 31, 1995
and November 30, 1995, and herein. The Company has reserves for the remaining
legal proceedings not yet settled as of February 29, 1996 and an estimate of the
legal fees related to these matters to be incurred in the future totaling
approximately $24.4 million, of which $20.3 million is expected to be paid
within one year. These reserves represent management's estimate of the net
costs of the ultimate disposition of these matters. There can be no assurance,
however, that the ultimate liability will not exceed such estimates. (See
Note 12.)
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company's strategy includes the pursuit of growth through the
development of integrated healthcare systems in certain strategic markets,
including joint ventures, hospital acquisitions and physician practice
acquisitions. All or portions of this growth may be financed through available
credit under the Company's new revolving credit agreement or, depending on
capital market conditions, the sale of additional debt or equity securities or
other bank borrowings. The Company's unused borrowing capacity under its new
revolving credit agreement was $480.0 million as of April 10, 1996. On
October 11, 1995, the Company sold $500 million of Senior Notes due 2003 and on
January 5, 1996, the Company sold $320 million of Exchangeable Subordinated
Notes due 2005. The net proceeds of both offerings were used to repay secured
loans under the Company's February 28, 1995 bank credit agreement.
Proceeds from the sales of facilities and other assets were $424.0 million
in the nine months ended February 29, 1996, substantially all of which was
derived from the sales of: 1) two hospitals and related healthcare businesses in
Singapore; 2) the sale of the Company's interests in the Subang Jaya Medical
Centre in Malaysia, Australian Medical Enterprises, Limited, and the
Bumrungrad Medical Center in Thailand; and the redemption of the Hillhaven
Series C and Series D preferred stock. The Company used the net proceeds from
these transactions to repay secured bank loans under its February 28, 1995
credit agreement. In addition, the Company is continuing to evaluate
opportunities to monetize certain other investments and non-core assets.
During fiscal 1996 the Company has spent $369.9 million for purchase of
new businesses, net of cash acquired. In August 1995, the Company acquired two
hospitals and a related physician practice in New Orleans, Louisiana and in
September 1995, acquired a hospital in El Paso, Texas. In November 1995, the
Company acquired a 104-bed not-for-profit general hospital in Jonesboro,
Arkansas. The Company also acquired or formed various management service
organizations and physician practices during the nine month period. The above
acquisitions were financed by borrowings under the Company's February 28, 1995
bank credit agreement.
Cash payments for property and equipment were $235.3 million in the nine
months ended February 29, 1996, compared to $100.5 million in the nine months
ended February 28, 1995. Capital expenditures for the Company, before any
significant acquisitions of facilities, are expected to be approximately $300.0
million for the current fiscal year ending May 31, 1996 and approximately $300.0
million to $400.0 million for each of the following two years. Such capital
expenditures relate to the development of healthcare services networks in
selected geographic areas and hospital facility construction projects. These
expenditures will be funded by cash flows from operations and available
borrowings under the Company's new bank credit agreement.
Gross proceeds from borrowings amounted to $1.6 billion during the nine
months ended February 29, 1996, including $487.4 million of net proceeds from
the sale of the 8-5/8% Senior Notes due 2003, $310.7 million from the sale of
the 6% Exchangeable Subordinated Notes due 2005 and borrowings of $763.0 million
under the Company's February 28, 1995 bank credit agreement. Borrowings in the
prior year nine-month period amounted to $137.3 million. The increase is due
primarily to the purchases of new businesses noted above and repayments of
secured bank loans under the Company's February 28, 1995 credit agreement.
Repayments of borrowings also were significantly higher in fiscal year 1996 than
in fiscal year 1995 due to
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
the application of proceeds received from the sales of facilities and other
assets in fiscal year 1996 discussed above. Debt service requirements have
increased significantly with the addition of the financing incurred to fund the
acquisition of AMH on March 1, 1995.
In addition to proceeds from borrowings, cash flows from financing
activities were enhanced during the nine-months ended February 29, 1996 by
$179.1 million in proceeds from the exercise of performance investment plan
options. The proceeds from these transactions were used to repay secured bank
loans under the Company's credit agreements. Continuing exercises of
performance investment plan options from March 1, 1996 through April 3, 1996
resulted in additional cash proceeds of $23.9 million. All performance
investment plan options have been exercised.
The Company's March 1, 1996 bank credit agreement has, among other
requirements, limitations on other borrowings, liens, investments, the sale of
all or substantially all assets and prepayment of subordinated debt, a
prohibition against the Company declaring or paying a dividend or purchasing its
stock unless its senior long-term unsecured debt securities are rated BBB or
higher by Standard and Poors' Ratings Services and Baa3 or higher by Moody's
Investors Service, Inc., and covenants regarding maintenance of net worth, debt
ratios and fixed charge coverages.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
The following is a summary of operations for the quarters and nine months
ended February 28, 1995 and February 29, 1996:
<TABLE>
<CAPTION>
QUARTER ENDED FEBRUARY 28 AND FEBRUARY 29
-----------------------------------------------
1995 1996 1995 1996
-------- -------- -------- --------
(DOLLARS IN MILLIONS) (% OF NET OPERATING REVENUES)
<S> <C> <C> <C> <C>
Net operating revenues:
Domestic general hospitals. . . . . . . . $ 534.2 $ 1,341.4 80.9% 93.7%
Other domestic operations (1) . . . . . . 74.6 90.4 11.3% 6.3%
International operations. . . . . . . . . 51.7 0.1 7.8% -
-------- --------- ------- --------
Net operating revenues . . . . . . . . . . . 660.5 1,431.9 100.0% 100.0%
-------- --------- ------- --------
Operating expenses:
Salaries and benefits . . . . . . . . . . 275.3 569.8 41.7% 39.8%
Supplies. . . . . . . . . . . . . . . . . 84.0 200.0 12.7% 14.0%
Provision for doubtful accounts . . . . . 22.1 71.9 3.3% 5.0%
Other operating expenses. . . . . . . . . 152.8 310.6 23.1% 21.7%
Depreciation. . . . . . . . . . . . . . . 34.0 58.4 5.2% 4.1%
Amortization. . . . . . . . . . . . . . . 3.6 19.4 0.6% 1.3%
-------- --------- ------- --------
Operating income . . . . . . . . . . . . . . $ 88.7 $ 201.8 13.4% 14.1%
-------- --------- ------- --------
-------- --------- ------- --------
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED FEBRUARY 28 AND FEBRUARY 29
-----------------------------------------------
1995 1996 1995 1996
-------- -------- -------- --------
(DOLLARS IN MILLIONS) (% OF NET OPERATING REVENUES)
<S> <C> <C> <C> <C>
Net operating revenues:
Domestic general hospitals. . . . . . . . $1,576.6 $ 3,781.4 80.4% 92.5%
Other domestic operations (1) . . . . . . 212.8 254.7 10.8% 6.2%
International operations. . . . . . . . . 156.1 50.6 8.0% 1.3%
Other (2) . . . . . . . . . . . . . . . . 16.6 - 0.8% -
-------- --------- ------- --------
Net operating revenues . . . . . . . . . . . 1,962.1 4,086.7 100.0% 100.0%
-------- --------- ------- --------
Operating expenses:
Salaries and benefits . . . . . . . . . . 831.5 1,616.7 42.4% 39.6%
Supplies. . . . . . . . . . . . . . . . . 243.1 564.7 12.4% 13.8%
Provision for doubtful accounts . . . . . 68.9 208.9 3.5% 5.1%
Other operating expenses. . . . . . . . . 447.5 888.9 22.7% 21.7%
Depreciation. . . . . . . . . . . . . . . 101.4 181.1 5.2% 4.4%
Amortization. . . . . . . . . . . . . . . 11.3 59.4 0.6% 1.5%
-------- --------- ------- --------
Operating income . . . . . . . . . . . . . . $ 258.4 $ 567.0 13.2% 13.9%
-------- --------- ------- --------
-------- --------- ------- --------
</TABLE>
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(1) NET OPERATING REVENUES OF OTHER DOMESTIC OPERATIONS CONSIST PRIMARILY OF
REVENUES FROM (I) THE COMPANY'S REHABILITATION HOSPITALS, LONG-TERM CARE
FACILITIES AND PSYCHIATRIC HOSPITALS THAT ARE LOCATED ON OR NEAR THE SAME
CAMPUSES AS THE COMPANY'S GENERAL HOSPITALS; (II) HEALTHCARE JOINT VENTURES
OPERATED BY THE COMPANY; (III) SUBSIDIARIES OF THE COMPANY OFFERING HEALTH
MAINTENANCE ORGANIZATIONS, PREFERRED PROVIDER ORGANIZATIONS AND INDEMNITY
PRODUCTS; AND (IV) REVENUES EARNED BY THE COMPANY IN CONSIDERATION OF THE
GUARANTEES OF CERTAIN INDEBTEDNESS AND LEASES OF HILLHAVEN AND OTHER THIRD
PARTIES.
(2) CONSISTS OF REVENUES FROM TOTAL RENAL CARE, INC., ACCOUNTED FOR AS A
CONSOLIDATED SUBSIDIARY PRIOR TO THE AUGUST 1994 SALE OF APPROXIMATELY 75%
OF THE COMPANY'S EQUITY INTEREST.
Income before income taxes was $126.3 million for the quarter ended
February 29, 1996, compared with $80.9 million for the prior year quarter.
Income before income taxes was $661.1 million for the nine months ended
February 29, compared with $264.1 million for the prior year period. These
results include pre-tax net gains on disposals of assets of $311.9 million
(approximately $.82 per share net of taxes, on a fully diluted basis) in 1996
and $29.5 million (approximately $.09 per share net of taxes, on a fully diluted
basis) in 1995.
Net operating revenues for the quarter and nine months ended February 29,
were $1,431.9 million and $4,086.7 million, respectively, compared with $660.5
million and $1,962.1 million in the prior year periods. The current quarter and
nine-month periods include revenues attributable to facilities acquired since
March 1, 1995, including the acquisition of AMH.
Operating income increased by $113.1 million from the prior year quarter
and by $308.6 million for the nine months ended February 29, 1996 from the
prior year nine-month period primarily due to the acquisition of AMH referred to
above. The operating income margin for the current quarter increased to 14.1%
from 13.4% a year ago and for the current nine-month period it increased to
13.9% from 13.2% a year ago. The increase in the operating margin is due
primarily to effective cost control programs in the hospitals and the benefits
of overhead reduction plans implemented during the first quarter of fiscal 1995
and following the AMH merger.
The table below sets forth certain selected operating statistics for the
Company's domestic general hospitals.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 28 AND FEBRUARY 29, FEBRUARY 28 AND FEBRUARY 29,
---------------------------------- -------------------------------------
INCREASE INCREASE
1995 1996 (DECREASE) 1995 1996 (DECREASE)
--------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Number of hospitals (at end of period) . . 33 75 42 33 75 42
Licensed beds (at end of period) . . . . . 6,620 16,874 154.9% 6,620 16,874 154.9%
Net inpatient revenues (in millions) . . . $ 385.7 $ 906.7 135.1% $ 1,125.9 $ 2,533.4 125.0%
Net outpatient revenues (in millions). . . $ 144.2 $ 402.6 179.2% $ 426.7 $ 1,157.9 171.4%
Admissions . . . . . . . . . . . . . . . . 51,882 130,536 151.6% 149,623 362,402 142.2%
Equivalent admissions. . . . . . . . . . . 67,637 187,675 177.5% 197,299 510,926 159.0%
Average length of stay (days). . . . . . . 5.6 5.6 - * 5.5 5.6 0.1 *
Patient days . . . . . . . . . . . . . . . 289,897 734,293 153.3% 825,377 2,014,660 144.1%
Equivalent patient days. . . . . . . . . . 375,131 1,058,125 182.1% 1,079,755 2,814,069 160.6%
Net inpatient revenues per patient day . . $ 1,330 $ 1,235 (7.1)% $ 1,364 $ 1,257 (7.8)%
Utilization of licensed beds . . . . . . . 48.6% 47.9% (0.7)% * 45.3% 44.7% (0.6)% *
Outpatient visits. . . . . . . . . . . . . 394,453 1,446,545 266.7% 1,141,203 4,113,201 260.4%
</TABLE>
*The % change is the difference between 1996 and 1995 percentages shown.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Net operating revenues from the Company's domestic general hospital
operations increased 151.1% to $1,341.4 million for the three months ended
February 29, compared with $534.2 million for the prior year period. Net
operating revenues for the nine-month periods ended February 29, 1996 and
February 28, 1995 were $3,781.4 million and $1,576.6 million, respectively.
Net operating revenues on a same-facility basis increased 4.1% for the
three months ended February 29, 1996, compared with the prior year quarter and
increased 3.3% for the comparable nine-month period. Same-facility net
inpatient revenue per patient day decreased slightly for the three months ended
February 29, 1996, compared with the prior year quarter and increased 1.2% for
the comparable nine-month period. Same-facility admissions increased 4.0% for
the three months ended February 29, 1996 compared with the prior year quarter
and increased 2.8% for the comparable nine-month period. The same-facilities
are on a pro forma basis and consists of 33 facilities owned and operated by the
Company on June 1, 1994 and February 29, 1996 and 36 facilities owned by AMH on
June 1, 1994 and now owned and operated by the Company. These increases have
occurred in spite of continued pressures by payors to reduce admissions and
lengths of stay and a continuing shift of less intensive services from an
inpatient to an outpatient basis or to alternative healthcare delivery services
because of technological improvements.
Medicare revenues as a percentage of total patient revenues were 41.7% and
39.6% for the three months and nine months ended February 29, 1996,
respectively, compared with 40.9% and 37.8% for the prior year periods,
respectively. Historically, rates paid under Medicare's prospective payment
system for inpatient services have increased, but such increases have been less
than cost increases. Payments for Medicare outpatient services are presently
cost reimbursed, but there are certain proposed regulations pending that would
convert Medicare reimbursement for outpatient services to a prospective payment
system which may result in reduced payments. Medicaid programs in certain
states in which the Company operates also are undergoing changes that will
result in reduced payments to hospitals. The Company has implemented hospital
cost control programs and overhead reductions and is forming integrated health
delivery systems to address the reduced payments. Pressures to control
healthcare costs have resulted in an increase in the percentage of revenues
attributable to managed care payors. The Company anticipates that its managed
care business will increase in the future.
The patient volumes and net operating revenues of the Company's
domestic general hospitals are subject to seasonal variations caused by a number
of factors, including but not necessarily limited to, seasonal cycles of
illness, climate and weather conditions, vacation patterns of both hospital
patients and admitting physicians and other factors relating to the timing of
elective hospital procedures.
Net operating revenues from the Company's other domestic operations
increased 21.2% to $90.4 million for the three months ended February 29, 1996
compared to $74.6 million for the prior year period, representing an increase of
$15.8 million. Net operating revenues for the nine-month period increased 19.7%
to $254.7 million compared with the prior year nine-month period. This increase
primarily reflects continued growth of National Health Plans, the Company's HMO
and insurance subsidiary, and the growth of joint ventures and physician
practices.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The $105.5 million decrease in net operating revenues from the Company's
international operations for the nine months ended February 29, 1996 compared
to the prior year period is attributable to the sales of the Company's hospitals
and related healthcare businesses in Singapore and Australia. Net operating
revenues and operating profits of the sold international facilities for the
period from June 1, 1995 through the dates of sale were $50.5 million and $6.7
million, respectively. Net operating revenues and operating profits for the
prior year nine-month period were $148.0 million and $27.7 million,
respectively.
Operating expenses, which include salaries and benefits, supplies,
provision for doubtful accounts, depreciation and amortization, and other
operating expenses, were $1,230.1 million for the quarter ended February 29,
1996 and $571.8 million for the prior year quarter. Operating expenses for the
current year periods include operating expenses from the facilities acquired in
the March 1, 1995 AMH merger. Operating expenses for the current and prior year
nine-month periods were $3,519.7 million and $1,703.7 million, respectively.
Salaries and benefits expense as a percentage of net operating revenues was
39.8% in the quarter ended February 29, 1996 and 41.7% in the prior year
quarter. Salaries and benefits expense as a percentage of net operating
revenues for the current and prior year nine-month periods were 39.6% and 42.4%,
respectively. The improvement is primarily attributable to a reduction in
staffing levels implemented during the first quarter of fiscal 1995 and
following the AMH merger.
Supplies expense as a percentage of net operating revenues was 14.0% in the
quarter ended February 29, 1996, and 12.7% in the prior year quarter. Supplies
expense as a percentage of net operating revenues for the current and prior year
nine-month periods were 13.8% and 12.4%, respectively. The increase over the
prior year periods is primarily attributable to higher supplies expense in the
facilities acquired in the AMH merger and subsequent thereto. The increase over
the prior year periods is also attributable to the sales of the Company's
international operations. Supplies expense as a percentage of net operating
revenues at the international facilities were substantially less than supplies
expense as a percentage of net operating revenues at the domestic general
hospital operations. The Company expects to reduce supplies expense through
incorporating acquired facilities into the Company's existing group purchasing
program.
The provision for doubtful accounts as a percentage of net operating
revenues was 5.0% for the quarter ended February 29, 1996, and 3.3% in the
prior year quarter. The provision for doubtful accounts as a percentage of net
operating revenues for the current and prior year nine-month periods were 5.1%
and 3.5%, respectively. The increase over the prior year periods is primarily
attributable to higher bad debt experience at the facilities acquired in the AMH
merger and subsequent thereto. The Company, through it's collection subsidiary,
Syndicated Office Systems, has been establishing improved follow-up collection
systems by consolidating the collection of accounts receivable.
Other operating expenses as a percentage of net operating revenues improved
from 23.1% for the quarter ended February 28, 1995 to 21.7% in the quarter ended
February 29, 1996. The comparison is similar for the nine-month periods. This
improvement reflects the effects of the cost control programs and overhead
reduction plans mentioned earlier.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Depreciation and amortization expense as a percentage of net operating
revenues was 5.4% in the quarter ended February 29, 1996, and 5.8% in the prior
year quarter. Depreciation and amortization expense as a percentage of net
operating revenues for the current and prior year nine-month periods was 5.9%
and 5.8 %, respectively. The increase from $112.7 million in the nine months
ended February 28, 1995 to $240.5 million for the nine months ended February 29,
1996 is due primarily to additional depreciation and to the increase in goodwill
amortization resulting from the AMH merger and current year hospital
acquisitions. Goodwill amortization associated with the AMH merger will be
approximately $63.4 million annually.
Interest expense, net of capitalized interest, was $79.5 million in the
quarter ended February 29, 1996, and $17.9 million in the prior year quarter.
Interest expense, net of capitalized interest for the current and prior year
nine-month periods was $237.9 million and $52.9 million, respectively. The
increase in interest expense was due primarily to the acquisition of AMH and the
senior notes and bank loans used to finance the acquisition and to retire debt
in connection with the merger.
Taxes on income as a percentage of income before income taxes was 44.0% in
the three months ended February 29, 1996 compared with 39.6% in the prior year
period. Taxes on income as a percentage of income before income taxes was 43.8%
in the nine months ended February 29, 1996 compared with 39.8% in the prior year
period. The difference between the Company's effective income tax rates and the
statutory federal income tax rate for the three and nine month periods are shown
below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------- ------------------------------------
FEBRUARY 28, 1995 FEBRUARY 29, 1996 FEBRUARY 28, 1995 FEBRUARY 29, 1996
----------------- ----------------- ----------------- -----------------
AMOUNT % AMOUNT % AMOUNT % AMOUNT %
------ ------ ------ ------ ------ ------ ------ ------
(IN MILLIONS OF DOLLARS AND AS A PERCENT OF PRETAX INCOME)
<S> <C> <C> <C> <C> <C> <C> <C>
Tax provision at statutory federal rate. . . . . . $ 28.3 35.0% $ 44.2 35.0% $ 92.4 35.0% $ 231.4 35.0%
State income taxes, net of federal income tax
benefit. . . . . . . . . . . . . . . . . . . 3.7 4.6% 5.5 4.4% 12.1 4.6% 25.2 3.8%
Goodwill amortization. . . . . . . . . . . . . . . - - 5.5 4.4% - - 16.4 2.5%
Gain on sale of foreign subsidiary's assets. . . . - - - - - - 16.3 2.5%
Other. . . . . . . . . . . . . . . . . . . . . . . - - 0.4 0.2% 0.5 0.2% - -
------ ------ ------ ------ ------ ------ ------- -------
Taxes on income and effective tax rates. . . . . . $ 32.0 39.6% $ 55.6 44.0% $105.0 39.8% $ 289.3 43.8%
------ ------ ------ ------ ------ ------ ------- -------
------ ------ ------ ------ ------ ------ ------- -------
</TABLE>
Amortization of the goodwill resulting from the AMH merger is a noncash
charge, but provides no income tax benefits.
BUSINESS OUTLOOK
Since the end of the Company's last fiscal year, Congress passed, and the
President vetoed, legislation which, if implemented, would have had an adverse
impact on the Company's current Medicare payment rates. The President
subsequently proposed alternative Medicare legislation which also would
adversely affect the Company if it becomes law. The Company is unable to
predict whether any healthcare legislation will be passed in the future, but it
continues to monitor such matters and analyzes their potential impacts in order
to formulate its future business strategies.
18
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
MATERIAL DEVELOPMENTS IN PREVIOUSLY REPORTED LEGAL PROCEEDINGS:
The Los Angeles Superior Court issued an order in January 1996,
approving the settlement of the shareholder derivative actions which
were filed in October and November of 1991. In addition, the U.S.
District Court in the Central District of California issued an order
on September 18, 1995, approving the settlement of the federal
securities class action lawsuit entitled In Re: National Medical
Enterprises Inc. Securities Litigation I. Both cases were previously
reported in the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1995. All payments relevant to the settlements
have been paid.
The Company has continued to receive additional lawsuits relating to
its former psychiatric operations, including a continuum of cases
filed in the District of Columbia, of the type referred to in the
fifth paragraph under Item 3 Legal Proceedings in its Annual Report on
Form 10-K for its fiscal year ended May 31, 1995, and expects that
additional lawsuits with similar allegations will be filed from time
to time.
In John C. Bedrosian vs. National Medical Enterprises, Inc., et al.,
the California Court of Appeal issued an order in February, 1996,
denying plaintiff's appeal of the various lower court rulings
denying plaintiff's request to vacate the Referee's decision
previously reported in the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1995. Plaintiff then filed a Petition
for Rehearing with the Court of Appeal, which was denied on April 1,
1996.
On March 7, 1996, Horizon/CMS Healthcare Corporation ("Horizon/CMS")
announced that it filed a lawsuit against the Company in the United
States District Court for the District of Nevada. Horizon/CMS stated
that the lawsuit arises out of an agreement entered into between
Horizon/CMS and the Company in connection with Horizon/CMS's attempted
acquisition of Hillhaven in January, 1995. Horizon/CMS alleges that
the Company has failed to honor its commitment to pay Horizon/CMS
approximately $14.56 million pursuant to the agreement. The Company
believes Horizon/CMS's claim is without merit and intends to
vigorously defend the lawsuit.
Although, based upon information currently available to it, management
believes that the amount of damages in excess of the reserves recorded
as of February 29, 1996, that may be awarded in any of the unresolved
legal proceedings cannot reasonably be estimated, management does not
believe it is likely that any damages awarded in such legal
proceedings will have a material adverse effect on the Company's
results of operations, liquidity or capital resources.
Items 2, 3, 4 and 5 are not applicable.
19
<PAGE>
PART II. OTHER INFORMATION (CONTINUED)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
(10) Material Contracts
(a) Credit Agreement, dated as of March 1, 1996, among
Tenet Healthcare Corporation, as Borrower, the Lenders
and Managing Agents party thereto, Bank of America
National Trust and Savings Association as Documentation
Agent, The Bank of New York as Syndication Agent and
Morgan Guaranty Trust Company of New York as
Administrative Agent.
(b) Amendment to Reimbursement Agreement, dated as of
March 1, 1996, among Tenet Healthcare Corporation, as
Account Party, Bank of America National Trust and
Savings Association, The Bank of New York, Bankers
Trust Company and Morgan Guaranty Trust Company of New
York, as Banks, and The Bank of New York, as the
Issuing Bank.
(11) (Page 22) Statement Re: Computation of Per Share Earnings
for the three months and nine months ended February 28, 1995
and February 29, 1996.
(27) Financial Data Schedule (included only in the EDGAR filing).
20
<PAGE>
PART II. OTHER INFORMATION (CONTINUED)
SIGNATURE
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.
TENET HEALTHCARE CORPORATION
(Registrant)
Date: April 12, 1996 /s/ RAYMOND L. MATHIASEN
------------------------------------
Raymond L. Mathiasen
Senior Vice President,
Chief Accounting Officer
21
<PAGE>
EXECUTION COPY
$1,550,000,000
CREDIT AGREEMENT
dated as of
March 1, 1996
among
Tenet Healthcare Corporation
The Lenders and Managing Agents Party Hereto
Bank of America National Trust and Savings Association
as Documentation Agent
The Bank of New York
as Syndication Agent
and
Morgan Guaranty Trust Company of New York
as Administrative Agent
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Arranged by:
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2
J.P. Morgan Securities Inc.
BA Securities, Inc.
The Bank of New York
as Co-Arrangers
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TABLE OF CONTENTS*
Page
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions................................................... 1
SECTION 1.2. Accounting Terms and Determinations........................... 19
ARTICLE 2
THE CREDITS
SECTION 2.1. Syndicated Borrowings......................................... 19
SECTION 2.2. Notice of Syndicated Borrowing................................ 20
SECTION 2.3. Money Market Borrowings....................................... 20
SECTION 2.4. Notice to Lenders; Funding of Loans........................... 24
SECTION 2.5. Notes......................................................... 25
SECTION 2.6. Maturity of Loans............................................. 26
SECTION 2.7. Optional Prepayments of Syndicated
Loans......................................................... 26
SECTION 2.8. Notice of Syndicated Prepayment............................... 26
SECTION 2.9. Interest Rates................................................ 27
SECTION 2.10. Method of Electing Interest Rates............................. 29
SECTION 2.11. Facility Fees................................................. 30
SECTION 2.12. Termination or Reduction of
Commitments................................................... 31
SECTION 2.13. General Provisions as to Payments............................. 31
SECTION 2.14. Funding Losses................................................ 32
SECTION 2.15. Computation of Interest and Fees.............................. 32
SECTION 2.16. Swingline Loan................................................ 33
ARTICLE 3
CONDITIONS
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*The Table of Contents is not a part of this Agreement.
i
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ii
SECTION 3.1. Closing....................................................... 35
SECTION 3.2. Release of Existing Security Interests........................ 38
SECTION 3.3. Borrowings.................................................... 38
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Corporate Existence and Power................................. 39
SECTION 4.2. Corporate and Governmental
Authorization; No Contravention............................... 39
SECTION 4.3. Binding Effect................................................ 39
SECTION 4.4. Financial Information......................................... 40
SECTION 4.5. Litigation.................................................... 40
SECTION 4.6. Compliance with ERISA......................................... 40
SECTION 4.7. Compliance with Laws.......................................... 41
SECTION 4.8. Environmental Matters......................................... 41
SECTION 4.9. Taxes......................................................... 41
SECTION 4.10. Material Subsidiaries......................................... 42
SECTION 4.11. Not an Investment Company..................................... 42
SECTION 4.12. Full Disclosure............................................... 42
ARTICLE 5
COVENANTS
SECTION 5.1. Information................................................... 42
SECTION 5.2. Maintenance of Property; Insurance............................ 45
SECTION 5.3. Conduct of Business, Maintenance of Existence................. 45
SECTION 5.4. Compliance with Laws.......................................... 46
SECTION 5.5. Inspection of Property, Books
and Records................................................... 46
SECTION 5.6. Consolidations, Mergers and
Sales of Assets................................................46
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SECTION 5.7. Negative Pledge............................................... 47
SECTION 5.8. Debt of Subsidiaries.......................................... 49
SECTION 5.9. Debt Ratio.................................................... 50
SECTION 5.10. Adjusted Consolidated Net Worth............................... 50
SECTION 5.11. Fixed Charge Ratio............................................ 50
SECTION 5.12. Restricted Payments........................................... 51
SECTION 5.13. Restriction on Investments.................................... 51
SECTION 5.14. Restrictions on Included Equity
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Page
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Affiliates.................................................... 51
SECTION 5.15. Restriction on Prepaying
Subordinated Debt............................................. 53
SECTION 5.16. Transactions with Affiliates.................................. 53
SECTION 5.17. Senior Status................................................. 53
SECTION 5.18. Payment of Dividends by Material
Subsidiaries.................................................. 53
SECTION 5.19. Use of Proceeds............................................... 54
ARTICLE 6
DEFAULTS
SECTION 6.1. Events of Default............................................. 54
SECTION 6.2. Notice of Default............................................. 57
ARTICLE 7
THE AGENTS
SECTION 7.1. Appointment and Authorization................................. 57
SECTION 7.2. Agents and Affiliates......................................... 57
SECTION 7.3. Action by any Administrative Agent............................ 57
SECTION 7.4. Consultation with Experts..................................... 58
SECTION 7.5. Liability of the Agents....................................... 58
SECTION 7.6. Indemnification............................................... 58
SECTION 7.7. Credit Decision............................................... 59
SECTION 7.8. Successor Administrative Agent................................ 59
SECTION 7.9. Fees.......................................................... 59
SECTION 7.10. Arranging Agents and Managing Agents. ........................ 59
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.1. Basis for Determining Interest
Rate Inadequate or Unfair..................................... 60
SECTION 8.2. Illegality.................................................... 60
SECTION 8.3. Increased Cost and Reduced Return............................. 61
SECTION 8.4. Taxes......................................................... 63
SECTION 8.5. Base Rate Loans Substituted for
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Page
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Affected Euro-Dollar Loans.................................... 65
ARTICLE 9
MISCELLANEOUS
SECTION 9.1. Notices....................................................... 65
SECTION 9.2. No Waivers.................................................... 66
SECTION 9.3. Expenses; Indemnification..................................... 66
SECTION 9.4. Sharing of Set-Offs........................................... 67
SECTION 9.5. Amendments and Waivers........................................ 67
SECTION 9.6. Successors and Assigns........................................ 68
SECTION 9.7. No Reliance on Margin Stock as
Collateral.................................................... 70
SECTION 9.8. Confidentiality............................................... 71
SECTION 9.9. WAIVER OF JURY TRIAL.......................................... 71
SECTION 9.10. GOVERNING LAW; SUBMISSION TO
JURISDICTION.................................................. 71
SECTION 9.11. Counterparts; Integration;
Effectiveness................................................. 71
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Commitment Schedule
Pricing Schedule
Schedule 4.05 - Pending Litigation
Schedule 4.06 - Erisa Exceptions
Exhibit A - Note
Exhibit B - Money Market Request
Exhibit C - Money Market Invitation
Exhibit D - Money Market Quote
Exhibit E - Swingline Note
Exhibit F - Senior Officer's Closing Certificate
Exhibit G - Opinion of Gibson, Dunn & Crutcher, Special
Counsel for the Borrower
Exhibit H - Opinion of Scott Brown, General Counsel
for the Borrower
Exhibit I - Opinion of Special Counsel for the
Administrative Agent
Exhibit J - Assignment and Assumption Agreement
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CREDIT AGREEMENT
AGREEMENT dated as of March 1, 1996 among TENET HEALTHCARE
CORPORATION, the LENDERS and MANAGING AGENTS party hereto, BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION as Documentation Agent, THE BANK OF NEW
YORK, as Syndication Agent, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Administrative Agent.
WHEREAS, terms used in these recitals have the meanings assigned to
them in Section 1.1 hereof;
WHEREAS, the Borrower desires to have available to it a revolving
credit facility in the aggregate amount of $1,550,000,000 pursuant to which it
may borrow for general corporate purposes; and
WHEREAS, this Agreement is intended by the Borrower to replace its
Existing Credit Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. DEFINITIONS. The following terms, as used herein, have
the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.3.
"Adjusted Consolidated Net Worth" means, at any date, the consolidated
stockholders' equity of the Borrower and its Subsidiaries minus the amount (if
any) by which their Consolidated Intangible Assets exceed $2,800,000,000, all
determined as of such date. "Consolidated Intangible Assets" means, at any
date, the sum of (i) all write-ups (other than (x) write-ups resulting from
foreign currency
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translations, (y) write-ups of assets of a going concern business made within
twelve months after the acquisition of such business and (z) write-ups to market
value of Investments in debt securities and equity securities of Persons not
accounted for on a consolidated basis or on the equity method) subsequent to
November 30, 1995 in the book value of any asset and (ii) all unamortized debt
discount and expense, unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, anticipated future benefit of tax loss
carry-forwards, copyrights, organization or developmental expenses and other
intangible assets, all determined as of such date with respect to the Borrower
and its Subsidiaries.
"Adjusted EBITDA" means, for any period, Consolidated EBITDA for such
period adjusted as follows:
(i) by deducting, to the extent included in such Consolidated EBITDA,
the Borrower's Pro Rata Share of each Equity Affiliate's net income for
such period; and
(ii) by adding back, with respect to each Equity Affiliate that is an
Included Equity Affiliate at the end of such period, an amount equal to the
lesser of:
(x) the Borrower's Pro Rata Share of the sum of (A) such Included
Equity Affiliate's net income for such period plus (B) to the extent
deducted in determining such net income, its interest expense, income
taxes, depreciation and amortization, or
(y) the sum of (A) all dividends and other distributions paid in cash
by such Included Equity Affiliate during such period to the Borrower
and its Subsidiaries and (B) the Borrower's Pro Rata Share of such
Included Equity Affiliate's interest expense for such period.
"Adjusted Interest Expense" means, for any period, the sum of (i)
Consolidated Interest Expense for such period and (ii) with respect to each
Equity Affiliate that is an Included Equity Affiliate at the end of such period,
an amount equal to the Borrower's Pro Rata Share of such
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Included Equity Affiliate's interest expense for such period.
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.9(b).
"Adjusted Rental Expense" means, for any period, the sum of (i)
Consolidated Rental Expense for such period and (ii) with respect to each Equity
Affiliate that is an Included Equity Affiliate at the end of such period, an
amount equal to the Borrower's Pro Rata Share of such Included Equity
Affiliate's rental expense for such period.
"Adjusted Total Debt" means at any time, without duplication, the sum
of (i) the consolidated Debt of the Borrower and its Subsidiaries and (ii) the
Borrower's Pro Rata Share of the Debt of each Included Equity Affiliate.
"Administrative Agent" means Morgan Guaranty Trust Company of New
York, in its capacity as Administrative Agent for the Lenders hereunder, and its
successors in such capacity.
"Administrative Questionnaire" means, with respect to each Lender, an
administrative questionnaire in the form prepared by the Administrative Agent
and submitted to the Administrative Agent (with a copy to the Borrower) duly
completed by such Lender.
"Affiliate" means, with respect to any Person, (i) any Person that
directly, or indirectly through one or more intermediaries, controls such Person
(a "Controlling Person") or (ii) any Person which is controlled by or is under
common control with a Controlling Person. As used herein, the term "control"
means possession, directly or indirectly, of the power to direct or cause the
direction of the management of a Person by voting securities, by contract or
otherwise.
"Agents" means the Administrative Agent, the Documentation Agent, the
Syndication Agent and the Managing Agents, and "Agent" means any one of them.
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"Aggregate Investment in Equity Affiliates" has the meaning set forth
in Section 5.13(a).
"Applicable Lending Office" means, with respect to any Lender, (i) in
the case of its Base Rate Loans, its Domestic Lending Office, (ii) in the case
of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case
of its Money Market Loans, its Money Market Lending Office.
"Arranging Agents" means (i) Bank of America National Trust and
Savings Association in its capacity as Documentation Agent in connection with
the credit facility provided hereunder and (ii) The Bank of New York, in its
capacity as Syndication Agent in connection with the credit facility provided
hereunder.
"Assignee" has the meaning set forth in Section 9.6(c).
"Availability Period" means the period from and including the Closing
Date to but excluding the Termination Date.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"Base Rate Borrowing" means a borrowing of Base Rate Loans pursuant to
Section 2.1 or 2.16(h).
"Base Rate Loan" means a Syndicated Loan which bears interest at the
Base Rate (or any higher rate determined pursuant to Section 2.9(a)) pursuant to
the applicable Notice of Syndicated Borrowing or Notice of Interest Rate
Election or the provisions of Section 2.16(h) or Article 8.
"Base Rate Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which
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is maintained or otherwise contributed to by any member of the ERISA Group.
"Borrower" means Tenet Healthcare Corporation, a Nevada corporation,
and its successors.
"Borrower's Latest Form 10-Q" means the Borrower's quarterly report on
Form 10-Q for its Fiscal Quarter ended November 30, 1995, as filed with the SEC
pursuant to the Exchange Act.
"Borrower's Pro Rata Share" means:
(i) with respect to the Debt of any Included Equity Affiliate at any
date, a percentage of such Debt equal to the percentage of such Equity
Affiliate's net income (or net loss) to be included in determining, in
accordance with GAAP, the consolidated net income of the Borrower and its
Subsidiaries for periods after such date (assuming no change in any
relevant ownership interests); and
(ii) with respect to the net income, interest expense, rental
expense, income taxes or depreciation of any Equity Affiliate for any
period of time, a percentage thereof equal to the percentage of such Equity
Affiliate's net income (or net loss) included in determining, in accordance
with GAAP, the consolidated net income of the Borrower and its Subsidiaries
for such period of time.
"Borrowing" means a Syndicated Borrowing, a Money Market Borrowing or
a Swingline Borrowing.
"Closing Date" means the date on which all the conditions set forth in
Section 3.1 have been satisfied (or waived in accordance with Section 9.5).
"Commitment" means (i) with respect to any Lender listed on the
Commitment Schedule, the amount set forth opposite its name on the Commitment
Schedule as its Commitment or (ii) with respect to any Assignee, the amount of
the transferor Lender's Commitment assigned to such Assignee pursuant to Section
9.6(c), in each case as such
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amount may be reduced from time to time pursuant to Section 2.12 or changed as
result of an assignment pursuant to Section 9.6(c). The term "Commitment" does
not include the Swingline Commitment.
"Commitment Percentage" means, with respect to any Lender at any time,
the percentage which the amount of such Lender's Commitment at such time
represents of the aggregate amount of all the Lenders' Commitments at such time.
At any time after the Commitments shall have terminated, the term "Commitment
Percentage" shall refer to a Lender's Commitment Percentage immediately before
such termination, adjusted to reflect any subsequent assignments pursuant to
Section 9.6(c).
"Commitment Schedule" means the Commitment Schedule attached hereto.
"Consolidated EBITDA" means, for any period, the sum of (i) the
consolidated net income of the Borrower and its Subsidiaries for such period
plus (ii) to the extent deducted in determining such consolidated net income,
the sum of (A) interest expense, (B) income taxes and (C) depreciation,
amortization and other similar non-cash charges; PROVIDED that Consolidated
EBITDA shall be calculated so as to exclude the effect of (x) any gain or loss
that is classified as extraordinary in accordance with GAAP and (y) any gain or
loss from any sale or other disposition of any Healthcare Facility, any
Healthcare Business or any Equity Interest in any Person.
"Consolidated Interest Expense" means, for any period, the
consolidated interest expense of the Borrower and its Subsidiaries for such
period.
"Consolidated Plant, Property and Equipment" means, at any time, the
consolidated plant, property and equipment shown on a consolidated balance sheet
of the Borrower and its Subsidiaries as of the end of the most recent Fiscal
Year ended prior to such time.
"Consolidated Rental Expense" means, for any period, the consolidated
rental expense of the Borrower and its Subsidiaries for such period.
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"Continuing Director" means (i) any individual who is a director of
the Borrower on the date of this Agreement and (ii) any individual who becomes a
director of the Borrower after the date of this Agreement and is elected or
nominated for election as a director of the Borrower by a majority of the
individuals who were Continuing Directors immediately before such election or
nomination.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business and deferred compensation payable to members of management of such
Person, (iv) all obligations of such Person as lessee which are capitalized in
accordance with GAAP and (v) all Guarantees by such Person of obligations of
other Persons of the types described in the foregoing clauses (i) through (iv),
inclusive (any such Guarantee to be included in any calculation of the amount of
such Person's Debt at an amount equal to the principal amount guaranteed
thereby). If such Person Guarantees Debt of another Person by causing a letter
of credit to be issued in support thereof, the "Debt" of such Person includes
(without duplication) such Person's obligation to reimburse the issuing bank for
drawings (including any future drawings) in respect of principal under such
letter of credit.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"Domestic Lending Office" means, as to each Lender, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Lender may hereafter designate
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as its Domestic Lending Office by notice to the Borrower and the Administrative
Agent.
"Environmental Laws" means any and all federal, state and local
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to the
environment, the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or wastes or the
clean-up or other remediation thereof.
"Equity Affiliate" means, at any date, a Person in which the Borrower
or a Subsidiary has an Equity Interest that would be accounted for on the equity
method in the Borrower's consolidated financial statements if such statements
were prepared as of such date. If such Person has any subsidiaries, the term
"Equity Affiliate" shall mean such Person and its consolidated subsidiaries, and
all amounts to be determined for purposes of this Agreement with respect to such
Equity Affiliate shall be determined with respect to such Person and its
consolidated subsidiaries on a consolidated basis.
"Equity Interest" means (i) in the case of a corporation, any shares
of its capital stock, (ii) in the case of a partnership, any partnership
interest (whether general or limited), (iii) in the case of any other business
entity, any participation or other interest in the equity or profits thereof or
(iv) any warrant, option or other right to acquire any Equity Interest described
in the foregoing clauses (i), (ii) and (iii), other than a right to convert a
debt security into, or exchange a debt security for, any such Equity Interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
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"ERISA Group" means the Borrower, its Subsidiaries and all members of
a controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Borrowing" means a borrowing pursuant to Section 2.1 of
Euro-Dollar Loans having the same initial Interest Period.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Lender, its office,
branch or Affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or Affiliate of such
Lender as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Administrative Agent.
"Euro-Dollar Loan" means a Syndicated Loan which bears interest at a
Euro-Dollar Rate pursuant to the applicable Notice of Syndicated Borrowing or
Notice of Interest Rate Election.
"Euro-Dollar Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
"Euro-Dollar Rate" means a rate of interest determined pursuant to
Section 2.9(b) or (c) on the basis of an Adjusted London Interbank Offered Rate.
"Euro-Dollar Reference Banks" means the principal London offices of
Morgan Guaranty Trust Company of New York, Bank of America National Trust and
Savings Association and The Bank of New York.
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"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.9(b).
"Event of Default" has the meaning set forth in Section 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Credit Agreement" means the $2,300,000,000 Credit Agreement
dated as of February 28, 1995 among the Borrower (formerly known as National
Medical Enterprises, Inc.), the lenders party thereto, Morgan Guaranty Trust
Company of New York, Bank of America National Trust and Savings Association, The
Bank of New York and Bankers Trust Company as Arranging Agents, and Morgan
Guaranty Trust Company of New York as Administrative Agent, as in effect
immediately before the Closing Date.
"Existing Lenders" means the lenders party to the Existing Credit
Agreement.
"Existing Security Agreement" means the Security Agreement dated as of
February 28, 1995 among the Borrower (formerly known as National Medical
Enterprises, Inc.) and N.M.E. International (Cayman) Limited, as Grantors, and
Morgan Guaranty Trust Company of New York, as Collateral Agent.
"Facility Fee Rate" means a rate per annum determined in accordance
with the Pricing Schedule.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, PROVIDED that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next
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succeeding Domestic Business Day, the Federal Funds Rate for such day shall be
the average rate quoted to Morgan Guaranty Trust Company of New York on such day
on such transactions as determined by the Administrative Agent.
"Financial Obligations" of any Person means at any date, without
duplication:
(i) Debt of such Person,
(ii) all obligations of such Person to reimburse any bank or other
Person in respect of amounts paid under a letter of credit or similar
instrument or to make any payment pursuant to a Hedging Obligation,
(iii) all Debt that is secured by a Lien on any asset of such Person
but is not otherwise an obligation of such Person, PROVIDED that the amount
of any Financial Obligation described in this clause (iii) shall be deemed
to be equal to the lesser of the amount of the relevant Debt or the book
value of the asset or assets of such Person securing such Debt, and
(iv) all Guarantees by such Person of Financial Obligations of other
Persons of the types described in clauses (i) and (ii) of this definition.
"Financing Documents" means this Agreement (including the Schedules
and Exhibits hereto), the Notes and the Swingline Note, and "Financing Document"
means any one of them.
"Fiscal Quarter" means a fiscal quarter of the Borrower.
"Fiscal Year" means a fiscal year of the Borrower.
"GAAP" means at any time generally accepted accounting principles as
then in effect in the United States, applied on a basis consistent (except for
changes with which the Borrower's independent public accountants have concurred)
with the most recent audited consolidated financial statements of the Borrower
and its Subsidiaries theretofore delivered to the Lenders.
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"Group of Loans" means at any time a group of Syndicated Loans
consisting of (i) all Syndicated Loans which are Base Rate Loans at such time or
(ii) all Syndicated Loans which are Euro-Dollar Loans having the same Interest
Period at such time; PROVIDED that, if a Loan of any particular Lender is
converted to or made as a Base Rate Loan pursuant to Section 8.2 or 8.5, such
Loan shall be included in the same Group or Groups of Loans from time to time as
it would have been in if it had not been so converted or made.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
payment obligation of any other Person, including without limiting the
generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Debt or other payment obligation (whether
arising by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Debt or other
payment obligation of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part), PROVIDED that the term Guarantee
shall not include endorsements for collection or deposit in the ordinary course
of business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics.
"Healthcare Business" means any going concern healthcare business or
any other going concern business that is related or ancillary to one or more
Healthcare Facilities or healthcare businesses.
"Healthcare Facility" means a hospital, outpatient clinic, long-term
care facility, medical office building or
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other comparable facility that is used or useful in providing healthcare
services.
"Hedging Obligation" means, with respect to any Person, any obligation
of such Person under (i) any interest rate swap agreement, interest rate cap
agreement or interest rate collar agreement, (ii) any foreign exchange contract
or currency swap agreement or (iii) any other agreement or arrangement of a type
designed to protect a Person against fluctuations in interest rates or currency
exchange rates.
"Included Equity Affiliate" means, at any time, an Equity Affiliate
that the Borrower has theretofore designated, by written notice to the
Administrative Agent and the Lenders, as an Included Equity Affiliate for
purposes of this Agreement; PROVIDED that at such time the Borrower or a
Subsidiary has the right to receive distributions of substantially all of the
Borrower's Pro Rata Share of such Equity Affiliate's net income for future
periods free of any restriction except a restriction that the Borrower or such
Subsidiary may agree to after such time. The Borrower may revoke any such
designation by written notice to the Administrative Agent and the Lenders at any
time.
"Indemnitee" has the meaning set forth in Section 9.3(b).
"Interest Period" means, (1) with respect to each Euro-Dollar Loan,
the period commencing on the date of borrowing specified in the applicable
Notice of Syndicated Borrowing or on the date specified in the applicable
Notice of Interest Rate Election and ending one, two, three or six months
thereafter, as the Borrower may elect in the applicable notice; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
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(b) any Interest Period which begins on the last Euro-Dollar 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, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(2) with respect to each Money Market LIBOR Borrowing, the period commencing on
the date of such Borrowing and ending such whole number of months thereafter as
the Borrower may elect in accordance with Section 2.3; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar 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, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Money Market Absolute Rate Borrowing, the period
commencing on the date of such Borrowing and ending such number of days
thereafter (but not less than 7 days) as the Borrower may elect in accordance
with Section 2.3; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall
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be extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Investment" means, with respect to any Person, any investment by such
Person in any other Person (including an Affiliate) in the form of direct or
indirect loans, capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Debt, Equity Interests or
other securities and all other items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP.
"Investment Grade Rating" means a rating of senior long-term unsecured
debt securities of the Borrower without any third party credit support as (i)
BBB- or higher by S&P and (ii) Baa3 or higher by Moody's.
"LC Issuing Bank" has the meaning set forth in Section 1.1 of the
Existing Credit Agreement.
"Lender" means each lender listed on the Commitment Schedule, each
Assignee which becomes a Lender pursuant to Section 9.6(c), and their respective
successors. The term "Lender" does not include the Swingline Bank in its
capacity as such.
"LIBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.3.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has substantially the same practical effect as a
security interest, in respect of such asset. For
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purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"Loan" means a Syndicated Loan or a Money Market Loan and "Loans"
means both of the foregoing. The term "Loan" does not include a Swingline Loan.
"London Interbank Offered Rate" has the meaning set forth in Section
2.9(b).
"Managing Agents" means the Lenders designated as Managing Agents on
the signature pages hereof, in their respective capacities as Managing Agents in
connection with the credit facility provided hereunder.
"Material Adverse Effect" means (i) a material adverse effect on the
business, operations, properties, financial condition or prospects of the
Borrower and its Subsidiaries, considered as a whole, or (ii) an adverse effect
on the validity or enforceability of any material provision of any Financing
Document.
"Material Financial Obligations" means non-contingent Financial
Obligations (other than the Notes and the Swingline Note) of the Borrower and/or
one or more Subsidiaries, arising in one or more related transactions, in an
aggregate principal or face amount exceeding $25,000,000; PROVIDED that, for
purposes of this definition and clauses (g) and (h) of Section 6.1, (i)
contingent obligations of the Borrower or any Subsidiary to reimburse a bank or
other Person for amounts not yet drawn under a letter of credit or similar
instrument shall be deemed to be non-contingent (and to have been accelerated)
if they are required to be prepaid or cash collateralized as a result of a
default under the relevant reimbursement agreement and (ii) contingent
obligations of the Borrower or any Subsidiary under any Hedging Obligation shall
be deemed to be non-contingent (and to have been accelerated) if such Hedging
Obligation is terminated by reason of a default by the Borrower or any
Subsidiary.
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"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $25,000,000.
"Material Subsidiary" means any Subsidiary except (i) a Subsidiary
that is not actively engaged in business and has assets of less than $5,000,000
and liabilities of less than $5,000,000 or (ii) a Subsidiary that is actively
engaged in business and has assets of less than $1,000,000 and liabilities of
less than $1,000,000.
"Metrocrest Reimbursement Agreement" means the Letter of Credit and
Reimbursement Agreement dated as of November 1, 1994 among the Borrower, the
banks party thereto, and The Bank of New York, as Issuing Bank and Agent
thereunder, as amended from time to time.
"Money Market Absolute Rate" has the meaning set forth in Section
2.3(d).
"Money Market Absolute Rate Loan" means a loan made or to be made by a
Lender pursuant to an Absolute Rate Auction.
"Money Market Borrowing" means a borrowing of Money Market Loans
pursuant to a LIBOR Auction or an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Lender, its Domestic
Lending Office or such other office, branch or Affiliate of such Lender as it
may hereafter designate as its Money Market Lending Office by notice to the
Borrower and the Administrative Agent; PROVIDED that any Lender may from time to
time by notice to the Borrower and the Administrative Agent designate separate
Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand,
and its Money Market Absolute Rate Loans, on the other hand, in which case all
references herein to the Money Market Lending Office of such Lender shall be
deemed to refer to either or both of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan made or to be made by a Lender
pursuant to a LIBOR Auction (including
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such a loan bearing interest at the Base Rate pursuant to Section 8.1(a)).
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.3(d).
"Money Market Quote" means an offer by a Lender to make a Money Market
Loan in accordance with Section 2.3.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"Non-Recourse Purchase Money Debt" of any Person means Debt incurred
to finance additions to its property, plant and equipment (or to refinance Debt
incurred for such purpose); PROVIDED that the lender or other obligee of such
Debt has no recourse (except for breach of representations, warranties and/or
covenants customary in asset-based financing) to assets of such Person, the
Borrower or any Subsidiary other than the assets financed or refinanced by such
Debt and cash flows attributable to such assets.
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, issued hereunder to evidence the obligation of the
Borrower to repay the Loans (other than the Swingline Loans), and "Note" means
any one of such promissory notes.
"Notice of Borrowing" means a Notice of Syndicated Borrowing (as
defined in Section 2.2), a Notice of Money Market Borrowing (as defined in
Section 2.3(f)) or a Notice of Swingline Borrowing (as defined in Section
2.16(b)).
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"Notice of Interest Rate Election" has the meaning set forth in
Section 2.10.
"Outstanding Committed Amount" means, with respect to any Lender at
any time, the sum of (i) the outstanding principal amount of each of its
Syndicated Loans and (ii) each outstanding participation in Swingline Loans (if
any) held by it pursuant to Section 2.16(h), all determined at such time after
giving effect to any prior assignments by or to such Lender pursuant to Section
9.6(c).
"Parent" means, with respect to any Lender, any Person controlling
such Lender.
"Participant" has the meaning set forth in Section 9.6(b).
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Pricing Level" has the meaning set forth in the Pricing Schedule.
"Pricing Schedule" means the Pricing Schedule attached hereto.
"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
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"Psychiatric Subsidiaries" means NME Psychiatric Properties, Inc., a
Delaware corporation, and its subsidiaries.
"Rate Period" has the meaning set forth in the Pricing Schedule.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Lenders" means at any time Lenders (i) having more than 50%
in amount of the Commitments at such time or (ii) if the Commitments shall have
terminated, holding more than 50% in aggregate principal amount of the Loans
outstanding at such time. For purposes of clause (ii) of this definition, each
participation in a Swingline Loan purchased by a Lender pursuant to Section
2.16(h) shall be deemed to be a Loan held by such Lender and not by the
Swingline Bank.
"Restricted Asset Transfer" means any sale or other transfer by the
Borrower or any Subsidiary of any Healthcare Facility, any Healthcare Business
or any Equity Interest in any Person (including, without limitation, any such
transfer accomplished by means of a merger or consolidation), except:
(i) a sale or other transfer to the Borrower or a Subsidiary;
(ii) a transfer accomplished by means of a merger or consolidation of
the Borrower permitted by Section 5.6(a);
(iii) a sale or other transfer of assets that were held for sale as
of November 30, 1995;
(iv) any issuance or sale by the Borrower of Equity Interests in the
Borrower;
(v) any sale or other transfer of Equity Interests in Vencor, Inc.,
pursuant to the provisions
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of the Borrower's 6% Exchangeable Subordinated Notes due 2005 or otherwise;
(vi) a sale or other transfer of Equity Interests in Westminster
Health Care Holdings PLC or any other Person that is neither a Subsidiary
nor an Equity Affiliate; and
(vii) any sale or other transfer of assets to an Equity Affiliate.
"S&P" means Standard & Poors' Ratings Services.
"SEC" means the United States Securities and Exchange Commission.
"Senior Officer of the Borrower" means an Executive Vice President, a
Senior Vice President or the Treasurer of the Borrower.
"Subsidiary" means, at any date, any corporation or other entity the
accounts of which would be consolidated with those of the Borrower in its
consolidated financial statements if such statements were prepared as of such
date in accordance with GAAP.
"Swingline Availability Period" means the period from and including
the Closing Date to but excluding the Swingline Maturity Date.
"Swingline Bank" means Morgan Guaranty Trust Company of New York, in
its capacity as the Swingline Bank under the swingline facility described in
Section 2.16, and its successors in such capacity.
"Swingline Borrowing" means a borrowing of a Swingline Loan pursuant
to Section 2.16(a).
"Swingline Commitment" means the obligation of the Swingline Bank to
make Swingline Loans to the Borrower in aggregate principal amount at any one
time outstanding not to exceed $10,000,000.
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"Swingline Loan" means a loan made by the Swingline Bank pursuant to
Section 2.16(a).
"Swingline Note" has the meaning set forth in Section 2.16(d).
"Swingline Maturity Date" means the day that is 30 days before the
Termination Date.
"Syndicated Borrowing" means a Base Rate Borrowing pursuant to Section
2.1 or Section 2.16(h) or a Euro-Dollar Borrowing pursuant to Section 2.1.
"Syndicated Loan" means a loan made pursuant to Section 2.1 or Section
2.16(h); PROVIDED that, if any such loan or loans (or portions thereof) are
combined or subdivided pursuant to a Notice of Interest Rate Election, the term
"Syndicated Loan" shall refer to the combined principal amount resulting from
such combination or to each of the separate principal amounts resulting from
such subdivision, as the case may be.
"Termination Date" means March 1, 2001, or, if such day is not a
Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
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SECTION 1.2 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP as
in effect from time to time; PROVIDED that, if the Borrower notifies the
Administrative Agent that the Borrower wishes to amend any covenant in Article 5
to eliminate the effect of any change in GAAP on the operation of such covenant
(or if the Administrative Agent notifies the Borrower that the Required Lenders
wish to amend Article 5 for such purpose), then the Borrower's compliance with
such covenant shall be determined on the basis of GAAP as in effect immediately
before the relevant change in GAAP became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the Borrower
and the Required Lenders.
ARTICLE 2
THE CREDITS
SECTION 2.1 SYNDICATED BORROWINGS. Each Lender severally agrees,
on the terms and conditions set forth in this Agreement, to make loans to the
Borrower pursuant to this Section from time to time during the Availability
Period; PROVIDED that such Lender's Outstanding Committed Amount shall not at
any time exceed its Commitment. Each borrowing under this Section shall be a
Syndicated Borrowing made from the several Lenders ratably in proportion to
their respective Commitments. Each such Syndicated Borrowing shall be in an
aggregate amount of $10,000,000 or any larger multiple of $1,000,000; PROVIDED
that (i) any such Syndicated Borrowing may be in the aggregate amount of the
unused Commitments and (ii) if such Syndicated Borrowing is made on the
Swingline Maturity Date, such Syndicated Borrowing may be in the aggregate
amount of the Swingline Loans outstanding on such date. Within the foregoing
limits, the Borrower may borrow under this Section, repay, or to the extent
permitted by Section 2.7, prepay Syndicated Loans and reborrow at any time
during the Availability Period under this Section.
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SECTION 2.2 NOTICE OF SYNDICATED BORROWING. The Borrower shall
give the Administrative Agent notice (a "Notice of Syndicated Borrowing") not
later than (x) 11:00 A.M. (New York City time) on the date of each Base Rate
Borrowing and (y) 1:00 P.M. (New York City time) on the third Euro-Dollar
Business Day before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in
the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether such Borrowing is to be a Base Rate Borrowing or a
Euro-Dollar Borrowing, and
(iv) in the case of a Euro-Dollar Borrowing, the duration of the
initial Interest Period applicable thereto.
Each Interest Period specified in a Notice of Syndicated Borrowing shall comply
with the provisions of the definition of Interest Period.
SECTION 2.3 MONEY MARKET BORROWINGS.
(a) THE MONEY MARKET OPTION. At any time during the Availability
Period when the Borrower has an Investment Grade Rating, the Borrower may,
as set forth in this Section, request the Lenders to make offers to make
Money Market Loans to the Borrower. The Lenders may, but shall have no
obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this
Section.
(b) MONEY MARKET QUOTE REQUEST. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to
the Administrative Agent by telex or facsimile transmission a Money Market
Quote Request substantially in the form of Exhibit B hereto so as to be
received no later than 1:00 P.M. (New York City time) on (x) the fifth
Euro-Dollar Business Day prior to the
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date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the
Domestic Business Day next preceding the date of Borrowing proposed therein, in
the case of an Absolute Rate Auction (or, in either case, such other time or
date as the Borrower and the Administrative Agent shall have mutually agreed and
shall have notified to the Lenders not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day
in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$10,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Borrower and the Administrative Agent may agree) of any
other Money Market Quote Request.
(c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon receipt of
a Money Market Quote Request, the Administrative Agent shall send to the
Lenders by telex or facsimile transmission an Invitation for Money Market
Quotes substantially in the form of Exhibit C hereto, which shall constitute
an invitation by the Borrower to each Lender to submit Money Market Quotes
offering to make the Money Market Loans to which such Money Market Quote
Request relates in accordance with this Section.
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(d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES. (i) Each Lender
may submit a Money Market Quote containing an offer or offers to make Money
Market Loans in response to any Invitation for Money Market Quotes. Each
Money Market Quote must comply with the requirements of this subsection (d) and
must be submitted to the Administrative Agent by telex or facsimile
transmission at its offices specified in or pursuant to Section 9.1 not later
than (x) 2:00 P.M. (New York City time) on the fourth Euro-Dollar Business
Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction
or (y) 10:00 A.M. (New York City time) on the proposed date of Borrowing, in
the case of an Absolute Rate Auction (or, in either case, such other time or
date as the Borrower and the Administrative Agent shall have mutually agreed
and shall have notified to the Lenders not later than the date of the Money
Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for
which such change is to be effective); PROVIDED that Money Market Quotes
submitted by the Administrative Agent (or any affiliate of the Administrative
Agent) in the capacity of a Lender may be submitted, and may only be submitted,
if the Administrative Agent or such affiliate notifies the Borrower of the
terms of the offer or offers contained therein not later than (x) one hour
prior to the deadline for the other Lenders, in the case of a LIBOR Auction
or (y) 15 minutes prior to the deadline for the other Lenders, in the case of
an Absolute Rate Auction. Subject to Articles 3 and 6, any Money Market Quote
so made shall be irrevocable except with the written consent of the
Administrative Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each such
offer is being made, which principal amount (w) may be greater than or less
than the Commitment of the quoting Lender, (x) must be $10,000,000 or a
larger multiple of $1,000,000, (y) may not exceed the principal amount of
Money Market Loans for which offers were requested and (z) may be subject
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to an aggregate limitation as to the principal amount of Money Market Loans
for which offers being made by such quoting Lender may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest per
annum (specified to the nearest 1/10,000th of 1%) (the "Money Market
Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Lender.
A Money Market Quote may set forth up to five separate offers by the quoting
Lender with respect to each Interest Period specified in the related
Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or does
not specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth in
the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
(e) NOTICE TO BORROWER. The Administrative Agent shall promptly
notify the Borrower of the terms (x) of any Money Market Quote submitted
by a Lender that is in accordance with subsection (d) and (y) of any Money
Market
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Quote that amends, modifies or is otherwise inconsistent with a previous Money
Market Quote submitted by such Lender with respect to the same Money Market
Quote Request. Any such subsequent Money Market Quote shall be disregarded by
the Administrative Agent unless such subsequent Money Market Quote is submitted
solely to correct a manifest error in such former Money Market Quote. The
Administrative Agent's notice to the Borrower shall specify (A) the aggregate
principal amount of Money Market Loans for which offers have been received for
each Interest Period specified in the related Money Market Quote Request, (B)
the respective principal amounts and Money Market Margins or Money Market
Absolute Rates, as the case may be, so offered and (C) if applicable,
limitations on the aggregate principal amount of Money Market Loans for which
offers in any single Money Market Quote may be accepted.
(f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than (x) 1:00
P.M. (New York City time) on the third Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) 11:00 A.M.
(New York City time) on the proposed date of Borrowing, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Administrative Agent shall have mutually agreed and shall
have notified to the Lenders not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective), the Borrower shall notify the Administrative
Agent of its acceptance or non-acceptance of the offers so notified to it
pursuant to subsection (e). In the case of acceptance, such notice (a "Notice
of Money Market Borrowing") shall specify the aggregate principal amount of
offers for each Interest Period that are accepted. The Borrower may accept
any Money Market Quote in whole or in part; PROVIDED that:
(i) the aggregate principal amount of each Money Market Borrowing
may not exceed the applicable amount set forth in the related Money Market
Quote Request,
(ii) the principal amount of each Money Market Borrowing must be
$10,000,000 or a larger multiple of $1,000,000,
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(iii) acceptance of offers may only be made on the basis of ascending
Money Market Margins or Money Market Absolute Rates, as the case may be,
(iv) the Borrower may not accept any offer that is described in
subsection (d) (iii) or that otherwise fails to comply with the
requirements of this Agreement, and
(v) the Borrower may not accept any offer unless the Borrower has an
Investment Grade Rating at the time.
(g) ALLOCATION BY ADMINISTRATIVE AGENT. If offers are made by two or
more Lenders with the same Money Market Margins or Money Market Absolute Rates,
as the case may be, for a greater aggregate principal amount than the amount in
respect of which such offers are accepted for the related Interest Period, the
principal amount of Money Market Loans in respect of which such offers are
accepted shall be allocated by the Administrative Agent among such Lenders as
nearly as possible (in multiples of $1,000,000, as the Administrative Agent may
deem appropriate) in proportion to the aggregate principal amounts of such
offers. Determinations by the Administrative Agent of the amounts of Money
Market Loans shall be conclusive in the absence of manifest error.
SECTION 2.4 NOTICE TO LENDERS; FUNDING OF LOANS. (a) Upon receipt
of a Notice of Syndicated Borrowing or a Notice of Money Market Borrowing, the
Administrative Agent shall promptly notify each Lender participating in such
Borrowing of the contents of such Notice of Borrowing and such Lender's share
of such Borrowing. Such Notice of Borrowing shall not thereafter be revocable
by the Borrower.
(b) Not later than 1:00 P.M. (New York City time) on the date of
each such Borrowing, each Lender participating therein shall make available its
share of such Borrowing, in Federal or other funds immediately available in
New York City, to the Administrative Agent at its address referred to in
Section 9.1. Unless the Administrative Agent determines that any applicable
condition specified in
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Article 3 has not been satisfied, the Administrative Agent shall (i) apply the
funds so received from the Lenders to repay all Swingline Loans (if any) then
outstanding, together with interest accrued thereon, and (ii) make the
remainder of such funds available to the Borrower at the Administrative Agent's
aforesaid address.
(c) Unless the Administrative Agent shall have received notice
from a Lender prior to the date of any such Borrowing that such Lender will
not make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (b) of this Section and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Lender shall not
have so made its share of such Borrowing available to the Administrative
Agent, such Lender and the Borrower severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the
Administrative Agent, at (i) in the case of the Borrower, a rate per annum
equal to the higher of the Federal Funds Rate and the interest rate
applicable to such Borrowing pursuant to Section 2.9 and (ii) in the case of
such Lender, the Federal Funds Rate. If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount so repaid shall
constitute such Lender's Loan included in such Borrowing for purposes of this
Agreement. If the Borrower shall repay such corresponding amount, such
repayment shall not affect any rights the Borrower may have against any
defaulting Lender.
SECTION 2.5 NOTES. (a) The Borrower's obligation to repay the
Loans of each Lender shall be evidenced by a single Note payable to the order
of such Lender for the account of its Applicable Lending Office in an amount
equal to the aggregate unpaid principal amount of such Lender's Loans.
(b) Each Lender may, by notice to the Borrower and the Administrative
Agent, request that its Base Rate
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Loans, its Euro-Dollar Loans or its Money Market Loans be evidenced by a
separate Note in an amount equal to the aggregate unpaid principal amount of
such Loans. Each such Note shall be in substantially the form of Exhibit A
hereto, with appropriate modifications to reflect the fact that it evidences
solely the relevant type of Loans. Each reference in this Agreement to a "Note"
or the "Notes" of such Lender shall be deemed to refer to and include any or all
of such Notes, as the context may require.
(c) Upon receipt of each Lender's Note pursuant to Section 3.1(b),
the Administrative Agent shall forward such Note to such Lender. Each Lender
shall record the date, amount and type of each Loan made by it and the date and
amount of each payment of principal made with respect thereto, and may, if such
Lender so elects in connection with any transfer or enforcement of its Note,
endorse on the schedule forming a part thereof appropriate notations to
evidence the foregoing information with respect to each such Loan evidenced
thereby then outstanding; PROVIDED that the failure of any Lender to make any
such recordation or endorsement shall not affect the obligations of the
Borrower under this Agreement or the Notes. Each Lender is hereby irrevocably
authorized by the Borrower so to endorse its Note and to attach to and make a
part of its Note a continuation of any such schedule as and when required.
SECTION 2.6 MATURITY OF LOANS. (a) Each Syndicated Loan shall
mature, and the principal amount thereof shall be due and payable, on the
Termination Date.
(b) Each Money Market Loan shall mature, and the principal amount
thereof shall be due and payable, on the last day of the Interest Period
applicable thereto.
SECTION 2.7 OPTIONAL PREPAYMENTS OF SYNDICATED LOANS. The Borrower
may at its option, by Notice of Syndicated Prepayment given in accordance with
Section 2.8, prepay any Group of Loans (subject, in the case of a Group of Euro-
Dollar Loans, to Section 2.14), in each case in whole at any time, or from time
to time in part in amounts aggregating at least $10,000,000, by paying the
principal amount to be prepaid together with interest accrued thereon to the
date of prepayment. Each such optional prepayment
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shall be applied to prepay ratably the Loans of the several Lenders included in
such Group of Loans.
SECTION 2.8 NOTICE OF SYNDICATED PREPAYMENT. The Borrower shall
give the Administrative Agent notice (a "Notice of Syndicated Prepayment") not
later than (x) 11:00 A.M. (New York City time) on the date of each prepayment
of BaseRate Loans and (y) 1:00 P.M. (New York City time) on the third Euro-
Dollar Business Day before each prepayment of Euro-Dollar Loans, specifying:
(i) the date of such prepayment, which shall be a Domestic Business
Day in the case of a prepayment of Base Rate Loans or a Euro-Dollar
Business Day in the case of a prepayment of Euro-Dollar Loans,
(ii) the aggregate amount of such prepayment, and
(iii) the Group or Groups of Loans to which such prepayment is to be
applied.
If the Borrower fails to specify the Group or Groups of Loans to which any such
prepayment is to be applied, such Group or Groups of Loans shall be selected by
the Administrative Agent. Each repayment or prepayment of Syndicated Loans
shall be applied ratably to the Loans included in the Group or Groups of Loans
selected by the Borrower or the Administrative Agent, as the case may be.
(b) Upon receipt of a Notice of Syndicated Prepayment, the
Administrative Agent shall promptly notify each relevant Lender of the contents
thereof and of such Lender's ratable share of such prepayment and such Notice of
Syndicated Prepayment shall not thereafter be revocable by the Borrower.
SECTION 2.9 INTEREST RATES. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from and
including the date such Loan is made to but excluding the date it becomes due,
at a rate per annum equal to the sum of the Base Rate for such day plus the
Base Rate Margin (if any) for such day. Such interest shall be payable in
arrears on the last Domestic Business Day of each Fiscal Quarter and, with
respect to the
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principal amount of any Base Rate Loan converted to a Euro-Dollar Loan, on the
date such amount is so converted. Any overdue principal of or interest on any
Base Rate Loan shall bear interest, payable on demand, for each day until paid
at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to
Base Rate Loans for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day plus the Adjusted London Interbank Offered Rate applicable to such Interest
Period. Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than three months, three months
after the first day thereof.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the
applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar
Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
each of the Euro-Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
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liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Lender to
United States residents).
(c) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day until paid, at a rate per
annum equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for
such day plus the quotient obtained (rounded upward, if necessary, to the next
higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary,
to the next higher 1/16 of 1%) of the respective rates per annum at which one
day (or, if such amount due remains unpaid more than three Euro-Dollar Business
Days, then for such other period of time not longer than six months as the
Administrative Agent may select) deposits in dollars in an amount approximately
equal to such overdue payment due to each of the Euro-Dollar Reference Banks are
offered to such Euro-Dollar Reference Bank in the London interbank market for
the applicable period determined as provided above by (y) 1.00 minus the
Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a)
or (b) of Section 8.1 shall exist, at a rate per annum equal to the sum of 2%
plus the rate applicable to Base Rate Loans for such day) and (ii) the sum of 2%
plus the Euro-Dollar Margin for such day plus the Adjusted London Interbank
Offered Rate applicable to such Loan at the date such payment was due.
(d) Each Euro-Dollar Reference Bank agrees to use its best efforts to
furnish quotations to the Administrative Agent as contemplated hereby. If any
Euro-Dollar Reference Bank does not furnish a timely quotation, the
Administrative Agent shall determine the relevant interest rate on the basis of
the quotation or quotations furnished by the remaining Euro-Dollar Reference
Bank or Banks or, if none of such quotations is available on a timely basis, the
provisions of Section 8.1 shall apply.
(e) Subject to Section 8.1(a), each Money Market LIBOR Loan shall
bear interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the sum of the London
Interbank
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Offered Rate for such Interest Period (determined in accordance with Section
2.9(b) as if the related Money Market LIBOR Borrowing were a Syndicated
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Lender making such Loan in accordance with Section 2.3. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Lender making such Loan in
accordance with Section 2.3. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof. Any overdue
principal of or interest on any Money Market Loan shall bear interest, payable
on demand, for each day until paid at a rate per annum equal to the sum of 2%
plus the Base Rate for such day.
SECTION 2.10. METHOD OF ELECTING INTEREST RATES. (a) The Loans
included in each Syndicated Borrowing shall bear interest initially at the
type of rate specified by the Borrower in the applicable Notice of Syndicated
Borrowing. Thereafter, the Borrower may from time to time elect to change or
continue the type of interest rate borne by each Group of Loans (subject in
each case to the provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day;
and
(ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or elect to continue such Loans as
Euro-Dollar Loans for an additional Interest Period, in each case effective
on the last day of the then current Interest Period applicable to such
Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Administrative Agent at least three Euro-Dollar Business
Days before the conversion or continuation selected in such notice is to be
effective. A Notice of Interest Rate Election may, if it so specifies, apply to
only a portion of the aggregate
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principal amount of the relevant Group of Loans; PROVIDED that (i) such portion
is allocated ratably among the Loans comprising such Group and (ii) the portion
to which such Notice applies, and the remaining portion to which it does not
apply, are each $10,000,000 or any larger multiple of $1,000,000.
(b) Each Notice of Interest Rate Election shall specify:
(i)the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in such
notice is to be effective, which shall comply with the applicable clause of
subsection (a) above;
(iii)if the Loans comprising such Group are to be converted to Euro-
Dollar Loans, the duration of the initial Interest Period applicable thereto;
and
(iv) if such Loans are to be continued as Euro-Dollar Loans for an
additional Interest Period, the duration of such additional Interest
Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Administrative Agent shall
promptly notify each Lender of the contents thereof and such notice shall not
thereafter be revocable by the Borrower. If the Borrower fails to deliver a
timely Notice of Interest Rate Election to the Administrative Agent for any
Group of Euro-Dollar Loans, such Loans shall be converted to Base Rate Loans on
the last day of the then current Interest Period applicable thereto.
SECTION 2.11. FACILITY FEES. (a) The Borrower shall pay to the
Administrative Agent, for the account of the Lenders ratably in proportion to
their Commitments, a facility fee calculated for each day at the Facility Fee
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Rate (determined for such day as provided in the Pricing Schedule) on the
aggregate amount of the Commitments on such day. Such facility fee shall accrue
from and including the Closing Date to but excluding the Termination Date (or
any earlier date on which the Commitments terminate in their entirety).
(b) PAYMENTS. Fees accrued under this Section shall be payable
quarterly on each March 31, June 30, September 30 and December 31 and on the
date on which the Commitments terminate in their entirety.
SECTION 2.12. TERMINATION OR REDUCTION OF COMMITMENTS. The Borrower
may, upon at least three Domestic Business Days' notice to the Administrative
Agent, (i) terminate the Commitments at any time, if there are no Syndicated
Loans or Swingline Loans outstanding at such time, or (ii) ratably reduce from
time to time by an aggregate amount of $10,000,000 or any multiple of $1,000,000
in excess thereof, the aggregate amount of the Commitments in excess of the
aggregate principal amount of all Syndicated Loans and Swingline Loans
outstanding at such time. Unless previously terminated, the Commitments shall
terminate at the close of business on the Termination Date.
SECTION 2.13. GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and fees
hereunder, not later than 12:00 Noon (New York City time) on the date when
due, in Federal or other funds immediately available in New York City, to the
Administrative Agent at its address referred to in Section 9.1. The
Administrative Agent will promptly distribute to each Lender its ratable
share (if any) of each such payment received by the Administrative Agent for
the account of the Lenders. Whenever any payment of principal of, or
interest on, the Base Rate Loans or the Swingline Loans or any payment of
fees shall be due on a day which is not a Domestic Business Day, the date for
payment thereof shall be extended to the next succeeding Domestic Business
Day. Whenever any payment of principal of, or interest on, the Euro-Dollar
Loans shall be due on a day which is not a Euro-Dollar Business Day, the date
for payment thereof shall be extended to the next succeeding Euro-Dollar
Business Day unless such Euro-Dollar Business Day falls in another
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calendar month, in which case the date for payment thereof shall be the next
preceding Euro-Dollar Business Day. Whenever any payment of principal of, or
interest on, the Money Market Loans shall be due on a day which is not a Euro-
Dollar Business Day, the date for payment thereof shall be extended to the next
succeeding Euro-Dollar Business Day. If the date for any payment of principal
is extended by operation of law or otherwise, interest thereon shall be payable
for such extended time.
(b) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to any Lenders
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
date an amount equal to the amount then due such Lender. If and to the extent
that the Borrower shall not have so made such payment, each Lender shall repay
to the Administrative Agent forthwith on demand the amount so distributed to
such Lender together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender repays such
amount to the Administrative Agent, at the Federal Funds Rate.
SECTION 2.14. FUNDING LOSSES. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan or any Euro-Dollar Loan is
converted to a Base Rate Loan (pursuant to Article 2, 6 or 8 or otherwise) on
any day other than the last day of an Interest Period applicable thereto, or the
last day of an applicable period fixed pursuant to Section 2.9(c), or if the
Borrower fails to borrow or prepay or convert any Euro-Dollar Loans after notice
has been given to any Lender in accordance with Section 2.4(a) or 2.10(c), the
Borrower shall reimburse each Lender within 15 days after demand for any
resulting loss or expense incurred by it (or by an existing or prospective
Participant in the related Loan), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after any such payment or conversion or
failure to borrow or prepay or convert, PROVIDED that
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such Lender shall have delivered to the Borrower a certificate setting forth in
reasonable detail the amount of such loss or expense and the method of
calculation thereof, which certificate shall be conclusive in the absence of
manifest error.
SECTION 2.15. COMPUTATION OF INTEREST AND FEES. (a) Interest based
on the Prime Rate hereunder shall be computed on the basis of a year of 365
days (or 366 days in a leap year) and paid for the actual number of days
elapsed (including the first day but excluding the last day). All other
interest and fees shall be computed on the basis of a year of 360 days and
paid for the actual number of days elapsed (including the first day but
excluding the last day).
(b) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder and each Facility Fee Rate applicable
hereunder. The Administrative Agent shall give prompt notice to the Borrower
and the relevant Lenders of each rate of interest and Facility Fee Rate so
determined, and its determination thereof shall be conclusive in the absence of
manifest error; PROVIDED that, if the Administrative Agent makes such
determinations for any Rate Period on the basis of an estimated Pricing Level
set forth in a certificate delivered by the Borrower pursuant to Section 5.1(e)
and subsequently determines (or receives a certificate pursuant to Section
5.1(e) establishing) that a higher Pricing Level applies during such Rate
Period, the Administrative Agent shall promptly notify the Borrower and the
Lenders of such higher Pricing Level and, within two Domestic Business Days
after receiving such notice, the Borrower shall pay to the Administrative Agent,
for the accounts of the relevant Lenders, the additional interest and additional
facility fees that should have been paid prior to such time by reason of the
applicability of such higher Pricing Level. If the Administrative Agent makes
such determinations on the basis of a Pricing Level estimated by the Borrower
and subsequently determines (or receives a certificate pursuant to Section
5.1(e) establishing) that a lower Pricing Level applied during the relevant Rate
Period, no adjustment shall be made for any resulting overpayments of interest
or
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facility fees theretofore made by the Borrower on the basis of the higher
Pricing Level estimated by it.
SECTION 2.16. SWINGLINE LOANS. (a) SWINGLINE COMMITMENT. The
Swingline Bank agrees, on the terms and conditions set forth in this Agreement,
to make loans to the Borrower pursuant to this Section from time to time during
the Swingline Availability Period; PROVIDED that the aggregate outstanding
principal amount of such loans shall not at any time exceed the Swingline
Commitment. Each loan under this Section shall be in a principal amount of at
least $1,000,000 and shall bear interest from time to time at the rate
applicable to Base Rate Loans. Within the foregoing limits, the Borrower may
borrow under this Section, repay Swingline Loans and reborrow at any time during
the Swingline Availability Period under this Section.
(b) NOTICE OF SWINGLINE BORROWING. The Borrower shall give the
Swingline Bank notice (a "Notice of Swingline Borrowing") not later than 2:00
P.M. (New York City time) on the date of each Swingline Borrowing, specifying
(i) the date of such Borrowing, which shall be a Domestic Business Day, and (ii)
the amount of such Borrowing.
(c) FUNDING OF SWINGLINE LOANS. Not later than 3:00 P.M. (New York
City time) on the date of each Swingline Borrowing, the Swingline Bank shall,
unless the Swingline Bank determines that any applicable condition specified in
Article 3 has not been satisfied, make available the amount of such Swingline
Borrowing, in Federal or other funds immediately available in New York City, to
the Borrower at the Swingline Bank's address referred to in Section 9.1.
(d) SWINGLINE NOTE. The Borrower's obligation to repay the Swingline
Loans shall be evidenced by a single Note substantially in form of Exhibit E
hereto (the "Swingline Note").
(d) OPTIONAL PREPAYMENT OF SWINGLINE LOANS. The Borrower may prepay
the Swingline Loans in whole at any time, or from time to time in part in a
principal amount of at least $1,000,000, by giving notice of such prepayment to
the Swingline Bank not later than 12:00 Noon (New York City time) on the date of
prepayment and paying the principal
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amount to be prepaid, together with interest accrued thereon to the date of
prepayment, to the Swingline Bank at its address referred to in Section 9.1, in
Federal or other funds immediately available in New York City, not later than
3:00 P.M. (New York City time) on the date of prepayment.
(f) MANDATORY PREPAYMENT OF SWINGLINE LOANS. On the date of each
Borrowing pursuant to Section 2.1 or 2.3, the Borrower shall prepay all
Swingline Loans then outstanding, together with interest accrued thereon to the
date of prepayment.
(g) MATURITY OF SWINGLINE LOANS. All Swingline Loans outstanding on
the Swingline Maturity Date shall be due and payable on such date together with
interest accrued thereon to such date.
(h) REFUNDING UNPAID SWINGLINE LOANS. If (i) the Swingline Loans are
not paid in full on the Swingline Maturity Date or (ii) the Swingline Loans
become immediately due and payable pursuant to Section 6.1, the Swingline Bank
(or the Administrative Agent on its behalf) may, by notice to the Lenders
(including the Swingline Bank, in its capacity as a Lender), require each Lender
to pay to the Swingline Bank an amount equal to such Lender's Commitment
Percentage of the aggregate unpaid principal amount of the Swingline Loans then
outstanding. Such notice shall specify the date on which such payments are to
be made, which shall be the first Domestic Business Day after such notice is
given. Not later than 12:00 Noon (New York City time) on the date so specified,
each Lender shall pay the amount so notified to it to the Swingline Bank at its
address referred to in Section 9.1, in Federal or other funds immediately
available in New York City. The amount so paid by each Lender shall constitute
a Base Rate Loan to the Borrower; PROVIDED that, if the Lenders are prevented
from making such Base Rate Loans to the Borrower by the provisions of the United
States Bankruptcy Code or otherwise, the amount so paid by each Lender shall
constitute a purchase by it of a participation in the unpaid principal amount of
the Swingline Loans (and interest accruing thereon after the date of such
payment). Each Lender's obligation to make such payment to the Swingline Bank
under this subsection (h) shall be absolute and unconditional and shall not be
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affected by any circumstance, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense or other right which such Lender or any other
Person may have against the Swingline Bank or the Borrower, (ii) the occurrence
or continuance of a Default or an Event of Default or the termination of the
Commitments, (iii) any adverse change in the condition (financial or otherwise)
of the Borrower or any other Person, (iv) any breach of this Agreement by the
Borrower or any other Lender or (v) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing; PROVIDED that no
Lender shall be obligated to make any payment to the Swingline Bank under this
subsection (h) with respect to a Swingline Loan made by the Swingline Bank at a
time when it knew that a Default had occurred and was continuing.
(i) TERMINATION OF SWINGLINE COMMITMENT. The Borrower may, upon at
least three Domestic Business Days' notice to the Administrative Agent,
terminate the Swingline Commitment at any time, if no Swingline Loans are
outstanding at such time. Unless previously terminated, the Swingline
Commitment shall terminate at the close of business on the Swingline Maturity
Date.
ARTICLE 3
CONDITIONS
SECTION 3.1. CLOSING. This Agreement shall become effective when
all the following conditions have been satisfied (or waived in accordance with
Section 9.5):
(a) the Administrative Agent shall have received (i) counterparts
hereof signed by the Borrower, the Lenders identified as such on the
signature pages hereof, the Swingline Bank and the Agents or (ii) in the
case of any such party as to which an executed counterpart shall not have
been received, telex, facsimile or other written confirmation (in form
satisfactory to the Administrative Agent) that a counterpart hereof has
been executed by such party;
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(b) the Administrative Agent shall have received (i) a duly executed
Note, dated on or before the Closing Date and complying with the provisions
of Section 2.5, for each Lender and (ii) a duly executed Swingline Note,
dated on or before the Closing Date, for the Swingline Bank;
(c) the Administrative Agent shall have received evidence
satisfactory to it that:
(i) the commitments of the Existing Lenders under the Existing Credit
Agreement will terminate on the Closing Date concurrently with the
effectiveness of this Agreement;
(ii) the Borrower will pay in full on the Closing Date the principal
of all loans and reimbursement obligations then outstanding under the
Existing Credit Agreement and all interest and fees accrued thereunder to
(but not including) the Closing Date; and
(iii) with respect to each letter of credit issued under the Existing
Credit Agreement, either (x) such letter of credit has been cancelled or
(y) the relevant LC Issuing Bank has agreed to allow such letter of credit
to remain outstanding after the Closing Date without recourse to the
Existing Lenders as participants therein and has agreed to the cancellation
of their participations therein as of the Closing Date;
(d) the Administrative Agent shall have received evidence
satisfactory to it that (i) all security interests created by the Existing
Security Agreement will be released on or before April 10, 1996 pursuant to
an unconditional and irrevocable agreement signed by the banks party to the
Metrocrest Reimbursement Agreement and (ii) termination statements (to be
filed promptly after such release) have been delivered for filing under the
Uniform Commercial Code as required to evidence the termination of such
security interests;
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(e) the Administrative Agent shall have received an opinion of
Gibson, Dunn & Crutcher, special counsel for the Borrower, dated the
Closing Date and addressed to the Administrative Agent and the Lenders,
substantially in the form of Exhibit G hereto and covering such other
matters incident to the transactions contemplated by this Agreement as any
Arranging Agent shall reasonably request;
(f) the Administrative Agent shall have received an opinion of the
Borrower's General Counsel, dated the Closing Date and addressed to the
Administrative Agent and the Lenders, substantially in the form of Exhibit
H hereto and covering such other matters incident to the transactions
contemplated by this Agreement as any Arranging Agent shall reasonably
request;
(g) the Administrative Agent shall have received an opinion of Davis
Polk & Wardwell, special counsel for the Administrative Agent, dated the
Closing Date and addressed to the Administrative Agent and the Lenders,
substantially in the form of Exhibit I hereto and covering such other
matters incident to the transactions contemplated by this Agreement as any
Arranging Agent shall reasonably request;
(h) the Administrative Agent shall have received a certificate of the
Secretary of the Borrower, dated the Closing Date, as to the articles of
incorporation and bylaws of the Borrower, no amendments thereto, the
adoption by the Borrower's board of directors of the resolutions referred
to in clause (i) below and the incumbency and signature of each officer of
the Borrower who executed or will execute any Financing Document or any
other document to be delivered pursuant to this Agreement, together with
evidence of the incumbency of such Secretary;
(i) the Administrative Agent shall have received a copy of resolutions
(in form and substance satisfactory to the Arranging Agents) of the
Borrower's board of directors authorizing the borrowings provided for herein
and the execution, delivery and performance of the Financing Documents,
certified by the Secretary
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of the Borrower to be in full force and effect without modification on the
Closing Date;
(j) the Borrower shall have paid or made arrangements satisfactory to
the Administrative Agent for paying all expenses payable by the Borrower on
or before the Closing Date pursuant to Section 9.3(a) of this Agreement and
Section 9.3(a) of the Existing Credit Agreement;
(k) the Borrower shall have paid to the Administrative Agent for the
account of each Lender a fee equal to 0.125% of such Lender's Commitment;
(l) the Administrative Agent shall have received a certificate,
substantially in the form of Exhibit F hereto, dated the Closing Date and
signed by a Senior Officer of the Borrower;
(m) the Metrocrest Reimbursement Agreement shall have been amended so
that references therein to the covenants and events of default in the
Existing Credit Agreement refer instead to the covenants and events of
default in this Agreement; and
(n) the Administrative Agent shall have received all documents it may
reasonably request relating to the existence of the Borrower, the corporate
authority for and the validity of the Financing Documents and any other
matters relevant thereto, all in form and substance reasonably satisfactory
to the Arranging Agents.
When this Agreement becomes effective, the Administrative Agent shall promptly
notify the Borrower and the Lenders that it is effective, and such notice shall
be conclusive and binding on all parties hereto.
SECTION 3.2. RELEASE OF EXISTING SECURITY INTERESTS. The parties
hereto that are also parties to the Existing Credit Agreement or the Metrocrest
Reimbursement Agreement consent to:
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(i) the termination of the commitments of the Existing Lenders under
the Existing Credit Agreement on the Closing Date;
(ii) the release of the security interests created by the Existing
Security Agreement at any time on or after the Closing Date; and
(iii) the termination on the Closing Date of all participations in
letters of credit sold to the Existing Lenders under the Existing Credit
Agreement.
SECTION 3.3. BORROWINGS. The obligation of any Lender to make a Loan
on the occasion of any Borrowing (other than a Syndicated Borrowing pursuant to
Section 2.16(h)) and the obligation of the Swingline Bank to make any Swingline
Loan are each subject to the satisfaction of the following conditions:
(a) the fact that the Closing Date shall have occurred on or prior to
April 12, 1996;
(b) receipt by the Administrative Agent of a Notice of Borrowing as
required by Section 2.2, 2.3 or 2.16(b), as the case may be;
(c) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans (and, in the case of a Swingline
Borrowing, the Swingline Loans) will not exceed the aggregate amount of the
Commitments;
(d) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing; and
(e) the fact that the representations and warranties of the Borrower
contained in this Agreement shall be true on and as of the date of such
Borrowing.
Each Borrowing shall be deemed to be a representation and warranty by the
Borrower on the date of such Borrowing as to the facts specified in clauses (c),
(d) and (e) of this Section.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.1. CORPORATE EXISTENCE AND POWER. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Nevada, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
SECTION 4.2. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO
CONTRAVENTION. The execution, delivery and performance by the Borrower of the
Financing Documents (i) are within its corporate powers, (ii) have been duly
authorized by all necessary corporate action, (iii) require no action by or in
respect of, or filing with, any governmental body, agency or official, (iv) do
not contravene any provision of applicable law or regulation or of the articles
of incorporation or by-laws of the Borrower, (v) do not constitute a breach of
or default under any agreement, judgment, injunction, order, decree or other
instrument binding upon the Borrower or any of its Subsidiaries, except for
breaches and defaults which, in the aggregate, could not reasonably be expected
to have a Material Adverse Effect, or (vi) result in the creation or imposition
of any Lien on any asset of the Borrower or any of its Subsidiaries.
SECTION 4.3. BINDING EFFECT. (i) This Agreement constitutes a valid
and binding agreement of the Borrower and (ii) the Notes and the Swingline Note,
when executed and delivered in accordance with this Agreement, will constitute
valid and binding obligations of the Borrower, in each case enforceable against
the Borrower in accordance with its terms.
SECTION 4.4. FINANCIAL INFORMATION.
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(a) The consolidated balance sheet of the Borrower and its
Subsidiaries as of May 31, 1995 and the related consolidated statements of
operations, cash flows and changes in stockholders' equity for the Fiscal Year
then ended, reported on by KPMG Peat Marwick LLP and set forth in the Borrower's
1995 Form 10-K/A, a copy of which has been delivered to each of the Lenders,
fairly present, in conformity with GAAP, the consolidated financial position of
the Borrower and its Subsidiaries as of such date and their consolidated results
of operations and cash flows for such Fiscal Year.
(b) The unaudited condensed consolidated balance sheet of the
Borrower and its Subsidiaries as of November 30, 1995 and the related unaudited
condensed consolidated statements of operations and cash flows for the six
months then ended, set forth in the Borrower's Latest Form 10-Q, a copy of which
has been delivered to each of the Lenders, fairly present, on a basis consistent
with the financial statements referred to in subsection (a) of this Section, the
consolidated financial position of the Borrower and its Subsidiaries as of such
date and their consolidated results of operations and cash flows for such six-
month period (subject to normal year-end adjustments).
(c) There has been no material adverse change since November 30, 1995
in the business, operations, properties, financial condition or prospects of the
Borrower and its Subsidiaries, considered as a whole.
SECTION 4.5. LITIGATION. Except as described in Schedule 4.5 hereto,
there are no actions, suits or proceedings pending against, or to the knowledge
of the Borrower threatened against, the Borrower or any of its Subsidiaries or
any of their respective properties, before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable possibility
of adverse decisions which in the aggregate could reasonably be expected to have
a Material Adverse Effect or which in any manner draw into question the validity
of any of the Financing Documents.
SECTION 4.6. COMPLIANCE WITH ERISA. Except as described in Schedule
4.6 hereto, each member of the ERISA
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Group has fulfilled its obligations under the minimum funding standards of ERISA
and the Internal Revenue Code with respect to each Plan and is in compliance in
all material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. Except as disclosed in
Schedule 4.6, no member of the ERISA Group has (i) sought a waiver of the
minimum funding standard under Section 412 of the Internal Revenue Code in
respect of any Plan, (ii) failed to make any contribution or payment to any Plan
or Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could result
in the imposition of a Lien or the posting of a bond or other security under
ERISA or the Internal Revenue Code or (iii) incurred any liability under Title
IV of ERISA other than a liability to the PBGC for premiums under Section 4007
of ERISA.
SECTION 4.7. COMPLIANCE WITH LAWS. Except as described in Schedule
4.6 hereto, the Borrower and its Subsidiaries are in compliance in all material
respects with all applicable laws, rules and regulations (including without
limitation any health care laws, rules or regulations), other than such laws,
rules or regulations (i) the validity or applicability of which the Borrower or
such Subsidiary is contesting in good faith by appropriate proceedings or (ii)
failures to comply with which could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
SECTION 4.8. ENVIRONMENTAL MATTERS. The Borrower has reviewed the
effect of Environmental Laws on the business, operations and properties of the
Borrower and its Subsidiaries, and has in good faith attempted to identify and
evaluate the associated liabilities and costs (including, without limitation,
capital or operating expenditures required for clean-up or closure of properties
presently or previously owned, capital or operating expenditures required to
achieve or maintain compliance with environmental protection standards imposed
by law or as a condition of any license, permit or contract, any related
constraints on operating activities, including any periodic or permanent
shutdown of any facility or reduction in the level of or change in the nature of
operations conducted
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thereat, any costs or liabilities in connection with off-site disposal of wastes
or Hazardous Substances, and actual or potential liabilities to third parties,
including employees, and any related costs and expenses). On the basis of the
foregoing review, the Borrower has reasonably concluded that such associated
liabilities and costs, including the costs of compliance with Environmental
Laws, are unlikely to have a Material Adverse Effect.
SECTION 4.9. TAXES. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes shown to be due
on such returns or pursuant to any assessment received by any of them (unless
such assessment is being contested in good faith by appropriate proceedings).
The charges, accruals and reserves on the books of the Borrower and its
Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Borrower, adequate.
SECTION 4.10. MATERIAL SUBSIDIARIES. Each of the Borrower's Material
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
SECTION 4.11. NOT AN INVESTMENT COMPANY. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.12. FULL DISCLOSURE. All information heretofore furnished
by the Borrower to the Administrative Agent, any Arranging Agent or any Lender
for purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all such information hereafter furnished by the
Borrower to the Administrative Agent, any Arranging Agent or any Lender will,
taken as a whole, be true and accurate in all material respects on the date as
of which such information is stated or certified. The Borrower has disclosed to
the Lenders in writing any and all facts
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which have or may (to the extent the Borrower can now reasonably foresee) have a
Material Adverse Effect.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Lender has any Commitment in
effect or any Loan or Swingline Loan remains outstanding or any interest or fees
accrued hereunder remain unpaid:
SECTION 5.1. INFORMATION. The Borrower will deliver to each Lender:
(a) as soon as available and in any event within 90 days after the
end of each Fiscal Year, an audited consolidated balance sheet of the
Borrower and its Subsidiaries as of the end of such Fiscal Year and the
related audited consolidated statements of operations, cash flows and
changes in stockholders' equity for such Fiscal Year, setting forth in each
case in comparative form the figures for the previous Fiscal Year, all
reported on in a manner acceptable to the SEC by KPMG Peat Marwick LLP or
other independent public accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year, a
condensed consolidated balance sheet of the Borrower and its Subsidiaries
as of the end of such Fiscal Quarter, the related condensed consolidated
statements of operations for such Fiscal Quarter and for the portion of the
Fiscal Year ended at the end of such Fiscal Quarter and the related
condensed consolidated statement of cash flows for the portion of the
Fiscal Year then ended, setting forth in the case of such condensed
consolidated statements of operations and cash flows in comparative form
the figures for the corresponding Fiscal Quarter and the corresponding
portion of the previous Fiscal Year, all certified (subject to normal
year-end adjustments) as to fairness of presentation and
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consistency with GAAP by a Senior Officer of the Borrower;
(c) concurrently with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of a
Senior Officer of the Borrower (i) setting forth in reasonable detail the
calculations required to establish whether the Borrower was in compliance
with the requirements of Sections 5.6 to 5.10, inclusive, and Sections 5.12
and 5.13 on the date of such financial statements and (ii) stating whether
any Default exists on the date of such certificate and, if any Default then
exists, setting forth the details thereof and the action which the Borrower
is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement by the firm of
independent public accountants which reported on such statements that, in
making the examination necessary for reporting on such financial
statements, they did not obtain knowledge of any Default hereunder except
as described in such statement;
(e) within 45 days after the end of each Fiscal Quarter, a
certificate signed by a Senior Officer of the Borrower setting forth the
Pricing Level applicable during the Rate Period that begins 45 days after
the end of such Fiscal Quarter and in reasonable detail the calculations
required to establish that such Pricing Level will be applicable; PROVIDED
that (x) in the case of the last Fiscal Quarter of any Fiscal Year, such
certificate may set forth only the Borrower's estimate of the applicable
Pricing Level (it being understood that, if the Borrower in good faith
cannot determine with reasonable certainty which of two Pricing Levels
applies, the Borrower may, in view of the provisions of Section 2.15(b),
appropriately estimate that the lower of such Pricing Levels applies), and
(y) if such certificate sets forth only an estimated Pricing Level, the
Borrower shall, within 90 days after the end of such Fiscal Year, deliver a
further certificate signed
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by a Senior Officer of the Borrower setting forth the calculations
contemplated by this clause (e) and either confirming that such estimated
Pricing Level applies or, if not, setting forth the Pricing Level that does
apply during the relevant Rate Period and requesting the Administrative
Agent to determine the amounts of any additional interest and/or additional
facility fees payable by the Borrower pursuant to Section 2.15(b);
(f) within five days after any officer of the Borrower obtains
knowledge of any Default, if such Default is then continuing, a certificate
of a Senior Officer of the Borrower setting forth the details thereof and
the action which the Borrower is taking or proposes to take with respect
thereto;
(g) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(h) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) which the Borrower shall have filed with the SEC;
(i) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows
that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such reportable
event given or required to be given to the PBGC; (ii) receives notice of
complete or partial withdrawal liability under Title IV of ERISA or notice
that any Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate, impose liability (other than
for premiums under Section 4007 of ERISA or
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premium-related penalties) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (iv) applies for a waiver of
the minimum funding standard under Section 412 of the Internal Revenue
Code, a copy of such application; (v) gives notice of intent to terminate
any Plan under Section 4041(c) of ERISA, a copy of such notice and other
information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or
(vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could
result in the imposition of a Lien or the posting of a bond or other
security, a certificate of a Senior Officer of the Borrower setting forth
details as to such occurrence and the action, if any, which the Borrower or
applicable member of the ERISA Group is required or proposes to take; and
(j) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Administrative Agent, at the request of any Lender, may reasonably request.
SECTION 5.2. MAINTENANCE OF PROPERTY; INSURANCE. (a) The Borrower
and each Material Subsidiary will keep all property useful and necessary in
its business in good working order and condition, ordinary wear and tear
excepted.
(b) The Borrower and each Material Subsidiary will maintain, with
financially sound and reputable insurance companies (which may be Affiliates of
the Borrower or part of the Borrower's self-insurance program) insurance on all
their properties in at least such amounts and against at least such risks as are
usually insured against in the same general area and by companies engaged in the
same or similar businesses and maintain professional liability and malpractice
insurance against claims usually insured against by medical personnel and
hospitals and other health facilities; and furnish to each Lender, upon written
request
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by any of the Agents, full information as to the insurance carried.
SECTION 5.3. CONDUCT OF BUSINESS, MAINTENANCE OF EXISTENCE.
(a) The Borrower and its Material Subsidiaries will continue to engage
primarily in business of the same general type as now conducted by the Borrower
and its Material Subsidiaries.
(b) The Borrower and each Material Subsidiary will preserve, renew
and keep in full force and effect its corporate existence and take all
reasonable action to maintain its rights, privileges and franchises necessary or
desirable in the normal conduct of business, PROVIDED that the foregoing shall
not prohibit any merger, consolidation or sale of assets expressly permitted by
Section 5.6.
SECTION 5.4. COMPLIANCE WITH LAWS. The Borrower and each Material
Subsidiary will comply with all material applicable laws, ordinances, rules,
regulations and requirements of governmental authorities (including without
limitation Environmental Laws, ERISA and the rules and regulations thereunder
and Public Law 92-603), and hold and maintain in full force and effect all
certifications, governmental approvals, licenses and permits necessary or
desirable to enable the Borrower and its Material Subsidiaries to conduct their
respective businesses as now conducted, except where the failure to comply
therewith or hold and maintain such certifications, governmental approvals,
licenses or permits could not, in the aggregate, reasonably be expected to have
a Material Adverse Effect.
SECTION 5.5 INSPECTION OF PROPERTY, BOOKS AND RECORDS. The
Borrower and each Material Subsidiary will keep proper books of record and
account in which full, true and correct entries shall be made of all dealings
and transactions in relation to its business and activities; and will permit
representatives of the Administrative Agent (at the request of any Lender) at
such requesting Lender's expense to visit and inspect any of their respective
properties, to examine and make abstracts (at such Lender's expense, unless an
Event of Default shall have occurred and be continuing, in which case at the
Borrower's expense) from any of their respective books and records and to
discuss
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their respective affairs, finances and accounts with officers of the Borrower
and with the accountants of the Borrower, all upon reasonable notice and at such
reasonable times and as often as may reasonably be desired.
SECTION 5.6. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS.
(a) The Borrower will not merge or consolidate with any other Person, or sell
or otherwise transfer all or substantially all of its assets to any other
Person, unless after giving effect to such merger, consolidation, sale or other
transfer, (i) no Default shall have occurred and be continuing and (ii) the
corporation surviving such merger or consolidation (if other than the Borrower)
or the Person acquiring such assets is organized under the laws of a state of
the United States and assumes in writing all the obligations of the Borrower
hereunder and said surviving corporation or acquiring Person delivers to each
Lender an opinion of its counsel, in form and substance satisfactory to the
Required Lenders, to the effect that the assumption of such obligations by such
surviving corporation or acquiring Person is effective and is fully binding upon
and enforceable against such surviving corporation or acquiring Person.
(b) The Borrower will not make any Restricted Asset Transfer, or
permit any Subsidiary to make any Restricted Asset Transfer, unless immediately
after giving effect thereto:
(i) no Default (under Section 5.13(b) or otherwise) shall have
occurred and be continuing,
(ii) the aggregate book value of all assets sold or otherwise
transferred in Restricted Asset Transfers during the twelve months then
ended does not exceed 10% of the consolidated total assets of the Borrower
and its Subsidiaries at such time, and
(iii) the aggregate book value of all assets sold or otherwise
transferred in Restricted Asset Transfers after November 30, 1995 does not
exceed 15% of the consolidated total assets of the Borrower and its
Subsidiaries at such time.
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For purposes of this subsection (b) and Section 5.13(b), the book value of
assets sold in a Restricted Asset Transfer shall be determined immediately prior
to such Restricted Asset Transfer.
(c) Neither the Borrower nor any Subsidiary (except a Psychiatric
Subsidiary) will merge or consolidate with, or sell or otherwise transfer any
assets to, any Psychiatric Subsidiary, except as permitted by Section 5.13(c).
SECTION 5.7. NEGATIVE PLEDGE. After the Closing Date, neither the
Borrower nor any Subsidiary (except a Psychiatric Subsidiary) will create,
assume or suffer to exist any Lien on any asset now owned or hereafter acquired
by it, except:
(a) any Lien existing prior to the Closing Date securing Debt;
PROVIDED that the Liens created by the Existing Security Agreement shall be
released on or before April 10, 1996;
(b) any Lien on bonds issued by the Metrocrest Hospital Authority
(and related proceeds and other distributions) granted to secure the
Borrower's obligations under the Metrocrest Reimbursement Agreement and the
Securities Pledge and Security Agreement referred to therein;
(c) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by clause (a) above;
PROVIDED that (i) the principal amount of such Debt is not increased and
(ii) such Debt is not secured by any additional assets;
(d) if the letters of credit issued pursuant to the Metrocrest
Reimbursement Agreement are replaced by other letters of credit issued for
the same purpose, any Lien securing the Borrower's obligations under the
reimbursement agreement relating to such replacement letters of credit;
PROVIDED that (i) the aggregate amount of such letters of credit is not
increased and (ii) the Borrower's obligations under the related
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reimbursement agreement are not secured or required to be secured by any
assets except the assets by which the Borrower's obligations under the
Metrocrest Reimbursement Agreement are secured or required to be secured;
(e) any Lien securing Non-Recourse Purchase Money Debt;
(f) any Lien on assets of a Person which becomes a Subsidiary after
the Closing Date; PROVIDED that such Lien secures only Debt of such Person
that is outstanding when such Person becomes a Subsidiary and was not
created in contemplation of such event;
(g) carriers', warehousemen's, mechanics', transporters,
materialmen's, repairmen's or other like Liens arising in the ordinary
course of business;
(h) any Lien imposed by any governmental authority for taxes,
assessments, governmental charges, duties or levies not yet due or which
are being contested in good faith and by appropriate proceedings; PROVIDED
that adequate reserves with respect thereto are maintained on the books of
the Borrower and its Subsidiaries in accordance with GAAP;
(i) Liens on cash and cash equivalents securing obligations of the
Borrower and its Subsidiaries with respect to workmen's compensation,
malpractice and other similar insurance policies; PROVIDED that the
aggregate amount of cash and cash equivalents subject to such Liens may not
exceed $20,000,000 at any time;
(j) Liens arising in the ordinary course of business (other than
Liens permitted by clause (f), (g) or (h) above) which (i) do not secure
Financial Obligations, (ii) do not secure any single obligation in an
outstanding amount exceeding $5,000,000 and (iii) do not secure obligations
in an aggregate outstanding amount exceeding $25,000,000;
(k) Liens on cash and cash equivalents securing Hedging Obligations,
PROVIDED that the aggregate amount
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of cash and cash equivalents subject to such Liens may not exceed
$50,000,000 at any time;
(l) any Lien on an asset leased by the Borrower or a Subsidiary under
a capital lease securing its obligations as lessee under such capital
lease; and
(m) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt; PROVIDED that, immediately after any such Debt is
incurred, the aggregate outstanding principal or face amount of all Debt
secured pursuant to this clause (m) shall not exceed $2,000,000.
SECTION 5.8. DEBT OF SUBSIDIARIES. After the Closing Date, no
Subsidiary will incur, assume or otherwise be liable in respect of any Debt,
except:
(a) Debt outstanding at the close of business on the Closing Date in
an aggregate principal or face amount not exceeding $300,000,000;
(b) Non-Recourse Purchase Money Debt;
(c) Debt of any Person which becomes a Subsidiary after the Closing
Date; PROVIDED that (i) such Debt is outstanding when such Person becomes a
Subsidiary and was not created in contemplation of such event or (ii) such
Debt is incurred solely for the purpose of refinancing Debt described in
the foregoing clause (i);
(d) Guarantees by any Subsidiary of Debt relating to any assets sold
or otherwise disposed of by it; PROVIDED that (i) such Debt was outstanding
when such assets were disposed of and was not created in contemplation of
the disposition thereof and (ii) the sum of (x) the aggregate outstanding
principal amount of all Debt which is Guaranteed by the Borrower or any of
its Subsidiaries pursuant to this clause (d) and (y) the aggregate amount
of all lease payments under operating leases which are Guaranteed by any
Subsidiary after November 30, 1995 shall not exceed $200,000,000 at any
time;
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(e) Debt consisting of the obligations of any Subsidiary as lessee
which are capitalized in accordance with GAAP; and
(f) Debt of any Subsidiary not otherwise permitted by the foregoing
clauses of this Section; PROVIDED that the aggregate outstanding principal
or face amount of all Debt of Subsidiaries permitted by this clause (f)
shall not exceed $10,000,000 at any time.
SECTION 5.9. DEBT RATIO. At the close of business on any day on or
after the Closing Date, the ratio of (i) Adjusted Total Debt at such time to
(ii) Adjusted EBITDA for the period of four consecutive Fiscal Quarters most
recently ended at or prior to such time will not be greater than the ratio set
forth below opposite the period in which such day is included:
PERIOD RATIO
- ------ -----
Closing Date through November 30, 1996 3.5 to 1
December 1, 1996 through November 30, 1997 3.0 to 1
December 1, 1997 through November 30, 1998 2.5 to 1
December 1, 1998 through November 30, 1999 2.25 to 1
After November 30, 1999 2.0 to 1
SECTION 5.10. ADJUSTED CONSOLIDATED NET WORTH. Adjusted Consolidated
Net Worth will at no time be less than the sum of (i) $1,970,000,000 plus (ii)
75% of the consolidated net income of the Borrower and its Subsidiaries for each
Fiscal Quarter ended after November 30, 1995, if such consolidated net income
for such Fiscal Quarter is positive, plus (iii) 100% of the amount by which the
consolidated stockholders' equity of the Borrower and its Subsidiaries is
increased after November 30, 1995 as a result of any issuance or sale of Equity
Interests by the Borrower.
SECTION 5.11 FIXED CHARGE RATIO. At the end of each Fiscal Quarter
ending after the Closing Date, the ratio of (i) the sum of Adjusted EBITDA plus
Adjusted Rental
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Expense to (ii) the sum of Adjusted Interest Expense plus Adjusted Rental
Expense, all calculated for the period of four consecutive Fiscal Quarters then
ended, will not be less than the ratio set forth below opposite the period in
which such period of four consecutive Fiscal Quarters ends:
PERIOD RATIO
- ------ -----
Closing Date through November 30, 1996 2.25 to 1
December 1, 1996 through November 30, 1997 2.35 to 1
December 1, 1997 through November 30, 1998 2.5 to 1
After November 30, 1998 3.0 to 1
SECTION 5.12. RESTRICTED PAYMENTS. Neither the Borrower nor any
Subsidiary will declare or make (i) any dividend or other distribution on any
shares of capital stock of the Borrower (except dividends payable solely in
shares of its capital stock) or (ii) any payment on account of the purchase,
redemption, retirement, acquisition, defeasance or prepayment of any Equity
Interests in the Borrower, unless the Borrower has an Investment Grade Rating
when such dividend is declared or when the Borrower or such Subsidiary becomes
legally obligated to make such distribution or other payment, as the case may
be.
SECTION 5.13. RESTRICTION ON INVESTMENTS. The sum of (i) the
aggregate book value of all Investments in Equity Affiliates by the Borrower and
its Subsidiaries, as determined from time to time in accordance with GAAP, and
(ii) the Loss Adjustment Amount for each Equity Affiliate in which the Borrower
or any Subsidiary makes an Investment after November 30, 1995 (such sum being
called the "Aggregate Investment in Equity Affiliates") will not at any time
exceed 17.5% of the consolidated total assets of the Borrower and its
Subsidiaries at such time. The term "Loss Adjustment Amount" means, for any
Equity Affiliate at any time, the cumulative amount by which the book value of
Investments by the Borrower and its Subsidiaries in such Equity Affiliate has
theretofore been reduced by operating losses, writedowns or writeoffs of assets
or other special charges.
(b) The sum of (i) the Aggregate Investment in Equity Affiliates and
(ii) the aggregate book value of all
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assets sold or otherwise transferred in Restricted Asset Transfers after
November 30, 1995 will not at any time exceed 27.5% of the consolidated total
assets of the Borrower and its Subsidiaries at such time.
(c) Neither the Borrower nor any Subsidiary (except a Psychiatric
Subsidiary) will make any Investment in any Psychiatric Subsidiary at any time
on or after the Closing Date; PROVIDED that the Borrower may make cash
Investments (not exceeding $10,000,000 in aggregate amount) in Psychiatric
Subsidiaries after the Closing Date to enable such Psychiatric Subsidiaries to
satisfy (i) payment obligations resulting from judgments against them and/or
settlements of litigation against them and (ii) working capital requirements.
SECTION 5.14 RESTRICTIONS ON INCLUDED EQUITY
AFFILIATES. (a) DEBT. On and after the Closing Date, no Included Equity
Affiliate will incur, assume or otherwise become liable in respect of any Debt,
except:
(i) Debt of such Included Equity Affiliate outstanding when it first
becomes an Equity Affiliate and not created in contemplation of such event;
(ii) Debt of any partner, member or shareholder of such Included
Equity Affiliate that (x) is assumed by such Included Equity Affiliate in
connection with a contribution of assets to its capital by such partner,
member or shareholder and (y) was not created in contemplation of such
event;
(iii)Debt secured by a Lien on any asset acquired by such Included
Equity Affiliate; PROVIDED that (x) such Debt was outstanding and was
secured by such Lien prior to the acquisition of such asset by such
Included Equity Affiliate and (y) neither such Debt nor such Lien was
created in contemplation of such acquisition;
(iv) Non-Recourse Purchase Money Debt;
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(v) Debt incurred solely for the purpose of refinancing Debt of such
Included Equity Affiliate permitted by clause (i), (ii), (iii) or (iv)
above;
(vi) Debt owing to the Borrower or any Subsidiary;
(vii) Debt incurred to satisfy working capital requirements; and
(viii) other Debt of Included Equity Affiliates not exceeding
$5,000,000 in aggregate principal amount outstanding at any time.
(b) LIENS. On and after the Closing Date, no Included Equity
Affiliate will create or assume any Lien securing Debt on any asset now owned or
hereafter acquired by it, except:
(i) any Lien securing Debt permitted by clause (iii) of subsection
(a) above; PROVIDED that such Lien is limited in each case to the asset
that was acquired subject to such Lien and any improvements thereto;
(ii) any Lien securing Debt permitted by clause (iv) of subsection
(a) above; PROVIDED that such Lien is limited in each case to the assets
acquired, constructed or improved with the proceeds of such Debt;
(iii) any Lien securing Debt permitted by clause (v) of subsection
(a) above; PROVIDED that in each case the Debt refinanced thereby was
secured and such Lien is limited to the assets that secured the Debt
refinanced thereby; and
(iv) other Liens securing Debt of Included Equity Affiliates not
exceeding $2,000,000 in aggregate principal amount outstanding at any time.
(c) COMPLIANCE. The Borrower and its Subsidiaries will at all times
have, with respect to each Included Equity Affiliate, the legally enforceable
right under its charter, partnership agreement or other applicable
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contract to prevent such Included Equity Affiliate from violating the provisions
of this Section.
SECTION 5.15. RESTRICTION ON PREPAYING SUBORDINATED DEBT. Neither
the Borrower nor any Subsidiary will prepay, defease or purchase, prior to the
date on which it is required by its terms to be repaid, repurchased or otherwise
retired, all or any portion of any Debt of the Borrower that is subordinated in
right of payment to the Loans.
SECTION 5.16. TRANSACTIONS WITH AFFILIATES. The Borrower will not,
and will not permit any Subsidiary to, directly or indirectly, pay any funds to
or for the account of, make any investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect, any transaction with,
any Affiliate except on an arms-length basis on terms at least as favorable to
the Borrower or such Subsidiary could have obtained from a third party who was
not an Affiliate; PROVIDED that the foregoing provisions of this Section shall
not prohibit any such Person from declaring or paying any lawful dividend or
other payment ratably in respect of all of its capital stock of the relevant
class so long as, after giving effect thereto, no Default shall have occurred
and be continuing.
SECTION 5.17. SENIOR STATUS. The obligations of the Borrower under
the Financing Documents will at all times constitute "senior debt" as defined in
any instrument or agreement evidencing or governing any subordinated debt of the
Borrower outstanding on or after the Closing Date.
SECTION 5.18. PAYMENT OF DIVIDENDS BY MATERIAL SUBSIDIARIES. After
the Closing Date neither the Borrower nor any of its Material Subsidiaries will
enter into any agreement or arrangement which would limit in any way the ability
of any Material Subsidiary to pay any dividend.
SECTION 5.19. USE OF PROCEEDS. The proceeds of the Loans will be
used by the Borrower:
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(i) on the Closing Date to pay in full the principal of all loans
and reimbursement obligations then outstanding under the Existing Credit
Agreement and all interest and fees accrued thereunder or to pay directly
obligations supported by any letter of credit outstanding under the
Existing Credit Agreement; and
(ii) for general corporate purposes.
(b) None of the proceeds of the Loans will be used, directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
buying or carrying any "margin stock" within the meaning of Regulation U in any
manner which would (i) violate any applicable law or regulation or (ii) require
any Form FRU-1 or any successor form to be executed.
ARTICLE 6
DEFAULTS
SECTION 6.1. EVENTS OF DEFAULT. If one or more of the following
events ("Events of Default") shall have occurred:
(a) any principal of any Loan or Swingline Loan shall not be paid
when due;
(b) any interest on any Loan or Swingline Loan, any fee or any other
amount payable under any Financing Document shall not be paid within three
Domestic Business Days after it becomes due;
(c) the Borrower shall fail to observe or perform any covenant
contained in Section 5.6 through 5.19, inclusive, hereof;
(d) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause
(a), (b) or (c) above) within 30 days after such failure occurs or, if
later, 10 days after written notice thereof has been
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given to the Borrower by the Administrative Agent at the request of the
Required Lenders;
(e) any representation, warranty, certification or statement made by
the Borrower in this Agreement or by the Borrower or any Subsidiary in any
certificate, financial statement or other document delivered pursuant
hereto shall prove to have been incorrect in any material respect when made
(or deemed made);
(f) the Borrower and/or one or more Subsidiaries shall fail to make
one or more payments in respect of Material Financial Obligations when due
or within any applicable grace period;
(g) any event or condition shall occur which results in the
acceleration of the maturity of Material Financial Obligations, or enables
(any applicable grace period having expired) the holder or holders of
Material Financial Obligations or any Person acting on their behalf to
accelerate the maturity thereof;
(h) any event or condition shall occur which, with the giving of
notice or lapse of time or both, would enable the holder or holders of
Material Financial Obligations or any Person acting on their behalf to
accelerate the maturity thereof, and (i) the Required Lenders shall have
determined, in their sole discretion, that such event or condition (unless
cured or waived) should be an Event of Default hereunder, (ii) the
Administrative Agent shall have given written notice of such determination
to the Borrower and (iii) the Borrower shall have failed to cause such
event or condition to be cured or waived within two Domestic Business Days
after receiving such notice;
(i) the Borrower or any Material Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property
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or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due, or
shall take any corporate action to authorize any of the foregoing;
(j) an involuntary case or other proceeding shall be commenced
against the Borrower or any Material Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered
against the Borrower or any Material Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
(k) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $25,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate, to impose liability (other than for premiums under Section
4007 of ERISA or premium-related penalties) in respect of, or to cause a
trustee to be appointed to administer any Material Plan; or a condition
shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated; or there
shall occur a complete or partial withdrawal from, or a default, within the
meaning of Section 4219(c)(5) of ERISA, with respect to, one or more
Multiemployer Plans which could cause one or more members of the ERISA
Group to incur a current payment obligation in excess of $25,000,000;
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(l) a judgment or order for the payment of money in excess of
$25,000,000 (net of insurance to the extent that the insurer shall have
admitted coverage thereof) shall be rendered against the Borrower or any
Subsidiary and such judgment or order shall continue unsatisfied and
unstayed for a period of 30 days; or
(m) any person or group of persons (within the meaning of Section 13
or 14 of the Exchange Act) shall have acquired beneficial ownership (within
the meaning of Rule 13d-3 promulgated by the SEC under the Exchange Act) of
20% or more of the outstanding shares of common stock of the Borrower; or
Continuing Directors shall no longer constitute a majority of the
Borrower's board of directors;
then, and in every such event, while such event is continuing, the
Administrative Agent shall (i) if requested by Lenders having more than 50% in
aggregate amount of the Commitments, by notice to the Borrower terminate the
Commitments and the Swingline Commitment and they shall thereupon terminate,
(ii) if requested by Lenders holding Notes evidencing more than 50% in aggregate
outstanding principal amount of the Loans, by notice to the Borrower declare the
Notes and the Swingline Note (in each case together with accrued interest
thereon) to be, and the Notes and the Swingline Note shall thereupon become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower; PROVIDED that, if
any Event of Default specified in clause (i) or (j) above occurs with respect to
the Borrower, then without any notice to the Borrower or any other act by the
Administrative Agent or the Lenders, the Commitments and the Swingline
Commitment shall thereupon terminate and the Notes and the Swingline Note (in
each case together with accrued interest thereon) shall become immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower.
SECTION 6.2 NOTICE OF DEFAULT. The Administrative Agent shall give
notice to the Borrower under clause (d), (h) or (j) of Section 6.1 promptly upon
being
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requested to do so by the Required Lenders and shall thereupon notify all the
Lenders thereof.
ARTICLE 7
THE AGENTS
SECTION 7.1. APPOINTMENT AND AUTHORIZATION. Each Lender irrevocably
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
it by the terms hereof, together with all such powers as are reasonably
incidental thereto.
SECTION 7.2. AGENTS AND AFFILIATES. Each of Morgan Guaranty Trust
Company of New York, Bank of America National Trust and Savings Association and
The Bank of New York shall have the same rights and powers under the Financing
Documents as any other Lender and may exercise or refrain from exercising the
same as though it were not an Agent, and each of Morgan Guaranty Trust Company
of New York, Bank of America National Trust and Savings Association and The Bank
of New York and their respective Affiliates may accept deposits from, lend money
to, and generally engage in any kind of business with the Borrower or any of the
Borrower's Subsidiaries or Equity Affiliates as if it were not an Agent under
any of the Financing Documents.
SECTION 7.3. ACTION BY ANY ADMINISTRATIVE AGENT. The obligations of
the Administrative Agent hereunder are only those expressly set forth herein.
Without limiting the generality of the foregoing, the Administrative Agent shall
not be required to take any action with respect to any Default, except as
expressly provided in Article 6.
SECTION 7.4. CONSULTATION WITH EXPERTS. The Administrative Agent may
consult with legal counsel (who may be counsel for the Borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
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SECTION 7.5. LIABILITY OF THE AGENTS. None of the Administrative
Agent, the Arranging Agents, their respective Affiliates and their respective
directors, officers, agents or employees shall be liable for any action taken or
not taken by such Person in connection with any Financing Document (i) in the
absence of its own gross negligence or willful misconduct or (ii) with the
consent or at the request of the Required Lenders, PROVIDED that this clause
(ii) shall not affect any rights the Borrower may have against the Lenders that
made such request. None of the Agents, their respective Affiliates and their
respective directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into or verify (i) any statement, warranty
or representation made in connection with any Financing Document or any
Borrowing; (ii) the performance or observance of any of the covenants or
agreements of the Borrower in any Financing Document; (iii) the satisfaction of
any condition specified in Article 3, except, in the case of the Administrative
Agent, receipt of items required to be delivered to it; or (iv) the validity,
effectiveness or genuineness of any Financing Document or any other instrument
or writing furnished in connection therewith. The Administrative Agent shall
not incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex,
facsimile transmission or similar writing) believed by it to be genuine or to be
signed by the proper party or parties.
SECTION 7.6. INDEMNIFICATION. The Lenders shall, ratably in
accordance with their respective Commitment Percentages, indemnify the
Administrative Agent, each Arranging Agent, the Swingline Bank, their respective
Affiliates and their respective directors, officers, agents and employees (to
the extent not reimbursed by the Borrower) against any cost, expense (including
counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from the relevant indemnitee's gross negligence or
willful misconduct) that such indemnitees may suffer or incur in connection with
the Financing Documents or any action taken or omitted by the relevant
indemnitee thereunder.
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SECTION 7.7. CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon any Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon any Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under the Financing Documents.
SECTION 7.8. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative
Agent may resign at any time by giving notice thereof to the Lenders and the
Borrower. Upon any such resignation, the Required Lenders shall have the right
to appoint a successor Administrative Agent. If no successor Administrative
Agent shall have been so appointed by the Required Lenders, and shall have
accepted such appointment, within 30 days after the retiring Administrative
Agent gives notice of resignation, then the retiring Administrative Agent may,
on behalf of the Lenders, appoint a successor Administrative Agent, which shall
be a commercial bank organized or licensed under the laws of the United States
or of any State thereof and having a combined capital and surplus of at least
$50,000,000. Upon the acceptance of its appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation hereunder as Administrative Agent,
the provisions of this Article shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent.
SECTION 7.9. FEES. The Borrower shall pay to the Administrative
Agent and each Arranging Agent for its own account fees in the amounts and at
the times previously agreed upon between the Borrower and such Agent.
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SECTION 7.10. ARRANGING AGENTS AND MANAGING AGENTS. The Arranging
Agents and the Managing Agents, in their capacities as such, shall have no
duties or obligations of any kind under the Financing Documents and shall not
have a fiduciary relationship with any Lender.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.1. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR
UNFAIR. If on or prior to the first day of any Interest Period for any Euro-
Dollar Loan or Money Market LIBOR Loan:
(a) the Administrative Agent is advised by the Euro-Dollar Reference
Banks that deposits in dollars (in the applicable amounts) are not being
offered to the Euro-Dollar Reference Banks in the relevant market for such
Interest Period, or
(b) in the case of a Group of Euro-Dollar Loans, Lenders having 50%
or more of the aggregate principal amount of such Loans advise the
Administrative Agent that the Adjusted London Interbank Offered Rate as
determined by the Administrative Agent will not adequately and fairly
reflect the cost to such Lenders of funding such Loans for such Interest
Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Lenders, whereupon until the Administrative Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist, (i) the
obligations of the Lenders to make or maintain Euro-Dollar Loans shall be
suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a
Base Rate Loan on the last day of the then current Interest Period applicable
thereto. Unless the Borrower notifies the Administrative Agent at least two
Domestic Business Days before the date of any Euro-Dollar Borrowing or Money
Market LIBOR Borrowing for which a Notice of Borrowing has previously been given
that it elects not to borrow on such date, (i) if such Borrowing is a
Euro-Dollar Borrowing, such
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Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such
Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans
comprising such Borrowing shall bear interest for each day from and including
the first day to but excluding the last day of the Interest Period applicable
thereto at the Base Rate for such day.
SECTION 8.2. ILLEGALITY. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) made on or after the date of this
Agreement by any such authority, central bank or comparable agency shall make it
unlawful or impossible for any Lender (or its Euro-Dollar Lending Office) to
make, maintain or fund its Euro-Dollar Loans and such Lender shall so notify the
Administrative Agent, the Administrative Agent shall forthwith give notice
thereof to the other Lenders and the Borrower, whereupon until such Lender
notifies the Borrower and the Administrative Agent that the circumstances giving
rise to such suspension no longer exist, the obligation of such Lender to make
Euro-Dollar Loans, or to convert outstanding Base Rate Loans into Euro-Dollar
Loans, shall be suspended. Before giving any notice to the Administrative Agent
pursuant to this Section, such Lender shall designate a different Euro-Dollar
Lending Office if such designation will avoid the need for giving such notice
and will not, in the judgment of such Lender, be otherwise disadvantageous to
such Lender. If such notice is given, each Euro-Dollar Loan of such Lender then
outstanding shall be converted to a Base Rate Loan either (a) on the last day of
the then current Interest Period applicable to such Euro-Dollar Loan if such
Lender may lawfully continue to maintain and fund such Loan to such day or (b)
immediately if such Lender shall determine that it may not lawfully continue to
maintain and fund such Loan to such day.
SECTION 8.3. INCREASED COST AND REDUCED RETURN. (a) If, on or
after (x) the date hereof, in the case of any
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Euro-Dollar Loan or any obligation to make Euro-Dollar Loans or (y) the date of
the related Money Market Quote, in the case of any Money Market Loan, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its Applicable Lending Office) with any request or directive
(whether or not having the force of law) made on or after the date of this
Agreement by any such authority, central bank or comparable agency shall impose,
modify or deem applicable any reserve (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System, but
excluding with respect to any Euro-Dollar Loan any such requirement included in
an applicable Euro-Dollar Reserve Percentage), special deposit, insurance
assessment or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender (or its Applicable Lending Office)
or shall impose on any Lender (or its Applicable Lending Office) or on the
London interbank market any other condition affecting its Euro-Dollar Loans, its
Notes, its obligation to make Euro-Dollar Loans or its Money Market Loans, and
the result of any of the foregoing is to increase the cost to such Lender (or
its Applicable Lending Office) of making or maintaining any Euro-Dollar Loan or
Money Market Loan, or to reduce the amount of any sum received or receivable by
such Lender (or its Applicable Lending Office) under this Agreement or under its
Notes with respect thereto, by an amount deemed by such Lender to be material,
then, within 15 days after demand by such Lender (with a copy to the
Administrative Agent), the Borrower shall pay to such Lender such additional
amount or amounts as will (subject to subsection (e) of this Section) compensate
such Lender for such increased cost or reduction.
(b) If any Lender shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request
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or directive regarding capital adequacy (whether or not having the force of law)
made on or after the date of this Agreement by any such authority, central bank
or comparable agency, has or would have the effect of reducing the rate of
return on capital of such Lender (or its Parent) as a consequence of such
Lender's obligations hereunder to a level below that which such Lender (or its
Parent) could have achieved but for such adoption, change, request or directive
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from time to time, within 15
days after demand by such Lender (with a copy to the Administrative Agent), the
Borrower shall pay to such Lender such additional amount or amounts as will
(subject to subsection (e) of this Section) compensate such Lender (or its
Parent) for such reduction.
(c) Each Lender will promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge, occurring after the
date hereof, which will entitle such Lender to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Lender, be otherwise disadvantageous to
it. A certificate of any Lender claiming compensation under this Section and
setting forth in reasonable detail the additional amount or amounts to be paid
to it hereunder and the method of calculation thereof and shall be conclusive in
the absence of manifest error. In determining such amount, such Lender may use
any reasonable averaging and attribution methods.
(d) No Lender shall be entitled to claim compensation pursuant to
this Section for (i) Taxes or Other Taxes (as such terms are defined in
Section 8.4) or (ii) any increased cost or reduction incurred or accrued more
than 90 days before such Lender first notifies the Borrower of the change in
law or other circumstance on which such claim is based.
SECTION 8.4. TAXES. (a) For purposes of this Section, the
following terms have the following meanings:
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"Relevant Payee" means any Lender or any Agent.
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Borrower pursuant to any Financing Document, and all liabilities with respect
thereto, EXCLUDING (i) in the case of each Relevant Payee, taxes imposed on its
income, and franchise or similar taxes imposed on it, by a jurisdiction under
the laws of which it is organized or in which its principal executive office is
located or in which its Applicable Lending Office is located and (ii) in the
case of each Lender, any United States withholding tax imposed on such payments
but only to the extent that such Lender is subject to United States withholding
tax at the time such Lender first becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to any Financing Document, or from the
execution or delivery of, or otherwise with respect to, any Financing Document.
(b) Any and all payments by any Borrower to or for the account of any
Relevant Payee under any Financing Document shall be made without deduction for
any Taxes or Other Taxes; PROVIDED that, if the Borrower shall be required by
law to deduct any Taxes or Other Taxes from any such payment, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 8.4) such Relevant Payee receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrower shall
make such deductions, (iii) the Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with applicable
law and (iv) the Borrower shall furnish to the Administrative Agent, at its
address referred to in Section 9.1, the original or a certified copy of a
receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Relevant Payee for the full
amount of Taxes or Other Taxes
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(including, without limitation, any Taxes or Other Taxes imposed or asserted by
any jurisdiction on amounts payable under this Section 8.4) paid by such
Relevant Payee and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. This indemnification shall be paid
within 15 days after such Relevant Payee makes demand therefor.
(d) Each Relevant Payee organized under the laws of a jurisdiction
outside the United States, on or prior to its execution and delivery of this
Agreement in the case of each Relevant Payee listed on the signature pages
hereof and on or prior to the date on which it becomes a Relevant Payee in the
case of each other Relevant Payee, and from time to time thereafter if requested
in writing by the Borrower (but only so long as such Relevant Payee remains
lawfully able to do so), shall provide the Borrower and the Administrative Agent
with Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that such
Relevant Payee is entitled to benefits under an income tax treaty to which the
United States is a party which exempts such Relevant Payee from United States
withholding tax or reduces the rate of withholding tax on payments of interest
for the account of such Relevant Payee or certifying that the income receivable
pursuant to the Financing Documents is effectively connected with the conduct of
a trade or business in the United States.
(e) For any period with respect to which a Relevant Payee has failed
to provide the Borrower and the Administrative Agent with the appropriate form
pursuant to Section 8.4(d) (unless such failure is due to a change in treaty,
law or regulation occurring after the date on which such form originally was
required to be provided), such Relevant Payee shall not be entitled to
indemnification under Section 8.4(b) or (c) with respect to Taxes imposed by the
United States; PROVIDED that if a Relevant Payee, which is otherwise exempt from
or subject to a reduced rate of withholding tax, becomes subject to Taxes
because of its failure to deliver a form required hereunder, the Borrower shall
take such steps as such Relevant Payee shall reasonably request to assist such
Relevant Payee to recover such Taxes.
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(f) If the Borrower is required to pay additional amounts to or for
the account of any Relevant Payee pursuant to this Section 8.4, such Relevant
Payee will change the jurisdiction of its Applicable Lending Office if, in the
judgment of such Relevant Payee, such change (i) will eliminate or reduce any
such additional payment which may thereafter accrue and (ii) is not otherwise
disadvantageous to such Relevant Payee.
SECTION 8.5. BASE RATE LOANS SUBSTITUTED FOR AFFECTED EURO-DOLLAR
LOANS. If (i) the obligation of any Lender to make Euro-Dollar Loans has been
suspended pursuant to Section 8.2 or (ii) any Lender has demanded compensation
under Section 8.3 or 8.4 with respect to its Euro-Dollar Loans and the Borrower
shall, by at least five Euro-Dollar Business Days' prior notice to such Lender
through the Administrative Agent, have elected that the provisions of this
Section shall apply to such Lender, then, unless and until such Lender notifies
the Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist:
(a) all Loans which would otherwise be made by such Lender as (or
continued as or converted into) Euro-Dollar Loans shall instead be made as
(or converted into) Base Rate Loans (on which interest and principal shall
be payable contemporaneously with the related Euro-Dollar Loans of the
other Lenders), and
(b) after each of its Euro-Dollar Loans has been repaid (or converted
to a Base Rate Loan), all payments of principal which would otherwise be
applied to repay such Euro-Dollar Loan shall be applied to repay its Base
Rate Loans instead.
If such Lender notifies the Borrower that the circumstances giving rise to such
notice no longer apply, the principal amount of each such Base Rate Loan shall
be converted into a Euro-Dollar Loan on the first day of the next succeeding
Interest Period applicable to the related Euro-Dollar Loans of the other
Lenders.
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ARTICLE 9
MISCELLANEOUS
SECTION 9.1. NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission or similar writing) and shall be given to such party:
(x) in the case of the Borrower or the Administrative Agent, at its
address, facsimile number or telex number set forth on the signature pages
hereof,
(y) in the case of any Lender or Agent (other than the Administrative
Agent), at its address, facsimile number or telex number set forth in its
Administrative Questionnaire or
(z) in the case of any party, such other address, facsimile number or
telex number as such party may hereafter specify for the purpose by notice
to the Administrative Agent and the Borrower.
Each such notice, request or other communication shall be effective (i) if given
by telex, when such telex is transmitted to the telex number referred to in this
Section and the appropriate answerback is received, (ii) if given by facsimile
transmission, when transmitted to the facsimile number referred to in this
Section and confirmation of receipt is received, (iii) if given by mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iv) if given by any other means,
when delivered at the address referred to in this Section; PROVIDED that notices
to the Administrative Agent under Article 2 or Article 8 shall not be effective
until received.
SECTION 9.2. NO WAIVERS. No failure or delay by the Administrative
Agent or any Lender in exercising any right, power or privilege under any
Financing Document shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or
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privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 9.3. EXPENSES; INDEMNIFICATION. (a) The Borrower shall pay
(i) all out-of-pocket expenses of the Administrative Agent, including fees and
disbursements of special counsel for the Administrative Agent, in connection
with the preparation and administration of the Financing Documents, any waiver
or consent thereunder or any amendment thereof or any Default or alleged Default
thereunder, (ii) all out-of-pocket expenses of each Arranging Agent (but not any
fees and disbursements of its counsel) in connection with the preparation and
administration of the Financing Documents, any waiver or consent thereunder or
any amendment thereof or any Default or alleged Default thereunder and (iii) if
an Event of Default occurs, all out-of-pocket expenses incurred by each Agent
and each Lender, including (without duplication) the fees and disbursements of
outside counsel and the allocated cost of inside counsel, in connection with
such Event of Default and any collection, bankruptcy, insolvency or other
enforcement proceedings resulting therefrom.
(b) The Borrower shall indemnify each Agent, the Swingline Bank and
each Lender, their respective Affiliates and the respective directors,
directors, officers, agents and employees of the foregoing (each an
"Indemnitee") and hold each Indemnitee harmless from and against any and all
liabilities, losses, damages, costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of counsel, which may be
incurred by such Indemnitee in connection with any investigative, administrative
or judicial proceeding (whether or not such Indemnitee shall be designated a
party thereto) brought or threatened relating to or arising out of any Financing
Document or any actual or proposed use by the Borrower or any of its
Subsidiaries or Equity Affiliates of any proceeds of the Loans; PROVIDED that no
Indemnitee shall have the right to be indemnified hereunder for such
Indemnitee's own gross negligence or willful misconduct as determined by a court
of competent jurisdiction.
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<PAGE>
SECTION 9.4. SHARING OF SET-OFFS. (a) Each Lender agrees that if
it shall, by exercising any right of set-off or counterclaim or otherwise,
receive payment of a proportion of the aggregate amount of principal and
interest due with respect to the Loans held by it which is greater than the
proportion received by any other Lender in respect of the aggregate amount of
principal and interest due with respect to the Loans held by such other Lender,
the Lender receiving such proportionately greater payment shall purchase such
participations in the Loans held by the other Lenders, and such other
adjustments shall be made, as may be required so that all such payments of
principal and interest with respect to the Loans held by the Lenders shall be
shared by the Lenders pro rata.
(b) Nothing in this Section shall impair the right of any Lender to
exercise any right of set-off or counterclaim it may have and to apply the
amount subject to such exercise to the payment of indebtedness of the Borrower
other than its indebtedness hereunder.
(c) The Borrower agrees, to the fullest extent it may effectively do
so under applicable law, that any holder of a participation in a Note, whether
or not acquired pursuant to the foregoing arrangements, may exercise rights of
set-off or counterclaim and other rights with respect to such participation as
fully as if such holder of a participation were a direct creditor of the
Borrower in the amount of such participation.
SECTION 9.5. AMENDMENTS AND WAIVERS. Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Borrower and the Required Lenders (and, if
the rights or duties of any Agent are affected thereby, by such Agent); PROVIDED
that no such amendment or waiver shall:
(i) unless signed by all the Lenders, increase or decrease any
Commitment (except for a ratable decrease in all the Commitments), postpone
the date fixed for the termination of any Commitment, reduce the principal
of or rate of interest on any Syndicated Loan or
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<PAGE>
postpone the Termination Date or any date fixed for any payment of interest
on any Syndicated Loan;
(ii) unless signed by the Swingline Bank, increase the Swingline
Commitment, postpone the date fixed for the termination of the Swingline
Commitment or otherwise affect any of its rights or obligations hereunder;
(iii) unless signed by all the Lenders entitled to receive such fees,
reduce or postpone the date fixed for any scheduled payment of fees
hereunder;
(iv) unless signed by all the Lenders, change any provision of this
Section or any other provision of this Agreement specifying which Lenders
may take any action that the Lenders or any of them are entitled to take
hereunder; or
(v) unless signed by each Lender affected thereby, waive any
condition set forth in clause (b), (c) or (k) of Section 3.1.
SECTION 9.6. SUCCESSORS AND ASSIGNS. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, except that the Borrower
may not assign or otherwise transfer any of its rights under the Financing
Documents without the prior written consent of all the Lenders and the Swingline
Bank.
(b) Any Lender may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans. If any Lender grants such a participating interest to
a Participant, whether or not upon notice to the Borrower and the Administrative
Agent, such Lender shall remain responsible for the performance of its
obligations hereunder, and the Borrower and the Administrative Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under the Financing Documents. Any agreement
pursuant to which any Lender may grant such a participating interest shall
provide that such Lender shall retain the sole right
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<PAGE>
and responsibility to enforce the obligations of the Borrower under the
Financing Documents including, without limitation, the right to approve any
amendment, modification or waiver of any provision thereof; PROVIDED that such
participation agreement may provide that such Lender will not agree to any
modification, amendment or waiver of this Agreement described in clause (i) or
(iii) of Section 9.5 without the consent of the Participant. An assignment or
other transfer which is not permitted by subsection (c) or (d) below shall be
given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection (b).
(c) Any Lender may at any time after the Closing Date assign to one or more
banks or other institutions (each an "Assignee") all, or a pro rata part of
all, of its rights and obligations under the Financing Documents, and such
Assignee shall assume such rights and obligations, pursuant to an Assignment
and Assumption Agreement substantially in the form of Exhibit G hereto signed
by such Assignee and such transferor Lender, with (and subject to) the
subscribed consent of the Borrower (which shall not be unreasonably withheld)
and the Swingline Bank; PROVIDED that:
(A) if such Assignee is an Affiliate of such transferor Lender or was a
Lender immediately prior to such assignment, no such consent shall be required;
(B) such assignment may, but need not, include rights of the transferor
Lender in respect of outstanding Money Market Loans;
(C) if such Assignee is not an Affiliate of the transferor Lender and was
not a Lender immediately prior to such assignment, then, unless the Borrower
otherwise agrees, the portion of the transferor Lender's Commitment assigned to
such Assignee shall be at least $20,000,000; and
(D) unless the Borrower otherwise agrees, the transferor Lender and/or its
Affiliates shall retain, in the aggregate, a Commitment at least equal to the
greater of (x) $20,000,000 or (y) 50% of the Commitment
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<PAGE>
assumed by the transferor Lender when it first became a Lender hereunder;
PROVIDED that, if the aggregate amount of the Commitments is reduced pursuant to
Section 2.12 or otherwise, the minimum amounts specified in clause (C) and
subclauses (x) and (y) of clause (D) above shall be correspondingly reduced.
When (i) such Assignment and Assumption Agreement has been signed and delivered,
(ii) notice thereof has been given to the Administrative Agent and (iii) such
Assignee has paid to such transferor Lender an amount equal to the purchase
price agreed between such transferor Lender and such Assignee, such Assignee
shall be a Lender party to this Agreement and shall have all the rights and
obligations of a Lender to the extent set forth in such Assignment and
Assumption Agreement, and the transferor Lender shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Lender, the Administrative Agent
and the Borrower shall make appropriate arrangements so that, if required, a new
Note is issued to the Assignee. In connection with any such assignment, either
the transferor Lender or the Assignee shall pay to the Administrative Agent an
administrative fee for processing such assignment in the amount of $2,500;
PROVIDED that such fee shall not be payable with respect to the first two
assignments made by the transferor Lender if they are made within 60 days after
the Closing Date. If the Assignee is not incorporated under the laws of the
United States or a State thereof, it shall deliver to the Borrower and the
Administrative Agent certification as to exemption from deduction or withholding
of any United States federal income taxes in accordance with Section 8.4(d).
(d) Any Lender may at any time assign all or any portion of its rights
under the Financing Documents to a Federal Reserve Bank. No such assignment
shall release the transferor Lender from its obligations thereunder.
(e) No Assignee, Participant or other transferee of any Lender's rights
shall be entitled to receive any greater payment under or by reason by Section
8.3 or 8.4 than such Lender would have been entitled to receive with
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<PAGE>
respect to the rights transferred, unless such transfer is made with the
Borrower's prior written consent or by reason of the provisions of Section 8.2,
8.3 or 8.4 requiring such Lender to designate a different Applicable Lending
Office under certain circumstances or, in the case of an Assignee, at a time
when the circumstances giving rise to such greater payment did not exist.
Subject to the foregoing limitation, any Lender claiming compensation or
indemnification pursuant to Section 8.3 or 8.4 may include in its claim similar
compensation or indemnification for any Participant having a participating
interest in such Lender's rights.
SECTION 9.7. NO RELIANCE ON MARGIN STOCK AS COLLATERAL. Each of the
Lenders represents to the Administrative Agent and each of the other Lenders
that it in good faith is not relying upon any "margin stock" (as defined in
Regulation U) as collateral in the extension or maintenance of the credit
provided for in this Agreement.
SECTION 9.8. CONFIDENTIALITY. Each Agent and Lender (each, a "Lending
Party") agrees to keep any information delivered or made available by the
Borrower to it confidential from anyone other than persons employed or retained
by such Lending Party who are, or are expected to be, engaged in evaluating,
approving, structuring or administering the credit facility provided herein;
PROVIDED that nothing herein shall prevent any Lending Party from disclosing
such information (a) to any other Lending Party, (b) to any other Person if
reasonably incidental to the administration of the credit facility provided
herein, (c) upon the order of any court or administrative agency, (d) upon the
request or demand of any regulatory agency or authority, (e) which had been
publicly disclosed other than as a result of a disclosure by any Lending Party
prohibited by this Agreement, (f) in connection with any litigation to which
such Lending Party or any of its Affiliates may be a party, (g) to the extent
necessary in connection with the exercise of any remedy hereunder, (h) to such
Lending Party's legal counsel and independent auditors, (i) to any Affiliate of
such Lending Party, solely in connection with this Agreement or any other
transaction or proposed transaction between such Lending Party and/or its
Affiliates and the Borrower and/or its Affiliates, and (j) subject to
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<PAGE>
provisions substantially similar to those contained in this Section, to any
actual or proposed Participant or Assignee.
SECTION 9.9. WAIVER OF JURY TRIAL. THE BORROWER, EACH AGENT, THE SWINGLINE
BANK AND EACH LENDER HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREBY.
SECTION 9.10. GOVERNING LAW; SUBMISSION TO JURISDICTION. EACH OF THE
FINANCING DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. THE BORROWER HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED THEREBY. THE BORROWER IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
SECTION 9.11 COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
TENET HEALTHCARE CORPORATION
By
-------------------------------
Title: Senior Vice President
Tenet Healthcare Corporation
2700 Colorado Avenue
Santa Monica, California 90404
Attention: Treasurer
(with a copy to
General Counsel)
Telephone: (805) 692-8700
Facsimile: (805) 967-5910
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a
Lender and as Documentation Agent
By
-------------------------------
Title:
THE BANK OF NEW YORK, as a Lender
and as Syndication Agent
By
-------------------------------
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as a Lender and
as the Swingline Bank
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<PAGE>
By
-------------------------------
Title:
ABN AMRO BANK N.V.,
LOS ANGELES BRANCH,
as a Lender and Managing Agent
By: ABN AMRO NORTH AMERICA, INC.,
as agent
By
-------------------------------
Title:
By
-------------------------------
Title:
BANKERS TRUST COMPANY, as a Lender
and Managing Agent
By
-------------------------------
Title:
THE BANK OF NOVA SCOTIA, as a
Lender and Managing Agent
By
-------------------------------
Title:
CHEMICAL BANK, as a Lender and
Managing Agent
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<PAGE>
By
-------------------------------
Title:
CREDIT SUISSE, as a Lender and
Managing Agent
By
-------------------------------
Title:
DEUTSCHE BANK AG, LOS ANGELES
AND/OR CAYMAN ISLANDS BRANCH,
as a Lender and Managing Agent
By
-------------------------------
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY, as a
Lender and Managing Agent
By
-------------------------------
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., LOS ANGELES AGENCY, as a
Lender and Managing Agent
By
-------------------------------
Title:
NATIONSBANK OF TEXAS, N.A., as a
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<PAGE>
Lender and Managing Agent
By
-------------------------------
Title:
PNC BANK, NATIONAL ASSOCIATION,
as a Lender and Managing Agent
By
-------------------------------
Title:
WACHOVIA BANK OF GEORGIA, N.A.,
as a Lender and Managing Agent
By
-------------------------------
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative
Agent
By
-------------------------------
Title:
60 Wall Street
New York, New York 10260-0060
Attention: Robert Osieski
Telex number: 177615
Facsimile number: 212-648-5014
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<PAGE>
COMMITMENT SCHEDULE
LENDER COMMITMENT
Morgan Guaranty Trust Company of New York $150,000,000
Bank of America National Trust
and Savings Association $150,000,000
The Bank of New York $150,000,000
ABN AMRO Bank N.V., Los Angeles Branch $100,000,000
Bankers Trust Company $100,000,000
The Bank of Nova Scotia $100,000,000
Chemical Bank $100,000,000
Credit Suisse $100,000,000
<PAGE>
Deutsche Bank AG, Los Angeles
and/or Cayman Islands Branch $100,000,000
The Industrial Bank of Japan, Limited,
Los Angeles Agency $100,000,000
The Long-Term Credit Bank of Japan, Ltd.,
Los Angeles Agency $100,000,000
NationsBank of Texas, N.A. $100,000,000
PNC Bank, National Association $100,000,000
Wachovia Bank of Georgia, N.A. $100,000,000
--------------
TOTAL 1,550,000,000
1
<PAGE>
PRICING SCHEDULE
The "Base Rate Margin", "Euro-Dollar Margin", and "Facility Fee Rate"
for any day are the respective rates per annum set forth below in the applicable
row under the column corresponding to the Pricing Level that applies on such
day:
<TABLE>
<CAPTION>
Pricing Level Level Level Level Level Level Level
Level I II III IV V VI VII
<S> <C> <C> <C> <C> <C> <C> <C>
Base Rate Margin 0% 0% 0% 0% 0% 0% 0.25%
Euro-Dollar Margin 0.30% 0.3125% 0.40625% 0.50% 0.59375% 0.6875% 0.875%
Facility Fee Rate 0.15% 0.1875% 0.21875% 0.25% 0.28125% 0.3125% 0.375%
</TABLE>
For purposes of this Pricing Schedule, the following terms have the
following meanings:
"Consolidated Debt Ratio" means, at the end of any Fiscal Quarter, the
ratio of (i) Adjusted Total Debt at the end of such Fiscal Quarter to (ii)
Adjusted EBITDA for the period of four consecutive Fiscal Quarters then ended.
"Consolidated Interest Coverage Ratio" means, at the end of any Fiscal
Quarter, the ratio of (i) Adjusted EBITDA to (ii) Adjusted Interest Expense, in
each case for the period of four consecutive Fiscal Quarters then ended.
"Level I Pricing" applies during any Rate Period if, at the end of the
Preceding Fiscal Quarter, (i) the Consolidated Interest Coverage Ratio was equal
to or greater than 5.0 to 1 and (ii) the Consolidated Debt Ratio was equal to or
less than 1.75 to 1.
<PAGE>
"Level II Pricing" applies during any Rate Period if no higher Pricing
Level applies and, at the end of the Preceding Fiscal Quarter, either (i) the
Consolidated Interest Coverage Ratio was less than 5.0 to 1 or (ii) the
Consolidated Debt Ratio was greater than 1.75 to 1.
"Level III Pricing" applies during any Rate Period if no higher
Pricing Level applies and, at the end of the Preceding Fiscal Quarter, either
(i) the Consolidated Interest Coverage Ratio was less than 4.75 to 1 or (ii) the
Consolidated Debt Ratio was greater than 2.0 to 1.
"Level IV Pricing" applies during any Rate Period if no higher Pricing
Level applies and, at the end of the Preceding Fiscal Quarter, either (i) the
Consolidated Interest Coverage Ratio was less than 4.5 to 1 or (ii) the
Consolidated Debt Ratio was greater than 2.25 to 1.
"Level V Pricing" applies during any Rate Period if, at the end of the
Preceding Fiscal Quarter, either (i) the Consolidated Interest Coverage Ratio
was less than 4.0 to 1 or (ii) the Consolidated Debt Ratio was greater than 2.5
to 1.
"Level VI Pricing" applies during any Rate Period if, at the end of
the Preceding Fiscal Quarter, either (i) the Consolidated Interest Coverage
Ratio was less than 3.5 to 1 or (ii) the Consolidated Debt Ratio was greater
than 3.0 to 1.
"Level VII Pricing" applies during any Rate Period if, at the end of
the Preceding Fiscal Quarter, either (i) the Consolidated Interest Coverage
Ratio was less than 3.0 to 1 or (ii) the Consolidated Debt Ratio was greater
than 3.5 to 1.
"Preceding Fiscal Quarter" means, with respect to any Rate Period, the
most recent Fiscal Quarter ended before such Rate Period begins.
3
<PAGE>
"Pricing Level" refers to the determination of which of Level I
Pricing, Level II Pricing, Level III Pricing, Level IV Pricing, Level V Pricing,
Level VI Pricing or Level VII Pricing applies on any day. Pricing Levels are
referred to in ascending order (e.g., Level III Pricing is a higher Pricing
Level than Level II Pricing.)
"Rate Period" means any period from and including the 46th day of a
Fiscal Quarter to and including the 45th day of the immediately succeeding
Fiscal Quarter.
4
<PAGE>
SCHEDULE 4.05
Pending Litigation
The Borrower hereby incorporates by reference the disclosure
concerning the legal proceedings referred to in its annual report on Form 10-KA
for its fiscal year ended May 31, 1995, its quarterly report on Form 10-QA for
its fiscal quarter ended August 31, 1995 and its quarterly report on Form 10-Q
for its fiscal quarter ended November 30, 1995.
The Company continues to experience a greater than normal level of
litigation relating to its former psychiatric operations, including a continuum
of cases filed in the District of Columbia. The majority of the lawsuits filed
contained allegations of fraud and conspiracy against the Company and certain of
its subsidiaries and former employees. The Company believes that the increase
in litigation stems, in whole or in part, from advertisements by certain lawyers
seeking former psychiatric patients in order to ascertain whether potential
claims exist against the Company. The advertisements focus, in many instances,
on the Company's settlement of past disputes involving the operations of its
psychiatric subsidiaries, including the Company's 1994 resolution of the
government's investigation and a corresponding criminal plea agreement. The
Company believes it has a number of defenses to these actions and will defend
the litigation vigorously. Although, based upon information currently available
to it, management believes that the amount of damages in excess of the reserves
for unusual litigation costs that may be awarded in the above unresolved matters
cannot reasonably be estimated, management does not believes it is likely that
any damages awarded in such legal proceedings will have a material adverse
affect on the Company's results of operations, liquidity or capital resources.
The Company expects that additional lawsuits of this nature will be filed.
<PAGE>
The court has approved the settlements of the shareholder derivative
actions filed in Los Angeles Superior Court in October and November of 1991 and
one federal class action lawsuit entitled In Re: National Medical Enterprises,
Inc. Securities Litigation I. All payments relevant to these settlements have
been funded.
Two federal class action lawsuits filed in August 1993 was
consolidated into one action pending in the U.S. District Court in the Central
District of California captioned In re: National Medical Enterprises Securities
Litigation II. On June 23, 1995, the defendants filed a motion to dismiss and
to strike plaintiffs' complaint and the court has not yet ruled on the motion.
Discovery continues to be stayed pending a ruling on the motion from the trial
court. The Company believes it has meritorious defenses to this action and will
defend this litigation vigorously.
On March 7, 1996, Horizon/CMS Healthcare Corporation ("Horizon/CMS")
announced that it filed a lawsuit against Tenet Healthcare Corporation ("Tenet")
in the United States District Court for the District of Nevada. Horizon/CMS
stated that the lawsuit arises out of an agreement entered into between
Horizon/CMS and Tenet in connection with Horizon/CMS's attempted acquisition of
The Hillhaven Corporation ("Hillhaven") in January 1995. Horizon/CMS alleges
that Tenet has failed to honor its commitment to pay Horizon/CMS approximately
$14.56 million pursuant to the agreement. The Company believes Horizon/CMS's
claim is without merit and intends to vigorously defend the lawsuit.
2
<PAGE>
SCHEDULE 4.06
Erisa Exceptions
EXISTING CONDITIONS WHICH COULD RESULT IN TITLE IV ERISA EXPOSURE
The American Medical International, Inc. (now known as Tenet HealthSystem
Medical, Inc.) Pension Plan (the "Pension Plan") was audited by the Department
of Labor in 1993 and 1994. As a result of the audit, American Medical Holdings,
Inc. (now known as Tenet HealthSystem Holdings, Inc.) ("AM Holdings") made an
approximately $6 million contribution to the Pension Plan in order to remedy
underfunding for the 1991 and 1992 plan years caused by inaccurate data used by
the Pension Plan actuary. On November 2, 1994, AM Holdings paid approximately
$1,664,900 in excise taxes to the Internal Revenue Service with respect to such
underfunding. The Internal Revenue Service subsequently required AM Holdings to
pay approximately $125,023 in interest with respect to the payment of the excise
taxes but granted AM Holdings' request for the waiver of the penalties
applicable to the payment of such excise taxes. This additional contribution
also necessitated the recalculation of PBGC premiums for the 1991 through 1993
plan years and resulted in the payment of approximately $847,516 of additional
PBGC premiums due. On August 4, 1995, AM Holdings paid approximately $155,411
in interest to the PBGC with respect to the underpayment of premiums for the
1991, 1992 and 1993 plan years and under separate cover filed a request for
waiver of the approximately $767,969 in penalties imposed with respect to the
late payment of such premiums. AM Holdings estimated that the total PBGC
penalties and interest would approximate $1.5 million (an accrual for which has
been made in AM Holdings' financial statements).
CIRCUMSTANCES IN WHICH PRESENT VALUE OF ACCRUED BENEFITS EXCEEDS CURRENT VALUE
OF PLAN ASSETS
<PAGE>
As of May 1, 1995, the present value of plan assets under the Pension Plan,
based upon the actuarial assumptions used for financial reporting purposes,
exceeded the total accrued benefit obligations under the Pension Plan by
approximately $3,000,000. Effective December 31, 1995, all benefit accruals
under the Pension Plan were discontinued.
EXCEPTIONS TO QUALIFICATION UNDER SECTION 4.01(A); EXCEPTIONS TO EXEMPTION UNDER
SECTION 401(A); CONDITIONS AFFECTING QUALIFICATION OR EXEMPTION
On April 8, 1994, AM Holdings filed a Voluntary Compliance Resolution Request
("VCR Request") with the National Office of the Internal Revenue Service with
respect to both the Pension Plan and the AMI Tax Deferred Savings Plan (the
"Savings Plan") in order to correct certain operational defects in the
administration of the plans. Pursuant to the VCR Request, AM Holdings may be
required to make certain corrections outlined in the VCR Request to remedy these
operational defects in order to preserve the qualified status of the plans. In
addition, in 1995, AM Holdings submitted the Pension Plan, Savings Plan and the
Saint Francis Pension Plan to the Internal Revenue Service for a ruling
regarding their continued qualification under Section 401(a) of the Code as
amended by the Tax Reform Act of 1986 and subsequent legislation. On March 5,
1996, the Internal Revenue Service issued a favorable determination letter with
respect to the Saint Francis Pension Plan. The Internal Revenue Service will
not issue a discrimination letter with respect to the Pension Plan and Savings
Plan until the VCR Request is complete.
PROHIBITED TRANSACTION EXPOSURE
AM Holdings has contracted with certain affiliated entities and physicians to
provide medical services under AM Holdings' medical plans. Technically, these
arrangements may constitute prohibited transactions under ERISA and the Code for
which a statutory or administrative exemption is not available. AM Holdings has
had informal conferences
2
<PAGE>
with the Department of Labor, during which the Department advised AM Holdings
that the Department is aware of several similar service provider arrangements
with other hospital corporations, that none of these entities have filed
prohibited transaction exemption applications with the Department and the
Department has not enforced, and does not intend to enforce, the prohibited
transaction rules with respect to such arrangements. AM Holdings has determined
that absent any new legal developments, it will not file an application for a
prohibited transaction exemption with the Department of Labor regarding these
service provider arrangements.
3
<PAGE>
EXECUTION COPY
AMENDMENT TO REIMBURSEMENT AGREEMENT
AMENDMENT dated as of March 1, 1996 to the Amended and Restated Letter
of Credit and Reimbursement Agreement dated as of February 28, 1995, as
heretofore amended (the "Reimbursement Agreement") among TENET HEALTHCARE
CORPORATION (formerly known as National Medical Enterprises, Inc.), as account
party, BANK OF AMERICA NATIONAL TRUST and SAVINGS ASSOCIATION, THE BANK OF NEW
YORK, BANKERS TRUST COMPANY and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Banks, and THE BANK OF NEW YORK, as the Issuing Bank.
WHEREAS, the Reimbursement Agreement incorporates by reference, or
otherwise refers to, certain provisions of the existing Morgan Credit Agreement
as defined therein;
WHEREAS, the existing Morgan Credit Agreement is to be replaced by a
new credit agreement (the "1996 Credit Agreement");
WHEREAS, the parties hereto desire to amend the Reimbursement
Agreement so that it refers to the relevant provisions of the 1996 Credit
Agreement rather than the existing Morgan Credit Agreement; and
WHEREAS, the security interests created by the Security Agreement (as
defined in the Reimbursement Agreement) are to be released on or before April
10, 1996, so that references to the Security Agreement in certain provisions of
the Reimbursement Agreement that apply (or in the case of representations and
warranties, are to be repeated) after April 10, 1996 will no longer be necessary
or appropriate;
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
SECTION 1. DEFINITIONS, REFERENCES. Unless otherwise specifically
defined herein, each term used herein which is defined in the Reimbursement
Agreement has the meaning assigned to such term in the Reimbursement Agreement.
Each reference to "hereof," "hereunder," "herein," and "hereby" and each other
similar reference and each reference to "this Agreement" and each other similar
reference contained in the Reimbursement Agreement shall, after this Amendment
becomes effective, refer to the Reimbursement Agreement as amended hereby.
SECTION 2. AMENDMENT OF DEFINITIONS. The definitions in Section 1.01
of the Reimbursement Agreement are amended as follows:
(a) The definition of "Letter of Credit Fee" is deleted and replaced
by the following definition:
"Letter of Credit Fee Rate" means a rate per annum equal to the
sum of the Eurodollar Margin and the Facility Fee Rate, each
determined in accordance with the Pricing Schedule attached to the
1996 Credit Agreement.
(b) The following new definitions are added immediately after the
definition of "Morgan Credit Agreement":
"1996 Closing Date" means the "Closing Date", as such term is
defined in the 1996 Credit Agreement.
"1996 Credit Agreement" means the Credit Agreement dated as of
March 1, 1996 among the Company, the Lenders and Managing Agents party
thereto, Bank of America National Trust and Savings Association as
Documentation Agent, The Bank of New York as Syndication Agent, and
Morgan Guaranty Trust Company of New York as Administrative Agent, as
such agreement may be amended from time to time.
2
<PAGE>
(c) The definition of "Termination Date" is amended to read as
follows:
"Termination Date" means the date which is five Business Days
prior to the "Termination Date" under and as defined in the 1996
Credit Agreement.
SECTION 3. LETTER OF CREDIT FEE. Section 3.01(a) of the Reimbursement
Agreement is amended to read as follows:
(a) LETTER OF CREDIT FEE. For the account of the Banks, a letter
of credit fee calculated for each day at the Letter of Credit Fee Rate
for such day on the aggregate outstanding face amount of the Series A
L/C and the Series B L/C on such day. Such letter of credit fee shall
accrue from and including the 1996 Closing Date to and including the
Termination Date and shall be payable quarterly in arrears on the last
Business Day of each March, June, September and December and on the
Termination Date.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The following new Section
4.03 is added at the end of Article IV of the Reimbursement Agreement:
SECTION 4.03. REPRESENTATIONS TO BE UPDATED. In connection with any
extension of the Letters of Credit after the 1996 Closing Date, the Company
will update the following representations and warranties as provided in
Section 5.02(b) hereof:
(i) the representations and warranties made by the Company in
Section 4.01 of this Agreement;
(ii) the representations and warranties made by the Company in
Sections 4.4 through 4.12 of the 1996 Credit Agreement (defined terms
used therein having the meanings assigned to such terms in the 1996
Credit Agreement except that, for purposes of this Agreement, (A) the
term "Financing Documents" shall include this Agreement, the Lease
Guaranty
3
<PAGE>
and the Letters of Credit and (B) the terms "this Agreement" and
"hereby" contained in Section 4.12 thereof shall include this
Agreement);
(iii) the representations and warranties made by the Company in
the Securities Pledge and Security Agreement; and
(iv) any other representations and warranties made by the Company
in any certificate, document or financial or other statement furnished
at any time hereunder or in connection herewith.
SECTION 5. CONDITIONS TO EXTENSIONS OF LETTERS OF CREDIT. Section
5.02(b) of the Reimbursement Agreement is amended to read as follows:
(b) the fact that each of the representations and warranties referred
to in Section 4.03 hereof will be true and correct on and as of the date of
extension of the Letters of Credit as if made on and as of such date
(except that representations and warranties made with respect to specified
dates or periods will be true and correct as of such specified dates or for
such specified periods, as the case may be); and
SECTION 6. INCORPORATION OF COVENANTS BY REFERENCE. Section 6.01 of
the Reimbursement Agreement is amended to read as follows:
SECTION 6.01. INCORPORATION BY REFERENCE. The Company agrees that, so
long as any Commitment remains in effect, any amount remains available for
drawing under any Letter of Credit or any amount is owing to any Bank or
the Issuing Bank hereunder, the Company shall observe and perform each of
its covenants and undertakings set forth in Article V of the 1996 Credit
Agreement and such covenants and undertakings are hereby incorporated
herein by reference. Defined terms used in Article V of the 1996 Credit
Agreement have the meanings assigned such terms in the 1996 Credit
Agreement; PROVIDED that, for purposes of this Section
4
<PAGE>
6.01, (i) the term "Lenders" shall mean the Banks, (ii) the term "Financing
Documents" shall include this Agreement, the Lease Guaranty and the Letters
of Credit, (iii) the term "Required Lenders" shall mean the Required Banks,
(iv) the term "Default" shall mean a Default as such term is defined
herein, and (v) the term "Administrative Agent" shall mean the Issuing
Bank.
SECTION 7. CROSS DEFAULT. Section 7.01(e) of the Reimbursement
Agreement is amended to read as follows:
(e) An Event of Default under and as defined in the 1996 Credit
Agreement shall have occurred and be continuing; or
SECTION 8. DELETION OF CERTAIN REFERENCES TO SECURITY AGREEMENT. (a)
The words ", Security Agreement" are deleted wherever they appear in Sections
4.01(a), 4.01(b), 4.01(c), 5.02(b), 7.01(d) and 11.06(b) of the Reimbursement
Agreement.
(b) The words ", Section 4(B) or 5 of the Security Agreement" are
deleted from Section 7.01(c) of the Reimbursement Agreement.
SECTION 9. AMENDMENTS AND WAIVERS. Section 11.05(B) of the
Reimbursement Agreement is amended to read as follows:
(B) Any amendment or wavier of any provision of Articles IV and V (or
any related definition) of the 1996 Credit Agreement shall be effective for
purposes of Articles IV and VI of this Agreement if signed by the Company
and the Required Banks hereunder in their respective capacities as
"Lenders" under the 1996 Credit Agreement.
SECTION 10. ASSIGNMENT OF RIGHTS AND OBLIGATIONS OF BANKERS TRUST
COMPANY. Bankers Trust Company hereby assigns, without recourse, representation
or warranty, to each of the other three Banks one-third of all the rights of
5
<PAGE>
Bankers Trust Company under the Reimbursement Agreement (except its right to
receive the fees accrued for its account prior to the 1996 Closing Date), and
each of such Banks hereby accepts such assignment and assumes one-third of all
the obligations of Bankers Trust Company under the Reimbursement Agreement. The
foregoing assignment and assumption of obligations shall be effective on the
1996 Closing Date and Bankers Trust Company shall have no obligations of any
kind under the Reimbursement Agreement thereafter. Schedule I to the
Reimbursement Agreement is deleted and replaced by Schedule I to this Amendment
which sets forth the Commitments of the Banks immediately after giving effect to
the foregoing assignment.
SECTION 11. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 12. COUNTERPARTS; EFFECTIVENESS. This Amendment may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Amendment shall become effective and binding on the parties hereto when:
(i) the Issuing Bank shall have received from each of the Company,
the Banks and the Issuing Bank either a counterpart hereof signed by such
party or telex, facsimile or other written confirmation satisfactory to it
that such party has signed a counterpart hereof;
(ii) the Issuing Bank shall have received a copy of the 1996 Credit
Agreement in the form signed by all the parties thereto and the 1996 Credit
Agreement shall have become effective;
(iii) the Company shall have paid to the Issuing Bank (A) all fees
accrued for the account of the Banks to but excluding the 1996 Closing Date
pursuant to Section 3.01(a) of the Reimbursement Agreement and (B) all
Reimbursement Obligations and other amounts (if
6
<PAGE>
any) due and payable to the Issuing Bank on or before the 1996 Closing
Date;
(iv) the Issuing Bank shall have received a certificate of the
Secretary of the Company, dated the 1996 Closing Date, as to the articles
of incorporation and bylaws of the Company, no amendments thereto, the
adoption by the Company's board of directors of the resolutions referred to
in clause (v) below and the incumbency and signature of the officer of the
Company who executed this Amendment, together with evidence of the
incumbency of such Secretary;
(v) the Issuing Bank shall have received a copy of resolutions (in
form and substance satisfactory to it) of the Company's board of directors
authorizing the execution and delivery of this Amendment, certified by the
Secretary of the Company to be in full force and effect without
modification on the 1996 Closing Date;
(vi) the Issuing Bank shall have received, with an original
counterpart for each Bank, a certificate dated the 1996 Closing Date,
substantially in the form of Exhibit A hereto, executed by the Executive
Vice President, a Senior Vice President or the Treasurer of the Company;
and
(vii) the Company shall have paid to the Issuing Bank for the account
of each Bank listed on Schedule I hereto a fee equal to 0.125% of such
Bank's Commitment set forth on Schedule I.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective authorized officers as of the day and year
first above written.
TENET HEALTHCARE CORPORATION
By:
---------------------------
7
<PAGE>
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
---------------------------
Title:
BANKERS TRUST COMPANY
By:
---------------------------
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:
---------------------------
Title:
THE BANK OF NEW YORK, as a Bank
By:
---------------------------
Title:
THE BANK OF NEW YORK, as Issuing
Bank
By:
---------------------------
Title:
8
<PAGE>
SCHEDULE I
LIST OF COMMITMENTS
AS OF 1996 CLOSING DATE
-----------------------
<TABLE>
<CAPTION>
BANK COMMITMENT
- ---- ----------
<S> <C>
The Bank of New York $28,983,333.34
Bank of America National
and Savings Association 28,983,333.33
Morgan Guaranty Trust Company
of New York 28,983,333.33
-------------
TOTAL $86,950,000.00
--------------
--------------
</TABLE>
<PAGE>
EXHIBIT A
OFFICER'S CERTIFICATE
AS TO CONTINUED ACCURACY OF
REPRESENTATIONS AND NO DEFAULT
Pursuant to Section 12(vi) of the Amendment dated as of March 1, 1996
(the "Amendment") to the Amended and Restated Letter of Credit and Reimbursement
Agreement dated as of February 28, 1995 among Tenet Healthcare Corporation
(formerly known as National Medical Enterprises, Inc.) (the "Company"), the
Banks party thereto and The Bank of New York, as Issuing Bank and Agent (as the
same may be amended from time to time, the "Agreement"), the undersigned
Executive Vice President, Senior Vice President, Treasurer or Assistant
Treasurer of the Company hereby certifies as follows:
1. The representations and warranties of the Company referred to in
Section 4 of the Amendment are true and correct on and as of the
date hereof with the same effect as if made on the date hereof;
2. Immediately after the Amendment becomes effective, no Default or
Event of Default (both as defined in the Agreement) will have
occurred and be continuing under the Agreement.
Dated: , 1996
---------
TENET HEALTHCARE CORPORATION,
a Nevada corporation
By:
---------------------------
Title:
<PAGE>
11
<PAGE>
EXHIBIT 11
TENET HEALTHCARE CORPORATION
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS *
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Feb 28 and Feb 29, Feb 28 and Feb 29,
-------------------- ---------------------
1995 1996 1995 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
FOR PRIMARY EARNINGS PER SHARE
Shares outstanding at beginning of period. . . . . . . . . . . . . 166,361 203,554 166,081 199,938
Shares issued upon exercise of stock options. . . . . . . . . . . 52 730 224 592
Dilutive effect of outstanding stock options. . . . . . . . . . . 1,489 3,670 1,921 2,797
Shares issued upon exercises of performance
investment options. . . . . . . . . . . . . . . . . . . . . . -- 5,314 -- 2,995
------- ------- ------- -------
Weighted average number of shares and share
equivalents outstanding . . . . . . . . . . . . . . . . . . . 167,902 213,268 168,226 206,322
------- ------- ------- -------
------- ------- ------- -------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,854 $ 70,682 $159,100 $371,798
------- ------- ------- -------
------- ------- ------- -------
Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . $0.29 $0.33 $0.95 $1.80
------- ------- ------- -------
------- ------- ------- -------
FOR FULLY DILUTED EARNINGS PER SHARE
Weighted average number of shares used in primary
calculation. . . . . . . . . . . . . . . . . . . . . . . . . . 167,902 213,268 168,226 206,322
Additional dilutive effect of stock options . . . . . . . . . . . . 343 372 226 329
Assumed conversion of dilutive convertible
debentures . . . . . . . . . . . . . . . . . . . . . . . . . . 13,825 4,363 13,251 8,851
------- ------- ------- -------
Fully diluted weighted average number of shares . . . . . . . . . . 182,070 218,003 181,703 215,502
------- ------- ------- -------
------- ------- ------- -------
Income used in primary calculation. . . . . . . . . . . . . . . . . $ 48,854 $ 70,682 $159,100 $371,798
Adjustments:
Interest expense on convertible debentures. . . . . . . . . . . . 3,856 1,353 10,268 9,005
Reduced reimbursement of above interest expense
by Medicare. . . . . . . . . . . . . . . . . . . . . . . . . . (851) (449) (1,081) (2,407)
Income taxes on interest less Medicare
reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . (1,230) (358) (3,684) (2,573)
-------- -------- -------- --------
Adjusted income used in fully diluted calculation . . . . . . . . . $ 50,629 $ 71,228 $164,603 $375,823
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per share. . . . . . . . . . . . . . . . . . . . . . . . . $ 0.28 $ 0.33 $ 0.91 $ 1.74
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
- ----------------
* All shares in these tables are weighted on the basis of the number of days
the shares were outstanding or assumed to be outstanding during each
period.
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> FEB-29-1996
<CASH> 114,200
<SECURITIES> 129,500
<RECEIVABLES> 1,543,100
<ALLOWANCES> 154,100
<INVENTORY> 126,900
<CURRENT-ASSETS> 1,516,700
<PP&E> 4,547,800
<DEPRECIATION> 957,800
<TOTAL-ASSETS> 8,322,800
<CURRENT-LIABILITIES> 1,027,300
<BONDS> 3,270,000
<COMMON> 16,400
0
0
<OTHER-SE> 2,639,400
<TOTAL-LIABILITY-AND-EQUITY> 8,322,800
<SALES> 0
<TOTAL-REVENUES> 4,086,700
<CGS> 0
<TOTAL-COSTS> 3,310,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 208,900
<INTEREST-EXPENSE> 237,900
<INCOME-PRETAX> 661,100
<INCOME-TAX> 289,300
<INCOME-CONTINUING> 371,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 371,800
<EPS-PRIMARY> 1.80
<EPS-DILUTED> 1.74
</TABLE>
