SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities and Exchange Act of 1934
July 1, 1999
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Date of Report (Date of earliest event reported)
HANGER ORTHOPEDIC GROUP, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 0-10670 84-0904275
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
Number)
7700 OLD GEORGETOWN ROAD, BETHESDA, MARYLAND 20814
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (301) 986-0701
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 1, 1999, Hanger Orthopedic Group, Inc. ("Hanger" or the
"Company") acquired all of the outstanding capital stock of NovaCare Orthotics
and Prosthetics, Inc. ("NovaCare O&P") from NovaCare, Inc. ("NovaCare"). The
acquisition (the "Acquisition") was effected pursuant to the terms of a Stock
Purchase Agreement, dated as of April 2, 1999 and amended on May 19, 1999 and
June 30, 1999 (the "Stock Purchase Agreement"), by and among Hanger, NovaCare,
NC Resources, Inc. (a wholly-owned subsidiary of NovaCare and the sole
shareholder of NovaCare O&P; "Resources") and HPO Acquisition Corporation (a
wholly-owned subsidiary of Hanger; "HPO"). The Stock Purchase Agreement is
filed as an exhibit hereto and the following description thereof is qualified
in its entirety by reference thereto.
NovaCare has been engaged in the acquisition and operation of orthotic
and prosthetic ("O&P") patient-care centers, in which business Hanger
primarily is engaged. NovaCare O&P has acquired over 90 O&P businesses since
1992 and, at March 31, 1999, employed 597 certified O&P practitioners and
operated 375 O&P patient-care centers in 37 states. As a result of the
Acquisition, which is being accounted for by Hanger as a purchase, Hanger has
become the leading provider of O&P patient-care services in the United States.
At March 31, 1999, Hanger and NovaCare collectively had a total of 636 O&P
patient-care centers and approximately 920 O&P practitioners in 42 states and
the District of Columbia.
TERMS OF THE ACQUISITION
The Stock Purchase Agreement provided for the acquisition by HPO of all
the outstanding capital stock of NovaCare O&P from Resources for an aggregate
consideration of $445 million, which consisted of (i) the assumption of
promissory notes payable by NovaCare O&P or its subsidiaries to sellers of O&P
businesses acquired by NovaCare O&P amounting to approximately $37.3 million,
(ii) the payment of certain severance obligations of NovaCare to certain
management personnel in the amount of approximately $1.1 million and (iii) the
balance in cash.
Of the $407.7 cash portion of the purchase price, $15 million was placed
in escrow pending certain post-closing adjustments relating to working
capital. If, as of July 1, 1999, the adjusted working capital of NovaCare O&P
is less than approximately $94 million, the cash portion of the purchase price
will be reduced by the amount of such deficiency. If, however, the adjusted
working capital of NovaCare O&P as of that date exceeds approximately $94
million, the cash portion will be increased by the amount of the excess.
Adjusted working capital will be determined prior to September 30, 1999 (i.e.,
within 90 days of the closing) and for purposes of the calculation will be
comprised of cash in an amount of at least $2.0 million, accounts receivable,
inventory, other current assets, accounts payable and accrued expenses to
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third-parties (excluding all inter-company obligations, accrued but unpaid
taxes and the current portion of the promissory notes owed to sellers of
businesses acquired by NovaCare O&P) calculated in accordance with the terms
of the Stock Purchase Agreement and generally accepted accounting principles
applied on a basis consistent with NovaCare O&P's past practice.
The Stock Purchase Agreement contains certain representations and
warranties and covenants that are customary in stock purchase agreements of
this type. Among these are representations as to NovaCare O&P's organization
and capitalization, its financial statements and the absence of undisclosed
liabilities, payment of its taxes, title to its assets, its insurance
coverage, pending litigation, bank accounts, intellectual property, Medicare
and Medicaid compliance and Year 2000 computer readiness. No consents of a
material nature were required to complete the Acquisition. The requisite
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
expired on May 19, 1999. In accordance with the Stock Purchase Agreement,
Hanger has entered into agreements whereby NovaCare will provide certain
transitional services to Hanger for varying periods while the operations of
NovaCare O&P are integrated into those of Hanger. Such services include
employee payroll services and benefits, computer services and accounts payable
services.
Hanger required approximately $430.2 million in cash to close the
Acquisition, pay approximately $20.0 million of related fees and expenses and
refinance existing debt of approximately $2.5 million. The funds were raised
by Hanger by (i) borrowing approximately $230 million of revolving credit and
term loans under a new bank credit facility (the "New Credit Facility"); (ii)
the sale of $150 million principal amount of 11.25% Senior Subordinated Notes
Due 2009 (the "Senior Subordinated Notes"); and (iii) the sale of $60 million
of 7% Redeemable Preferred Stock. The New Credit Facility includes a line of
credit of up to $100 million (approximately $30.0 million of which was drawn
at the closing of the Acquisition) for possible future acquisitions and
general corporate purposes. Additional information regarding the sources of
financing for the Acquisition is set forth below.
DESCRIPTION OF THE NEW CREDIT FACILITY
The New Credit Facility was provided by a syndicate of banks and other
financial institutions lead by The Chase Manhattan Bank, as administrative
agent, collateral agent and issuing bank, Chase Securities, Inc, as lead
arranger and bank manager, Bankers Trust Company, as syndication agent, and
Paribas, as documentation agent. The following description of the New Credit
Facility does not purport to be complete and is qualified in its entirety by
reference to certain agreements setting forth principal terms and conditions
of the facility, including the Credit Agreement, dated as of June 16, 1999,
filed as an exhibit hereto. Capitalized terms used herein but not otherwise
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defined below have the meaning as ascribed to them in the New Credit Facility.
The New Credit Facility provides senior secured financing of up to $300
million, consisting of the $100 million Tranche A Term Facility and the $100
million Revolving Credit Facility, each with a maturity of six years, and the
$100 million Tranche B Term Facility with a maturity of seven years and six
months.
The Tranche A Term Facility, the Tranche B Term Facility and the
Revolving Credit Facility initially bear interest (subject to performance
based stepdowns applicable to the Tranche A Term Facility and the Revolving
Credit Facility) at a rate equal to LIBOR plus (a) in the case of the Tranche
A Term Facility and the Revolving Credit Facility, 2.5% or, at Hanger's
option, the alternate base rate (as defined in the New Credit Facility) plus
1.5% or (b) in the case of the Tranche B Term Facility, 3.5% or, at Hanger's
option, the alternate base rate plus 2.5%.
In addition to paying interest on outstanding principal under the New
Credit Facility, Hanger is required to pay a commitment fee to the lenders
under the Revolving Credit Facility in respect of the unutilized commitments
thereunder at a rate equal to 0.5% per annum.
The Tranche A Term Facility and the Tranche B Term Facility amortize in
quarterly amounts based upon the annual amounts shown below:
<TABLE>
<CAPTION>
Tranche A Term Tranche B Term
Facility Facility
-------------- --------------
(dollars in millions)
<S> <C> <C>
Fiscal Year 1999.......................................... $ 0.0 $ 0.0
Fiscal Year 2000.......................................... 10.0 1.0
Fiscal Year 2001.......................................... 20.0 1.0
Fiscal Year 2002.......................................... 20.0 1.0
Fiscal Year 2003.......................................... 20.0 1.0
Fiscal Year 2004.......................................... 20.0 1.0
Fiscal Year 2005.......................................... 10.0 47.5
Fiscal Year 2006.......................................... 0.0 47.5
Fiscal Year 2007.......................................... 0.0 0.0
--------- --------
Total .................................................... $ 100.00 $ 100.00
========= ========
</TABLE>
Hanger's obligations under the New Credit Facility are unconditionally
and irrevocably guaranteed by each of Hanger's domestic (and, to the extent no
adverse tax consequences would result, foreign) subsidiaries after the
Acquisition. In addition, the New Credit Facility is collateralized by first
priority security interests in substantially all tangible and intangible
assets of Hanger and each of Hanger's existing and subsequently acquired or
organized domestic (and, to the extent no adverse tax consequences would
result, foreign) subsidiaries, including all the capital stock of, or other
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equity interests in, each of Hanger's direct or indirect subsidiaries and each
of Hanger's subsequently acquired or organized direct or indirect subsidiaries
(which, in the case of a foreign subsidiary, will in each case be limited to
65% of such capital stock or equity interests, as the case may be).
Subject to certain exceptions, the New Credit Facility is subject to
mandatory prepayment with (a) 100% of the proceeds of asset sales, (b) 50% of
Hanger's excess cash flow (as defined in the New Credit Facility), (c) 100% of
the proceeds of equity offerings and (d) 100% of the proceeds from the
issuance of debt obligations (other than the Senior Subordinated Notes).
The New Credit Facility contains a number of covenants that, among other
things, restrict the ability of Hanger and its subsidiaries to dispose of
assets, incur additional indebtedness, incur guarantee obligations, repay
other indebtedness, pay certain restricted payments and dividends, create
liens on assets, make investments, loans or advances, make certain
acquisitions, engage in mergers or consolidations, make capital expenditures,
enter into sale and leaseback transactions, or engage in certain transactions
with subsidiaries and affiliates and otherwise restrict corporate activities.
In addition, under the New Credit Facility, Hanger is required to comply with
specified financial ratios and tests, including minimum fixed charge coverage
and interest coverage ratios and a maximum leverage ratio. The New Credit
Facility also contains certain customary events of default.
DESCRIPTION OF THE SENIOR SUBORDINATED NOTES
The following description of the Senior Subordinated Notes does not
purport to be complete and is qualified in its entirety by reference to the
Purchase Agreement, dated as of June 9, 1999, and the Registration Rights
Agreement, dated as of June 16, 1999, among Hanger and Deutsche Banc
Securities Inc., Chase Securities Inc. and Paribas Corporation, and the
Indenture, dated as of June 16, 1999, among Hanger, its subsidiaries and U.S.
Bank Trust, National Association, as Trustee, which are filed as exhibits
hereto.
The Senior Subordinated Notes, of which $150,000,000 principal amount
were sold by Hanger on June 16, 1999 to institutional investors, bear interest
at 11.25% per year and mature on June 15, 2009. Interest is payable on June 15
and December 15, beginning on December 15, 1999.
The Senior Subordinated Notes are uncollateralized senior subordinated
obligations of Hanger and rank junior to its existing and future senior debt.
Hanger's subsidiaries unconditionally guarantee the Senior Subordinated Notes
and such guarantees are subordinated to existing and future senior debt of
such subsidiaries. If Hanger creates or acquires a new domestic subsidiary, it
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will guarantee the Senior Subordinated Notes unless Hanger designates the
subsidiary as an "unrestricted subsidiary" under the Indenture or the
subsidiary does not have significant assets.
The Senior Subordinated Notes are not redeemable by Hanger before June
15, 2004. Thereafter, Hanger may redeem some or all of the Senior Subordinated
Notes at the following redemption prices, which are expressed as percentages
of the principal amount thereof, if redeemed during the 12-month period
commencing on June 15 of the following years: 2004-105.625%; 2005-104.500%;
2006-103.375%; and 2007 and thereafter - 100.000%. In addition, the Company
must pay accrued and unpaid interest on Senior Subordinated Notes redeemed.
At any time before June 16, 2002, which is the third anniversary of the
issuance of the Notes, Hanger has the right to repurchase up to 33% of the
outstanding Senior Subordinated Notes with funds raised by it in one or more
public equity offerings, as long as Hanger pays 111.25% of the base amount of
the Senior Subordinated Notes, plus interest; Hanger repurchases the Senior
Subordinated Notes within 90 days of completing the public equity offering;
and at least 65% of the sum of the aggregate principal amount of the Senior
Subordinated Notes issued under the Indenture remain outstanding immediately
after such redemption.
If a change in control of Hanger occurs, it must give holders of the
Senior Subordinated Notes the opportunity to sell their Senior Subordinated
Notes to Hanger at 101% of their face amount, plus accrued interest. If Hanger
engages in asset sales, it generally must either invest the net cash proceeds
from such sales in its business within 180 days, repay senior debt or make an
offer to purchase a principal amount of the Senior Subordinated Notes equal to
the excess net cash proceeds. The purchase price of the Senior Subordinated
Notes will be 100% of their principal amount, plus accrued interest.
The Indenture contains covenants generally limiting the ability of
Hanger and its subsidiaries to incur additional debt, pay dividends or
distributions on capital stock or repurchase capital stock, issue stock of
subsidiaries, make certain investments, create liens on their assets to
collateralize debt, enter into transactions with affiliates, merge or
consolidate with another company and transfer and sell assets.
Hanger is obligated under the terms of the Registration Rights Agreement
to register notes (the "Exchange Notes") having substantially identical terms
as the Senior Subordinated Notes with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933 as part of an offer to
exchange freely tradable Exchange Notes for the Senior Subordinated Notes.
Hanger is required to file a registration statement for the Exchange Notes
with the Commission by August 16, 1999, which is 60 days after the issuance of
the Notes, and to use its reasonable best efforts to cause the registration
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statement to be declared effective by October 26, 1999, which is 125 days
after the issuance of the Notes. Hanger will be required to pay additional
interest on the Senior Subordinated Notes if the above timing requirements are
not satisfied or if Hanger does not complete the exchange offer within 30 days
after the registration statement is declared effective. When there is a
registration default, the annual interest rate on the Senior Subordinated
Notes will increase by 0.50%, and the annual interest rate will increase by an
additional 0.50% for each subsequent 90-day period during which the
registration default continues, up to a maximum additional interest rate of
1.0% per year.
DESCRIPTION OF THE PREFERRED STOCK
The following description does not purport to be complete and is
qualified in its entirety by reference to the Securities Purchase Agreement,
dated as of June 16, 1999, and the Investor Rights Agreement, dated as of July
1, 1999, among Hanger, Chase Equity Associates, L.P.and Paribas North America,
Inc., and the Certificate of Designations setting forth the principal terms
and conditions of Hanger's 7% Redeemable Preferred Stock, par value $0.01 per
share (the "Redeemable Preferred Stock"), which documents are filed as
exhibits hereto.
The Redeemable Preferred Stock, which has an initial liquidation
preference of $1,000 per share, is entitled to receive dividends at an annual
rate of 7.0%, compounded quarterly, and such dividends, whether or not
declared, accumulate and compound until declared and paid. The dividend rate
will increase to 10.0% if certain events of non-compliance occur.
The Company plans at its Annual Meeting of Stockholders planned to be
held in September 1999, to seek the approval of its stockholders for the
Company to have the authority to make the Redeemable Preferred Stock
convertible into non-voting Common Stock of the Company. In order for the
Redeemable Preferred Stock to become convertible into non-voting Common Stock,
the Company's stockholders must approve (i) the making of the Redeemable
Preferred Stock convertible as a result of the applicability of the
stockholder approval requirements of the New York Stock Exchange and (ii) an
amendment to the Company's Certificate of Incorporation increasing the number
of authorized shares of Common Stock and creating a class of non-voting Common
Stock. References hereinafter to the "Non-Voting Common Stock" refer to such
proposed new class of non-voting Common Stock and references to the "Common
Stock" refer to the Company's voting Common Stock.
If the Redeemable Preferred Stock becomes convertible, it will be
convertible at the holder's option into shares of Non-Voting Common Stock at a
conversion price of $16.50 per share, subject to adjustment (the "Conversion
Price"). The Conversion Price will decrease by $1.00 on September 30, 1999 and
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on the last day of each three-month period thereafter, unless stockholders of
the Company have authorized the Company to make the Redeemable Preferred Stock
convertible and approved an amendment to the Company's Certificate of
Incorporation increasing the number of authorized shares of Common Stock and
creating a class of Non-Voting Common Stock. Furthermore, if such stockholder
approvals are attained, the Redeemable Preferred Stock will be convertible at
the option of the Company into shares of Non-Voting Common Stock following the
third anniversary of the issuance of the Redeemable Preferred Stock if the
average closing price of the Common Stock for 20 consecutive trading days is
equal or greater than 175% of the Conversion Price. The Non-Voting Common
Stock will be convertible at the option of the holders upon the occurrence of
certain events into shares of Common Stock.
If the Redeemable Preferred Stock, which is non-voting, does not become
convertible, it will be redeemable, in its entirety but not in part, at any
time at a redemption price equal to the liquidation preference plus all
accrued and unpaid dividends. After any such redemption, each former holder of
Redeemable Preferred Stock redeemed will continue to have the right to receive
from the Company at any time, the excess, if any, of (i) the average closing
price of the Company's Common Stock for 20 consecutive trading days multiplied
by the number of shares of Common Stock that such holder would have received
if the outstanding Redeemable Preferred Stock had been made convertible into
Common Stock and such holder had converted all of such stock into Common Stock
(the "Common Stock Equivalent Value") over (ii) the redemption price paid for
such holder's Redeemable Preferred Stock. The Company's obligation to pay such
amount is subject to restrictions contained in the New Credit Facility and the
Indenture relating to the Senior Subordinated Notes.
If the Redeemable Preferred Stock does not become convertible, each
holder thereof will have the right to require the Company to repurchase the
Redeemable Preferred Stock (such rights, the "Put Rights") at a purchase price
equal to the Common Stock Equivalent Value. Each such holder may exercise its
Put Rights at any time and from time to time commencing on the earliest of (a)
the date that is the 15-month anniversary of the issuance of the Redeemable
Preferred Stock, (b) the date that the shareholders of the Company decline to
approve either the making of the Redeemable Preferred Stock convertible or the
amendment to the Company's Certificate of Incorporation and (c) the occurrence
of a change of control of the Company. The terms and conditions of the Put
Rights are subject to restrictions contained in applicable law, the New Credit
Facility and the Indenture relating to the Senior Subordinated Notes.
If the Company is prohibited from paying the excess of the Common Stock
Equivalent Value over the redemption price following a redemption at the
Company's option or from paying the purchase price on the exercise by a holder
of its Put Rights, the Company will be required to use its best efforts to
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obtain the requisite consents and waivers or to refinance its outstanding
indebtedness.
The Redeemable Preferred Stock will be mandatorily redeemable on the
11th anniversary of the issuance of such stock at a redemption price equal to
the liquidation preference plus all accrued and unpaid dividends. In the event
of a change of control of the Company, it must offer to redeem all the
outstanding shares of Redeemable Preferred Stock at a redemption price equal
to 101% of the sum of the per share liquidation preference thereof plus all
accrued and unpaid dividends through the date of the change of control.
Upon the occurrence of an event of non-compliance, holders of the
Redeemable Preferred Stock will have the right to elect two members to the
Company's Board of Directors. The Certificate of Designations relating to the
Redeemable Preferred Stock contains customary covenants, including, among
others (i) approval of affiliate transactions, (ii) approval of merger and
acquisition transactions in excess of $100 million, (iii) incurrence of
indebtedness based on covenants consistent in nature with those found in the
Senior Subordinated Notes and (iv) approval of the issuance of any pari passu
or senior equity securities.
Pursuant to the Investor Rights Agreement, holders of the Redeemable
Preferred Stock have certain rights to have their Common Stock registered
under the Securities Act of 1933 and certain rights to obtain information from
the Company.
In connection with the Acquisition and related financing transactions,
the Company filed a Certificate of Elimination of Class A, B, C, D, E and F
Preferred Stock with the Secretary of State of the State of Delaware on June
18, 1999, cancelling the Company's previously authorized and issued classes of
preferred stock, no shares of which were issued or outstanding on that date.
MANAGEMENT
Following consummation of the Acquisition on July 1, 1999, Ivan R. Sabel
continued to serve as the Chairman of the Board of Directors and Chief
Executive Officer of Hanger. Ronald G. Hiscock, who had been the President and
Chief Executive Officer of NovaCare O&P since July 1998, became the President
and Chief Operating Officer of Hanger upon effectiveness of the Acquisition on
July 1, 1999. Furthermore, upon effectiveness of the Acquisition, Richmond L.
Taylor, who had been the Executive Vice President and Chief Operating Officer
of NovaCare O&P, became an Executive Vice President of Hanger and Chief
Operating Officer of each of Hanger Prosthetics & Orthotics, Inc. and NovaCare
O&P, the two wholly-owned subsidiaries of Hanger which now operate all of its
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patient-care centers.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Attached hereto are (i) audited NovaCare O&P balance sheets, dated June
30, 1997 and 1998 and March 31, 1999 (unaudited), (ii) NovaCare O&P statements
of operations, statements of NovaCare, Inc. net investment and statements of
cash flows for the fiscal years ended June 30, 1996, 1997 and 1998 and the
nine-month periods ended March 31, 1998 and 1999 (unaudited) and (iii) the
report of independent accountants and notes to the consolidated financial
statements relating thereto.
(b) PRO FORMA FINANCIAL INFORMATION.
Attached hereto are unaudited pro forma consolidated statements of
operations of Hanger for the year ended December 31, 1998, three months ended
March 31, 1999 and 12 months ended March 31, 1999, and the unaudited pro forma
balance sheet as of March 31, 1999, based on Hanger's historical financial
statements and adjusted to give effect to its Acquisition of NovaCare O&P.
(c) EXHIBITS.
The following exhibits are filed herewith:
Exhibit No. Document
----------- --------
2(a) Stock Purchase Agreement, dated as of April 2,
1999, by and among NovaCare, Inc., NC Resources,
Inc., Hanger Orthopedic Group, Inc. and HPO
Acquisition Corporation, Amendment No. 1
thereto, dated as of May 19, 1999, and Amendment
No. 2 thereto, dated as of June 30, 1999
2(b) Certificate of Designations, Rights and
Preferences of 7% Redeemable Preferred Stock
2(c) Certificate of Elimination of Class A, B, C, D,
E and F Preferred Stock
10(a) Credit Agreement, dated as of June 16, 1999,
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among Hanger Orthopedic Group, Inc., various
bank lenders, and The Chase Manhattan Bank, as
administrative agent, col-lateral agent and
issuing bank, Chase Securities Inc., as lead
arranger and book manager, Bankers Trust
Company, as syndication agent, and Paribas, as
documentation agent
10(b) Senior Subordinated Note Purchase Agreement,
dated as of June 9, 1999, relating to 11.25%
Senior Subordinated Notes, among Hanger
Orthopedic Group, Inc., Deutsche Banc Securities
Inc., Chase Securities Inc. and Paribas
Corporation
10(c) Indenture, dated as of June 16, 1999, among
Hanger Orthopedic Group, Inc., its subsidiaries
and U.S. Bank Trust, National Association, as
Trustee
10(d) Registration Rights Agreement, dated as of June
16, 1999, by and among Hanger Orthopedic Group,
Inc., Deutsche Banc Securities Inc., Chase
Securities Inc. and Paribas Corporation,
relating to the 11.25% Senior Subordinated Notes
due 2009
10(e) Securities Purchase Agreement, dated as of June
16, 1999, Relating to Preferred Stock, among
Hanger Orthopedic Group, Inc., Chase Equity
Associates, L.P. and Paribas North America, Inc.
10(f) Investor Rights Agreement, dated July 1, 1999,
among Hanger Orthopedic Group, Inc., Chase
Equity Associates, L.P. and Paribas North
America, Inc.
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23 Consent of independent accountants
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: July 15, 1999 HANGER ORTHOPEDIC GROUP, INC.
By: /s/IVAN R. SABEL
----------------
Ivan R. Sabel
Chairman and Chief Executive
Officer
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
NovaCare Orthotics and Prosthetics, Inc.:
Report of Independent Accountants..............................................F-1
Balance sheets, dated June 30, 1997 and 1998
and March 31, 1999 (unaudited)................................................F-2
Statements of operations for the fiscal years ended
June 30, 1996, 1997 and 1998 and nine-month periods ended March 31,
1998 and 1999
(unaudited)...................................................................F-3
Statements of NovaCare, Inc. net investment
for the years ended June 30, 1996, 1997 and 1998
and the nine-month period ended march 31, 1998
(unaudited)...................................................................F-4
Statements of cash flows for the fiscal years
ended June 30, 1996, 1997 and 1998
and nine-month periods ended March 31, 1998
and 1999 (unaudited)..........................................................F-5
Notes to consolidated financial statements.....................................F-6
Unaudited Pro Forma Consolidated Financial Information of Hanger:
Introduction...................................................................F-15
Pro forma consolidated balance sheet as of
March 31, 1999...............................................................F-16
Pro forma consolidated statement of operations
for the year ended December 31, 1998.........................................F-18
Pro forma consolidated statement of operations
for the three months ended March 31, 1998.....................................F-22
Pro forma consolidated statement of operations
for the three months ended March 31, 1999.....................................F-25
Pro forma consolidated statement of operations
for the twelve months ended March 31, 1999....................................F-28
</TABLE>
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder
of NovaCare Orthotics and Prosthetics, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of NovaCare, Inc. net
investment and of cash flows present fairly, in all material respects, the
financial position of NovaCare Orthotics and Prosthetics, Inc. and its
subsidiaries (the "Company") at June 30, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the
period ended June 30, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Philadelphia, Pennsylvania
March 19, 1999
F-1
<PAGE>
NOVACARE ORTHOTICS AND PROSTHETICS, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF NOVACARE, INC.)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
As of
As of June 30, March 31,
-------------- ---------
1997 1998 1999
---- ---- ----
(Unaudited)
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents......................................................... $ 1,724 $ 1,959 $ 1,150
Accounts receivable, net of allowance at June 30, 1997, 1998 and
March 31, 1999 of $5,890, $11,919 and $5,090, respectively 43,015 61,728 66,086
Inventories....................................................................... 18,450 35,679 42,876
Deferred income taxes............................................................. 1,907 268 268
Other current assets.............................................................. 3,043 5,210 6,262
-------- -------- --------
Total current assets......................................................... 68,139 104,844 116,642
Property and equipment, net............................................................ 12,087 13,149 13,837
Excess cost of net assets acquired, net................................................ 180,435 258,866 256,899
Other assets, net...................................................................... 2,392 2,711 1,826
-------- -------- --------
$263,053 $379,570 $389,204
======== ======== ========
LIABILITIES AND NOVACARE, INC. NET INVESTMENT
Current liabilities:
Current portion of financing arrangements--third parties $ 8,871 $ 18,079 $ 13,164
Current portion of financing arrangements--related party -- -- 82,854
Accounts payable and accrued expenses--related party 65,684 116,925 111,605
Accounts payable and accrued expenses--third parties 13,530 19,164 19,312
-------- -------- --------
Total current liabilities.................................................... 88,085 154,168 226,935
Financing arrangements--related party................................................... 57,894 83,029 --
Financing arrangements, net of current portion-third parties 26,540 37,653 27,513
Deferred income taxes.................................................................. 2,082 3,478 4,831
Other.................................................................................. 1,330 1,752 494
-------- -------- --------
Total liabilities............................................................ 175,931 280,080 259,773
Commitments and contingencies.......................................................... -- -- --
NovaCare, Inc. net investment.......................................................... 87,122 99,490 129,431
-------- -------- --------
$263,053 $379,570 $389,204
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
NOVACARE ORTHOTICS AND PROSTHETICS, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF NOVACARE, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the
Nine Months
For the Years Ended June 30, Ended March 31,
---------------------------- ---------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Net revenues............................................... $100,886 $161,074 $251,732 $182,424 $209,442
Cost of services........................................... 74,788 120,118 188,699 137,894 155,102
--------- --------- --------- --------- ---------
Gross profit.......................................... 26,098 40,956 63,033 44,530 54,340
Selling, general and administrative expenses 11,093 9,157 16,367 12,438 8,915
Selling, general and administrative allocated from
related party........................................... 2,949 6,103 9,624 7,332 13,404
Provision for uncollectible accounts 1,870 2,841 4,840 3,564 4,177
Amortization of excess cost of net assets
acquired................................................ 2,177 4,061 6,598 4,691 5,538
Provision for restructure.................................. 1,477 -- -- -- --
--------- --------- --------- --------- ---------
Income from operations................................ 6,532 18,794 25,604 16,505 22,306
Interest expense--related party............................. (2,146) (4,291) (7,453) (5,404) (5,891)
Interest expense--third parties............................. (603) (1,910) (3,239) (2,394) (2,210)
Royalty expense--related party.............................. (5,924) (9,106) (15,244) (11,445) (12,583)
Minority interest.......................................... (111) (114) (135) (81) (137)
--------- --------- --------- --------- ---------
(Loss) income before income taxes.......................... (2,252) 3,373 (467) (2,819) 1,485
Income tax (benefit) provision............................. (1,281) 2,359 2,372 799 2,553
--------- --------- --------- --------- ---------
Net (loss) income..................................... $ (971) $ 1,014 $ (2,839) $ (3,618) $ (1,068)
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
NOVACARE ORTHOTICS AND PROSTHETICS, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF NOVACARE, INC.)
CONSOLIDATED STATEMENTS OF NOVACARE, INC. NET INVESTMENT
(IN THOUSANDS)
<TABLE>
<S> <C>
Balance at June 30, 1995......................................... $ 8,805
Net contributions from NovaCare, Inc. ...................... 75,169
Net loss.................................................... (971)
---------
Balance at June 30, 1996......................................... 83,003
Net contributions from NovaCare, Inc. ...................... 3,105
Net income.................................................. 1,014
---------
Balance at June 30, 1997......................................... 87,122
Net contributions from NovaCare, Inc. ...................... 15,207
Net loss.................................................... (2,839)
---------
Balance at June 30, 1998......................................... 99,490
Net contributions from NovaCare, Inc. (Unaudited)........... 31,009
Net loss (Unaudited)........................................ (1,068)
---------
Balance at March 31, 1999 (Unaudited)............................ $129,431
=========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
NOVACARE ORTHOTICS AND PROSTHETICS, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF NOVACARE, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the
Nine Months
For the Years Ended June 30, Ended March 31,
---------------------------- ---------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income......................................... $ (971) $ 1,014 $(2,839) $(3,618) $(1,068)
Adjustments to reconcile net (loss) income to net
cash flows used in operating activities:
Depreciation and amortization........................ 4,874 6,858 10,549 7,498 8,786
Provision for uncollectible accounts 1,870 2,841 4,840 3,564 4,177
Minority interest.................................... 111 114 135 81 137
Deferred income taxes................................ 77 (63) 2,920 1,499 1,353
Noncash portion of nonrecurring items 1,017 -- -- -- --
Changes in assets and liabilities, net of ef-
fects from acquisitions:
Accounts receivable............................. (5,364) (9,769) (11,642) (5,114) (9,996)
Inventories..................................... (2,039) 2,502 (11,849) (9,645) (7,229)
Other current assets............................ (322) (149) (2,317) (1,201) (1,048)
Accounts payable and accrued expenses
--third parties............................... (1,797) (6,834) (8,358) (3,953) 2,051
Other, net...................................... -- (90) 244 339 (508)
-------- -------- -------- -------- --------
Net cash flows (used in) operating
activities............................... (2,544) (3,576) (18,317) (10,550) (3,345)
-------- -------- -------- -------- --------
Cash flows from investing activities:
Payments for businesses acquired, net of cash
acquired . (3,312) (81,214) (57,214) (45,191) (7,454)
Additions to property and equipment (1,965) (3,819) (4,851) (3,840) (4,090)
Proceeds from sale of assets.............................. -- 3,519 1,516 1,526 --
-------- -------- -------- -------- --------
Net cash flows used in investing activities (5,277) (81,514) (60,549) (47,505) (11,544)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Payment of long-term debt and credit
arrangements--third parties............................. (3,505) (16,271) (12,357) (10,124) (10,998)
Net advances from related party........................... 6,270 101,824 91,458 73,605 25,078
-------- -------- -------- -------- --------
Net cash flows provided by financing activities 2,765 85,553 79,101 63,481 14,080
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents (5,056) 463 235 5,426 (809)
Cash and cash equivalents, beginning of year 6,317 1,261 1,724 1,724 1,959
-------- -------- -------- -------- --------
Cash and cash equivalents, end of year $ 1,261 $ 1,724 $ 1,959 $ 7,150 $ 1,150
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
NOVACARE ORTHOTICS AND PROSTHETICS, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF NOVACARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED JUNE 30, 1996, 1997, 1998
(IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
NovaCare Orthotics and Prosthetics, Inc. (the "Company") is a wholly
owned subsidiary of NovaCare, Inc. (the "Parent"). The Company provides
clinical services to patients including the design, fitting, fabrication and
servicing of orthotic and prosthetic devices. Orthotic devices are used to
provide external support, correction or protection to patients suffering from
musculoskeletal conditions. Prosthetic devices are artificial limbs used by
patients who have suffered the loss of a limb as a result of vascular
diseases, diabetes, cancer, or trauma.
BASIS OF PRESENTATION
The financial statements of the Company include the consolidated
financial position, results of operations, and cash flows of the Company. The
Parent's historical cost basis of assets and liabilities has been reflected in
the Company's financial statements. The financial information in these
financial statements is not necessarily indicative of results of operations,
financial position and cash flows that would have occurred if the Company had
been a separate stand-alone entity during the periods presented or of future
results.
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of the
Company, its majority-owned subsidiaries and companies effectively controlled
through management agreements. Investments of 20% to 50% of the voting
interest of affiliates are accounted for using the equity method. All
significant intercompany accounts and transactions between the Company and its
subsidiaries have been eliminated. The Company recognizes a minority interest
in its Balance Sheets and Statements of Operations for the portion of
majority-owned subsidiaries attributable to its minority owners.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers its holdings of highly liquid debt and
money-market instruments to be cash equivalents if the securities mature
within 90 days from the date of acquisition. These investments are carried at
cost, which approximates fair value.
NET REVENUES
Net revenues are reported at the net realizable amounts from customers
and third-party payers. Net revenues generated directly from Medicare and
Medicaid reimbursement programs represented 31%, 37%, 36%, 35% and 35% of the
Company's consolidated net revenues for fiscal years 1996, 1997 and 1998 for
the nine month periods ended March 31, 1998 and 1999 (unaudited),
respectively.
F-6
<PAGE>
NOVACARE ORTHOTICS AND PROSTHETICS, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF NOVACARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS--(CONTINUED) FOR THE FISCAL YEARS
ENDED JUNE 30, 1996, 1997, 1998
(IN THOUSANDS)
INVENTORIES
Inventories consist of customized orthotic and prosthetic merchandise
held for sale, work in process and raw materials and are carried at the lower
of cost or market. Cost of inventories is determined by the first-in,
first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided on a
straight-line basis over the estimated useful lives of the assets, which range
principally from three to seven years for property and equipment and 30 to 40
years for buildings. Leasehold improvements are amortized over the lesser of
the lease term or the asset's estimated useful life. Property and equipment
also include external and incremental internal costs incurred to develop major
business systems.
EXCESS COST OF NET ASSETS ACQUIRED
Assets and liabilities acquired in connection with business combinations
accounted for under the purchase method are recorded at their respective fair
values. Deferred taxes have been recorded to the extent of the difference
between the fair value and the tax basis of the assets acquired and
liabilities assumed. The excess of the purchase price over the fair value of
net assets acquired, including the recognition of applicable deferred taxes,
consists of non-compete agreements, customers lists, and goodwill and is
amortized on a straight-line basis over the estimated useful lives of the
assets which range from five to 40 years.
Effective July 1, 1997, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of", which
establishes accounting standards for the impairment of long-lived assets,
certain identified intangible assets and goodwill related to those assets to
be held and used and for long-lived assets and certain intangible assets to be
disposed of. In accordance with SFAS No. 121, the Company reviews the
realizability of long-lived assets, certain intangible assets and goodwill
whenever events or circumstances occur which indicate recorded cost may not be
recoverable. The Company also reviews the overall recoverability of goodwill
based primarily on estimated future undiscounted cash flows.
If the expected future cash flows (undiscounted) are less than the
carrying amount of such assets, the Company recognizes an impairment loss for
the difference between the carrying amount of the assets and their estimated
fair value. In estimating future cash flows for determining whether an asset
is impaired, and in measuring assets that are impaired, assets are grouped by
geographic region.
OTHER ASSETS
Other assets consist principally of executive savings plan assets,
acquired patents, and security deposits. The executive savings plan is a
non-qualified savings plan offered to Company executives through NovaCare's
benefit plan. Contributions made to the fund by eligible employees are
partially matched by the Company. Withdrawals from the fund by employees are
limited to events specified by the plan.
INCOME TAXES
The Company records deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns in accordance with the SFAS No. 109. See
further discussion of income tax transactions with the Parent in Note 2.
F-7
<PAGE>
NOVACARE ORTHOTICS AND PROSTHETICS, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF NOVACARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE FISCAL YEARS ENDED JUNE 30, 1996, 1997, 1998
(IN THOUSANDS)
UNAUDITED FINANCIAL INFORMATION
The March 31, 1998 and 1999 interim financial data is unaudited;
however, in the opinion of the Company, the interim unaudited data include all
adjustments, consisting only of normal recurring adjustments which are, in the
opinion of management, necessary for the fair statement of the results for the
interim periods.
2. RELATED PARTY TRANSACTIONS
As a NovaCare subsidiary, the Company entered into several arrangements
where other NovaCare subsidiaries charged fees for services that those
subsidiaries provided to the Company.
Upon a change of control of the Company, certain of these arrangements
may be voided and the Company will no longer be subject to these fees. The
Company will, however, be responsible for obtaining independent financing and
will incur selling, general and administrative expenses related to the
provision of these services.
The following is a listing of the related party transactions reflected
in the historical financial statements of the Company.
TRADEMARKS
The Company is charged a fee equal to a percentage of revenues for the
use of the "NovaCare" name and trademark. Fees are paid to the Parent on a
quarterly basis in accordance with the trademark agreement.
ADVANCES AND FINANCING ARRANGEMENTS
The Company participated in the Parent's centralized cash management
system to finance operations and acquisitions. The Company's cash deposits are
transferred to the Parent on a daily basis. The Parent funds the Company's
disbursement bank accounts as required. When disbursements exceed deposits,
the Parent advances the difference to the Company through an interest-free
accrued liability account. Assuming a LIBOR plus 1.5% borrowing rate, which
approximates the Parent's borrowing rate, interest expense on net advances
from the Parent would have been $702, $2,149, $6,424, $4,483 and $5,732 for
the years ended June 30, 1996, 1997 and 1998 and for the nine-month periods
ended March 31, 1998 and 1999 (unaudited), respectively.
In addition, certain advances from the Parent to the Company are funded
through a line of credit arrangement. The annual interest rate on the line of
credit is the prime rate of the Parent's lending bank plus 1.5% on the daily
outstanding balance. Interest due to the Parent is paid quarterly in
accordance with the loan agreement.
ALLOCATED SELLING, GENERAL AND ADMINISTRATIVE
The Parent has historically provided leased office space at the Parent's
headquarters and certain selling, general and administrative services to the
Company including shared management, legal, information systems, finance, and
human resources. These expenses were allocated to the Company based on net
revenues, specific utilization, or other methods which management of the
Company believes to be reasonable.
F-8
<PAGE>
NOVACARE ORTHOTICS AND PROSTHETICS, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF NOVACARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE FISCAL YEARS ENDED JUNE 30, 1996, 1997 AND 1998
(IN THOUSANDS)
The expenses allocated to the Company for these services are not
necessarily indicative of the expenses that would have been incurred if the
Company had been a separate, independent entity that had managed these
functions or if the Company contracted for these services with an independent
third party.
INCOME TAXES
The Company is included in the consolidated Federal income tax return of
the Parent. All tax payments are made by the Parent on behalf of the Company.
The Company includes the liability for tax payments in its accrued liability
account with the Parent. Current and deferred tax expense, included in these
statements, was calculated as if the Company had filed separate income tax
returns.
Under a tax sharing agreement with the Parent, the Company is entitled
to the tax benefits, attributable to the Company's losses, which are used in
the Parent's consolidated return.
BENEFITS AND PAYROLL SERVICE FEES
Beginning in February 1997, the Company contracted with NovaCare
Employee Services, Inc. to provide payroll and benefit management
administration (the "Contract"). For services received, the Company is charged
a fee that includes an allowance for selling general and administrative
expenses.
3. PROVISION FOR RESTRUCTURE
The following table sets forth the Company's provision for restructure
for the year ended June 30, 1996. There was no provision for restructure in
fiscal 1997, 1998 or in the nine-month period ended March 31, 1999.
<TABLE>
<CAPTION>
Productivity and cost reduction programs:
<S> <C>
Employee severance costs............................................. $ 164
Lease terminations................................................... 780
Asset write-offs, net of estimated sale proceeds..................... 121
Other................................................................ 412
------
Total provision...................................................... $1,477
======
</TABLE>
The 1996 productivity and cost reduction programs pertained to the
consolidation and reorganization of the Company's operations and certain
administrative functions. As of June 30, 1998, the reorganization was
substantially complete.
A schedule of the Company's reserves for restructure is as follows:
<TABLE>
<CAPTION>
Nine Months
For the Years Ended June 30, Ended March 31,
---------------------------- ---------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Beginning balance........................................... $ 728 $ 588 $ 1,304 $ 1,304 $ 235
Provision for restructure................................... 1,477 -- -- --
Proceeds from sale of assets................................ 3,519 -- --
Payments and other reductions............................... (1,617) (2,803) (1,069) (769) --
-------- -------- -------- -------- ---------
Ending balance.............................................. $ 588 $ 1,304 $ 235 $ 535 $ 235
======== ======== ======== ======== ========
</TABLE>
F-9
<PAGE>
NOVACARE ORTHOTICS AND PROSTHETICS, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF NOVACARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE FISCAL YEARS ENDED JUNE 30, 1996, 1997 AND 1998
(IN THOUSANDS)
4. ACQUISITION TRANSACTIONS
During the years ended June 30, 1997 and 1998, the Company acquired 33
and 42 businesses, respectively. There were no acquisitions during the
nine-month period ended March 31, 1999. The following unaudited pro forma
consolidated results of operations of the Company give effect to each of the
fiscal 1997 and 1998 acquisitions as if they occurred on July 1, 1996:
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------
1997 1998
---- ----
<S> <C> <C>
Net revenues...................................................... $270,102 $278,209
Net income........................................................ 4,992 (242)
</TABLE>
The above pro forma information is not necessarily indicative of the
results of operations that would have occurred had the acquisitions been made
as of July 1, 1996, or the results that may occur in the future.
Information with respect to businesses acquired in purchase transactions
was as follows (the allocation for fiscal 1998 acquisitions is preliminary):
<TABLE>
<CAPTION>
As of June 30,
-----------------------
1997 1998
---- ----
<S> <C> <C>
Excess cost of net assets acquired................................. $ 194,554 $ 279,583
Less: accumulated amortization..................................... (14,119) (20,717)
----------- -----------
$ 180,435 $ 258,866
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------
1997 1998
---- ----
<S> <C> <C>
Cash paid (net of cash acquired).............................................................. $ 80,469 $ 52,191
Notes issued.................................................................................. 29,133 25,879
Other consideration........................................................................... 116
--------- ---------
109,602 78,186
Fair value of assets acquired, principally accounts receivable and property and
equipment.................................................................................. 7,552 6,393
--------- ---------
Cost in excess of fair value of net assets acquired........................................... $102,050 $ 71,793
========= =========
</TABLE>
Certain purchase agreements require additional payments if specific
financial targets are met. Aggregate contingent payments in connection with
these acquisitions at June 30, 1998 and at March 31, 1999 (unaudited) of
approximately $30,005 and $20,163, respectively have not been included in the
initial determination of cost of the businesses acquired since the amount of
such contingent consideration that may be paid in the future, if any, is not
presently determinable. In connection with businesses acquired in prior years,
the Company paid $1,267, $745, $5,023, $3,840 and $6,665 in cash in fiscal
years ended June 30, 1996, 1997 and 1998, and the nine-month periods ended
March 31, 1998 and 1999 (unaudited) respectively, and also the Parent issued
61 and 51 shares of its common stock on behalf of the Company during fiscal
years ended June 30, 1996 and 1997, respectively. In fiscal 1998 and in the
nine-month period ended March 31, 1999, no stock was issued on behalf of the
Company.
F-10
<PAGE>
NOVACARE ORTHOTICS AND PROSTHETICS, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF NOVACARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE FISCAL YEARS ENDED JUNE 30, 1996, 1997 AND 1998
(IN THOUSANDS)
5. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
As of
As of June 30, March 31,
-------------- ---------
1997 1998 1999
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Materials and supplies.................................................................. $12,569 $21,540 $27,084
Work in process......................................................................... 4,509 10,840 12,112
Finished goods.......................................................................... 1,372 3,299 3,680
-------- -------- --------
$18,450 $35,679 $42,876
======== ======== ========
</TABLE>
6. PROPERTY AND EQUIPMENT
The components of property and equipment were as follows:
<TABLE>
<CAPTION>
As of
As of June 30, March 31,
-------------- ---------
1997 1998 1999
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Land and buildings..................................................................... $ 2,681 $ 703 $ 703
Property, equipment and furniture...................................................... 12,202 16,620 18,847
Leasehold improvements................................................................. 5,317 7,749 10,267
-------- -------- --------
20,200 25,072 29,817
Less: accumulated depreciation and amortization........................................ (8,113) (11,923) (15,980)
-------- -------- --------
$12,087 $13,149 $13,837
======== ======== ========
</TABLE>
Depreciation expense, including depreciation expense allocated by the
Parent, for the fiscal years 1996, 1997, and 1998 and for the nine months
ended March 31, 1998 and 1999 (unaudited) was $2,697, $2,797, $3,951, $2,807
and $3,248, respectively.
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES -- THIRD PARTIES
Accounts payable and accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
As of
As of June 30, March 31,
-------------- ---------
1997 1998 1999
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Accounts payable....................................................................... $ 3,241 $ 3,848 $ 7,980
Accrued compensation and benefits...................................................... 4,072 3,934 4,455
Accrued contingent purchase price...................................................... 2,523 4,712 4,233
Accrued interest....................................................................... 472 2,025 1,445
Accrued costs of productivity and cost improvement programs............................ 1,304 235 235
Other.................................................................................. 1,918 4,410 964
-------- -------- --------
$13,530 $19,164 $19,312
======== ======== ========
</TABLE>
F-11
<PAGE>
NOVACARE ORTHOTICS AND PROSTHETICS, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF NOVACARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE FISCAL YEARS ENDED JUNE 30, 1996, 1997 AND 1998
(IN THOUSANDS)
8. FINANCING ARRANGEMENTS
Financing arrangements consisted of the following:
<TABLE>
<CAPTION>
As of
As of June 30, March 31,
-------------- ---------
1997 1998 1999
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Line of credit-- related party, due November 30, 1999............................... $ 57,894 $ 83,029 $ 82,854
Subordinated promissory notes (6% to 9%), payable through 2007...................... 35,206 50,328 39,863
Other . 205 5,404 814
--------- --------- ---------
93,305 138,761 123,531
Less: current portion............................................................... (8,871) (18,079) (96,018)
--------- --------- ---------
$ 84,434 $120,682 $ 27,513
========= ========= =========
</TABLE>
Subordinated promissory notes consist primarily of notes to former
owners of businesses acquired. Carrying value of the notes approximates fair
value.
Financing arrangements with related party is comprised of a line of
credit with NovaCare. The Company periodically draws from the line and is
charged interest at a rate of the Parent's lending bank's prime rate plus 1.5%
on the daily outstanding balance (See Note 2). The interest rates charged to
the Company at June 30, 1998 and March 31, 1999 (unaudited) were 10.00% and
9.25%, respectively.
At June 30, 1998, aggregate annual maturities of financing arrangements
were as follows for the next five fiscal years and thereafter:
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C> <C>
1999.................................................................... $ 18,079
2000.................................................................... 95,725
2001.................................................................... 10,019
2002.................................................................... 7,980
2003.................................................................... 5,252
Thereafter.............................................................. 1,706
--------
$138,761
</TABLE>
Interest paid on debt during the fiscal years 1996, 1997 and 1998 and
during the nine months ended March 31, 1998 and 1999 (unaudited) was $4,096,
$10,857, $8,805, $6,858 and $8,871, respectively.
9. LEASES
The Company rents office and clinical space, transportation and therapy
equipment under non-cancelable operating leases.
F-12
<PAGE>
NOVACARE ORTHOTICS AND PROSTHETICS, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF NOVACARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE FISCAL YEARS ENDED JUNE 30, 1996, 1997 AND 1998
(IN THOUSANDS)
Future minimum lease commitments for all non-cancelable leases as of
June 30, 1998, the most recent period for which the information is available
are as follows:
<TABLE>
<CAPTION>
Operating
Fiscal Year Leases
----------- ---------
<S> <C> <C>
1999........................................................................ $13,974
2000........................................................................ 10,379
2001........................................................................ 8,780
2002........................................................................ 5,556
2003........................................................................ 2,813
Thereafter.................................................................. 1,042
------
Total minimum lease payments................................................ $42,544
=======
</TABLE>
10. INCOME TAXES
The components of income tax expense were as follows:
<TABLE>
<CAPTION>
Nine Months
For the Years Ended June 30, Ended March 31,
---------------------------- ---------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Current:
Federal........ ....................................... $(1,558) $ 1,522 $(1,134) $ (971) $ 300
State.................................................. 200 900 586 271 900
-------- -------- -------- -------- --------
(1,358) 2,422 (548) (700) 1,200
-------- -------- -------- -------- --------
Deferred:
Federal................................................ 60 (49) 2,273 1,170 1,053
State.................................................. 17 (14) 647 329 300
-------- -------- -------- -------- --------
77 (63) 2,920 1,499 1,353
-------- -------- -------- -------- --------
$(1,281) $ 2,359 $ 2,372 $ 799 $ 2,553
======== ======== ======== ======== ========
</TABLE>
The components of net deferred tax assets (liabilities) as of June 30,
1997 and 1998 and March 31, 1999 were as follows:
<TABLE>
<CAPTION>
As of
As of June 30, March 31,
-------------- ---------
1997 1998 1999
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Accruals and reserves not currently deductible for tax purposes $1,088 $ 278 $ 278
Restructure reserves.................................................................... 571 -- --
Other................................................................................... 410 267 267
-------
Gross deferred tax assets.......................................................... 2,069 545 545
-------
Depreciation and capital leases......................................................... (1,922) (3,478) (4,831)
Other, net.............................................................................. (160) -- --
-------
Gross deferred tax liabilities..................................................... (2,082) (3,478) (4,831)
-------
Net deferred tax asset (liability)................................................. $ (13) $(2,933) $(4,286)
======= ======== ========
</TABLE>
F-13
<PAGE>
NOVACARE ORTHOTICS AND PROSTHETICS, INC. AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF NOVACARE, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE FISCAL YEARS ENDED JUNE 30, 1996, 1997 AND 1998
(IN THOUSANDS)
The reconciliation of the expected tax expense (computed by applying the
federal statutory tax rate to income before income taxes) to actual tax
expense was as follows:
<TABLE>
<CAPTION>
Nine Months
For the Years Ended June 30, Ended March 31,
---------------------------- ---------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Expected federal income tax expense........................ $ (788) $ 1,181 $ (163) $ (987) $ 520
State income taxes, less federal benefit................... 334 660 543 390 780
Non-deductible nonrecurring items.......................... 31 113 56 42 42
Non-deductible amortization of excess cost of net assets
acquired................................................ 564 988 1,452 1,089 1,208
Other, net................................................. (1,422) (583) 484 265 3
--------
$(1,281) $ 2,359 $ 2,372 $ 799 $ 2,553
======== ======== ======== ======== ========
</TABLE>
11. BENEFIT PLANS
RETIREMENT PLANS
Through the Parent, the Company participates in defined contribution
401(k) plans covering substantially all of its employees. The Company's
portion of contributions made to the plans by the Parent for fiscal 1996, 1997
and 1998 for the nine-months ended March 31, 1998 and 1999 (unaudited) and
were $516, $471, $712, $512 and $634, respectively.
STOCK OPTION PLANS
Certain employees of the Company participate in the Parent's stock
option plans. Under the plans, substantially all options are granted for a
term of up to 10 years at prices equal to the fair market value at the date of
grant. Upon a change of control, options vest immediately and no further
liability would accrue to either the Company or the Parent.
12. COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the amount
of ultimate liability, if any, with respect to these actions will not have a
materially adverse effect on the financial position or results of operations
of the Company.
F-14
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Consolidated Financial Statements (as
defined below) of the Company are based on Hanger's historical financial
statements for the year ended December 31, 1998 contained in its Annual Report
on Form 10-K for the year then ended and quarters ended March 31, 1998 and
1999 contained in its Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999, and NovaCare O&P's historical financial statements appearing
elsewhere in this report, as adjusted to illustrate the estimated effects of
the Acquisition, related financing transactions and other acquisitions by
Hanger and NovaCare O&P during the periods presented, and reclassifications to
NovaCare O&P financial statements to conform with Hanger's calendar year
presentation and financial statement classifications. The unaudited pro forma
adjustments are based upon available information and certain assumptions that
management believes are reasonable. The Unaudited Pro Forma Consolidated
Financial Statements and accompanying notes should be read in conjunction with
the above-referenced historical financial statements of Hanger and NovaCare
O&P.
The Unaudited Pro Forma Consolidated Financial Statements have been
prepared to give effect to the Acquisition and related financing transactions,
including the offering of 11 1/4% Senior Subordinated Notes, and the
application of the net proceeds therefrom, as if such transactions had
occurred as of January 1, 1998 for the consolidated statements of operations
(collectively, the "Unaudited Pro Forma Consolidated Statements of
Operations"), and as of March 31, 1999 for the consolidated balance sheet (the
"Unaudited Pro Forma Consolidated Balance Sheet" and, together with the
Unaudited Pro Forma Consolidated Statements of Operations, the "Unaudited Pro
Forma Consolidated Financial Statements"). The Acquisition will be treated as
a purchase for financial accounting purposes.
The Unaudited Pro Forma Consolidated Financial Statements do not purport
to be indicative of what the Company's financial position or results of
operations would actually have been had the Acquisition been completed on such
date or at the beginning of the periods indicated or to project the Company's
results of operations for any future period.
F-15
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
<TABLE>
<CAPTION>
Hanger Novacare
Orthopedic Orthotics and Pro Forma
Group, Inc. Prosthetics, Inc. Adjustments Pro Forma(7)
------------- ----------------- ------------ -------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................... $ 4,982,406 $ 1,150,000 $ (2,632,406)(1) $ 3,500,000
Accounts receivable, net........................ 40,511,291 66,086,000 -- 106,597,291
Inventories..................................... 17,487,818 42,876,000 -- 60,363,818
Prepaids and other assets....................... 5,433,884 6,262,000 -- 11,695,884
Deferred income taxes........................... 4,497,724 268,000 -- 4,765,724
------------- ------------- ------------- -------------
Total Current Assets................................. 72,913,123 116,642,000 (2,632,406) 186,922,717
------------- ------------- ------------- -------------
Property, plant and equipment,
net.......................................... 23,106,474 13,837,000 -- 36,943,474
Intangible assets, net.......................... 114,011,549 256,899,000 99,765,000 (2) 470,675,549
Other assets.................................... 978,943 1,826,000 -- 2,804,943
------------- ------------- ------------- -------------
Total Assets......................................... $211,010,089 $389,204,000 $ 97,132,594 $697,346,683
============= ============= ============= =============
LIABILITIES
Current Liabilities:
Current portion of long-term debt $ 4,097,338 $ 96,018,000 $(85,354,000)(3) $ 14,761,338
Accounts payable................................ 5,189,337 119,585,000 (110,512,000)(3) 14,262,337
Accrued expenses and other...................... 6,641,961 6,877,000 -- 13,518,961
Customer deposits............................... 933,739 -- -- 933,739
Accrued wages and payroll taxes 5,910,858 4,455,000 -- 10,365,858
Deferred revenue................................ 292,368 -- -- 292,368
------------- ------------- ------------- -------------
Total Current Liabilities............................ 23,065,601 226,935,000 (195,866,000) 54,134,601
------------- ------------- ------------- -------------
Long-term debt.................................. 13,698,506 27,513,000 362,429,594 (4) 403,641,100
Deferred income taxes........................... 5,222,766 4,831,000 -- 10,053,766
Other liabilities............................... 2,228,289 494,000 -- 2,722,289
------------- ------------- ------------- -------------
Total Liabilities.................................... 44,215,162 259,773,000 166,563,594 470,551,756
------------- ------------- ------------- -------------
Mandatorily Redeemable Preferred
Stock, Class F.................................... -- -- -- --
7% Redeemable Preferred Stock........................ -- -- 60,000,000 (5) 60,000,000
SHAREHOLDERS' EQUITY
Common stock.................................... 189,739 -- -- 189,739
Additional paid in capital...................... 146,089,640 -- -- 146,089,640
Retained Earnings............................... 21,171,110 -- -- 21,171,110
NovaCare, Inc., net investment 129,431,000 (129,431,000)(6) --
------------- ------------- ------------- -------------
167,450,489 129,431,000 (129,431,000) 167,450,489
Treasury Stock.................................. (655,562) (655,562)
------------- ------------- ------------- -------------
Total Shareholders' Equity........................... 166,794,927 129,431,000 (129,431,000) 166,794,927
------------- ------------- ------------- -------------
Total Liabilities and Shareholders'
Equity............................................ $211,010,089 $389,204,000 $ 97,132,594 $697,346,683
============= ============= ============= =============
F-16
<PAGE>
<FN>
(1) Reflects $850,000 of additional NovaCare O&P cash required to be on hand
at closing and the use of $3,482,406 of Hanger cash to be used to
finance a portion of the Acquisition and related fees and expenses.
(2) Reflects excess of NovaCare purchase price over net assets acquired.
(3) Adjusts for net liabilities not assumed by the Company, and the
refinancing of Hanger's revolver of $2,500,000.
(4) Represents debt incurred in connection with the acquisition of NovaCare
O&P:
Tranche A Term Facility.................................. $ 100,000,000
Tranche B Term Facility.................................. 100,000,000
Notes.................................................... 150,000,000
Revolving Credit Facility................................ 12,429,594
-------------
$ 362,429,594
=============
(5) Reflects the issuance of Preferred Stock in conjunction with the
acquisition of NovaCare O&P.
(6) Eliminates NovaCare's ownership interest in NovaCare O&P being acquired
by Hanger.
(7) Excludes potential future contingent consideration to be paid to former
shareholders of acquired companies based on prescribed formulas.
Contingent consideration is to be accounted for as additional purchase
price consideration if and when it becomes probable.
</FN>
</TABLE>
F-17
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Hanger Novacare Other
Orthopedic Orthotics and Acquired Pro Forma Pro Forma
Group, Inc. Prosthetics Inc.* Companies(1) Adjustments (13)(14)
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net sales.............................. $ 187,870,312 $ 273,995,445 $ 33,574,693 $ (3,023,256)(2) $ 492,417,194
Cost of products & services sold....... 92,903,145 140,794,133 15,765,998 (2,632,079)(2) 246,283,570
(547,627)(3)
-------------- -------------- -------------- -------------- --------------
Gross profit........................... 94,967,167 133,201,312 17,808,695 156,450 246,133,624
Selling, general & administrative...... 63,512,051 106,304,951 11,806,001 (1,847,046)(3) 160,550,089
(24,344)(4)
(16,105,625)(5)
(3,095,899)(6)
Depreciation & amortization............ 5,781,754 11,597,865 831,461 52,569 (7) 21,004,286
2,740,637 (8)
-------------- -------------- -------------- -------------- --------------
Income from operations................. 25,673,362 15,298,496 5,171,233 18,436,158 64,579,249
Interest expense, net.................. (1,902,315) (11,300,871) (115,438) 8,172,068 (4) (43,265,599)
(2,471,936)(9)
(35,647,107)(10)
Other expense, net..................... (315,337) (182,948) (48,853) (8,153)(4) (555,291)
-------------- -------------- -------------- -------------- --------------
Income before taxes.................... 23,455,710 3,814,677 5,006,942 (11,518,970) 20,758,359
Provision (benefit) for income taxes... 9,616,000 4,171,000 50,631 (5,326,704)(11) 8,510,927
-------------- -------------- -------------- -------------- --------------
Net income (loss)...................... $ 13,839,710 $ (356,323) $ 4,956,311 $ (6,192,266) $ 12,247,432
============== ============== ============== ============== ==============
Diluted income per common share (12)... $ 0.75 $ 0.66
============== ==============
Shares used to compute diluted income per
common share......................... 18,515,567 18,653,020
============== ==============
<FN>
----------
* The historical statement of operations data for NovaCare O&P, as
adjusted to conform with Hanger's financial statement classifications.
Adjustments primarily relate to the following reclassifications:
o Administrative salary expense of $20.2 million, rent expense
of $13.2 million and other administrative expenses of $23.0
million reclassified from cost of products and services sold
to selling, general & administrative expense.
o Depreciation and amortization expense of $3.6 million
reclassified from cost of products and services sold to
depreciation & amortization expense.
o Royalty fee expense of $16.1 million reclassified from other
expense to selling, general & administrative expense.
(1) Other Acquired Companies (along with NovaCare O&P, the "Acquired
Companies") for the year ended December 31, 1998 represent the results
of operations of such companies from January 1, 1998 to the earlier of
their respective dates of acquisition or December 31, 1998. Each of the
acquisitions has been accounted for as a purchase. Accordingly, the
results of operations of each of the Acquired Companies are included in
the historical results of operations of the Company from the date of its
acquisition.
</FN>
</TABLE>
F-18
<PAGE>
Results of operations of the companies acquired by Hanger during the period
January 1, 1998 through March 31, 1999 ("Other Acquired Companies (Hanger)")
prior to their acquisition dates for the periods presented are as follows:
<TABLE>
<CAPTION>
Company Acquired as of Net Sales Net Income (Loss)
------- -------------- --------- -----------------
<S> <C> <C> <C>
Wayne Rosen.................................................... January 14, 1998 $ 38,061 $ (1,964)
NOPS........................................................... March 4, 1998 1,069,662 (156,803)
Teufel......................................................... March 31, 1998 1,005,452 16,711
Hattiesberg.................................................... April 30, 1998 117,156 34,405
Augusta Brace.................................................. May 15, 1998 219,584 (30,344)
P&O Rehab. Tech................................................ June 11, 1998 238,772 (2,997)
Associated O&P................................................. June 19, 1998 574,856 98,858
Orthotics Techniques........................................... July 17, 1998 180,650 16,120
Seattle Limb System............................................ August 1, 1998 9,859,000 2,707,000
Advanced Prosthetics........................................... September 25, 1998 1,145,518 549,792
Orthopedic Services............................................ September 30, 1998 1,949,068 364,438
Fessenden O&P.................................................. November 13, 1998 1,220,622 399,168
Baltimore Orthotics............................................ December 1, 1998 1,015,829 71,084
Manasota Orthopedic............................................ December 4, 1998 340,642 (24,682)
OST Patient Advocates.......................................... December 11, 1998 585,161 2,092
Thornton Orthopedic............................................ January 5, 1999 934,586 39,679
Carolina....................................................... January 6, 1999 1,551,188 397,002
Universal O&P.................................................. January 29, 1999 821,677 (7,766)
Medical Center Brace........................................... February 12, 1999 3,736,592 50,143
------------- -------------
Total..................................................... $ 26,604,076 $ 4,521,936
============= =============
</TABLE>
Results of operations of the companies acquired by NovaCare O&P during the
period January 1, 1998 through March 31, 1999 ("Other Acquired Companies
(NovaCare O&P)") prior to their acquisition dates for the periods presented
are as follows:
<TABLE>
<CAPTION>
Company Acquired as of Net Sales Net Income (Loss)
------- -------------- --------- -----------------
<S> <C> <C> <C>
Kroll's........................................................ January 1, 1998 $ -- $ --
Atlanta Prosthetics............................................ January 1, 1998 -- --
TD Rehab Systems............................................... January 1, 1998 -- --
Shamp Prosthetics-Orthotics.................................... January 1, 1998 -- --
Cajon Orthotics & Prosthetics.................................. January 1, 1998 -- --
Cahill Orthopedic Laboratory................................... February 1, 1998 138,793 4,324
CPO Prosthetics and Orthotics.................................. February 1, 1998 392,244 (24,025)
Kessler Associates............................................. March 1, 1998 126,000 10,858
University O&P Consultants..................................... April 1, 1998 381,332 (23,708)
Advanced Orthopedic Systems.................................... May 1, 1998 167,601 642
Central Valley Prosthetics & Orthotics......................... May 1, 1998 133,230 48,204
Meadowbrook Orthopedics........................................ May 1, 1998 318,438 9,590
O.S. Orthotics & Prosthetics................................... May 1, 1998 266,246 75,861
Binghamton Limb & Brace........................................ June 1, 1998 726,183 96,737
Stockton Orthopedic............................................ June 1, 1998 445,561 24,127
Protech O&P Center............................................. June 1, 1998 636,632 41,383
American Rehabilitation Systems................................ June 1, 1998 362,343 8,663
Orthopedic Laboratories........................................ June 1, 1998 201,111 10,748
Columbus Orthopaedic Prosthetic &
Orthotic Center.............................................. June 1, 1998 906,163 57,095
Tuscon Limb & Brace............................................ June 1, 1998 1,078,530 45,849
Physical Restoration Laboratories.............................. June 1, 1998 690,210 48,027
------------- -------------
Total..................................................... $ 6,970,617 $ 434,375
============= =============
</TABLE>
F-19
<PAGE>
(2) Reflects the elimination of profit on intercompany sales during the
period presented. Net sales and cost of products & services sold have
been reduced by $3,023,256 and $2,632,079, respectively.
(3) Reflects a net reduction in cost of products and services sold and
selling, general and administrative expense of $547,627 and $1,847,046,
respectively, for employee and practitioner salaries of the Acquired
Companies to reflect the difference between such historical amounts and
amounts specified in employment contracts for comparable employment
positions with the Company.
<TABLE>
<CAPTION>
Year Ended
Company December 31, 1998
------- -----------------
<S> <C>
Other Acquired Companies (Hanger)........................................... $ 1,552,171
Other Acquired Companies (NovaCare O&P)..................................... 842,502
-----------
Total................................................................... $ 2,394,673
===========
</TABLE>
(4) Adjustments to selling, general and administrative expense, interest
expense and other income to reflect the elimination of historical income
and expense generated from assets not acquired and/or liabilities not
assumed:
<TABLE>
<CAPTION>
Selling,
general and Interest
Company Administrative expense Other
------- -------------- -------- -----
<S> <C> <C> <C>
NovaCare O&P.................................................. $ - $ 8,090,290 $ -
Other Acquired Companies (Hanger)............................. 10,074 18,115 8,153
Other Acquired Companies (NovaCare O&P)....................... 14,270 63,663 -
-------- ----------- -------
Total..................................................... $ 24,344 $ 8,172,068 $ 8,153
======== =========== =======
</TABLE>
(5) Adjustment to reduce selling, general and administrative expense by the
royalty fee of $16,105,625 charged by NovaCare, Inc. to NovaCare O&P.
(6) Reduction in selling, general and administrative expense related to
elimination of intercompany profit of $3,095,899 previously allocated to
Novacare O&P for personnel provided by a subsidiary of NovaCare.
(7) Reflects increases in historical amounts of the Acquired Companies for
amortization expense resulting from non-compete agreements signed in
connection with acquisitions, as follows:
<TABLE>
<CAPTION>
Year Ended
Company December 31, 1998
------- -----------------
<S> <C>
Other Acquired Companies (Hanger)........................................... $ 52,569
</TABLE>
(8) Reflects additional amortization over a 40-year period, as if such
Acquired Companies were acquired as of the beginning of the period
presented, as follows:
<TABLE>
<CAPTION>
Year Ended
Company December 31, 1998
------- -----------------
<S> <C>
NovaCare O&P................................................................ $ 2,020,192
Other Acquired Companies (Hanger)........................................... 580,827
Other Acquired Companies (NovaCare O&P)..................................... 139,618
--------
Total................................................................... $ 2,740,637
===========
</TABLE>
(9) Reflects additional interest expense that would have been incurred if
the consideration (in the form of cash and promissory notes) for the
Other Acquired Companies had been paid at January 1, 1998. The interest
rates used to calculate pro forma interest on the assumed additional
debt required to fund the cash payments reflects the Company's
approximate borrowing rate.
<TABLE>
<CAPTION>
Year Ended
Company December 31, 1998
------- -----------------
<S> <C>
Other Acquired Companies (Hanger)........................................... $ 2,072,700
Other Acquired Companies (NovaCare O&P)..................................... 399,236
--------
Total.................................................................... $ 2,471,936
===========
</TABLE>
F-20
<PAGE>
(10) Represents the interest expense on the financing for the Acquisition as
of the beginning of the period presented :
<TABLE>
<CAPTION>
Source Amount Interest Rate Interest
------ ------ ------------- --------
<S> <C> <C> <C>
Revolving Credit Facility.....................................$ 12,429,594 8.16% $ 1,452,107(a)
Tranche A Term Facility....................................... 100,000,000 8.16% 8,160,000
Tranche B Term Facility....................................... 100,000,000 9.16% 9,160,000
Notes......................................................... 150,000,000 11.25% 16,875,000
-----------
$35,647,107
===========
</TABLE>
----------
(a) Interest expense includes $437,852 related to the unused portion
not borrowed under the Revolving Credit Facility.
An increase or decrease of 0.125% in the assumed interest rate on the
Revolving Credit Facility, Tranche A Term Facility and Tranche B Term
Facility would change the pro forma interest expense by $265,000 for the
twelve months ended December 31, 1998.
(11) To reflect income taxes as if the Company and Acquired Companies were a
C Corporation for the period presented, at an effective tax rate of 41%.
(12) Historical and pro forma diluted income per share is computed by
dividing net income adjusted for preferred stock dividends by the number
of weighted average common and common-equivalent shares outstanding for
the period. The shares used in the computation of net income per common
share on a pro forma basis also include common stock issued in
connection with acquisitions.
If approved by the Company's stockholders in the future, the Company
may, at its option, make the 7% Redeemable Preferred Stock convertible
into the Company's Common Stock. The computation of net income per
common share on a pro forma basis does not include the common stock into
which such shares of 7% Redeemable Preferred Stock would be convertible.
If such shares were included in the computation, pro forma EPS would
decrease from $0.66 to $0.55.
(13) The unaudited pro forma amounts exclude potential future contingent
consideration to be paid to former shareholders of acquired companies
based on prescribed formulas. Contingent consideration is to be
accounted for as additional purchase price consideration if and when it
becomes probable.
(14) Does not reflect reductions to historical amounts as a result of future
termination of employment of certain employees, the closure of certain
facilities and management's estimate of certain costs that were
previously allocated to Novacare O&P. Following is a summary of
estimated cost savings not reflected in the historical amounts and the
related impact on pro forma EBITDA, net income and EPS:
<TABLE>
<S> <C>
Employee terminations............................................................... $ 6,358,176
Closure of NovaCare O&P facilities.................................................. 747,576
Elimination of corporate allocations of parent of NovaCare O&P 970,797
------------
$ 8,076,549
============
EBITDA.............................................................................. $ 85,583,535
Adjusted EBITDA..................................................................... $ 93,660,084
Net income.......................................................................... $ 12,247,432
Adjusted net income................................................................. $ 20,323,981
EPS................................................................................. $ 0.66
Adjusted EPS........................................................................ $ 1.09
Reported EPS........................................................................ $ 0.75
</TABLE>
F-21
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
Hanger Novacare Other
Orthopedic Orthotics and Acquired Pro Forma Pro Forma
Group, Inc. Prosthetics Inc.* Companies(1) Adjustments (13)(14)
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net sales.................................. $ 40,750,018 $ 62,930,280 $ 15,313,025 $ (1,391,929)(2) $ 117,601,394
Cost of products & services sold 21,303,131 31,105,257 7,395,142 (1,351,882)(2) 58,062,474
(389,174)(3)
-------------- -------------- -------------- -------------- --------------
Gross profit.............................. 19,446,887 31,825,023 7,917,883 349,127 59,538,920
Selling, general & administrative 14,729,001 27,024,656 5,682,570 (875,901)(3) 42,486,807
(13,791)(4)
(3,829,500)(5)
(230,228)(6)
Depreciation & amortization................ 1,259,983 2,638,838 366,379 21,015 (7) 5,309,466
1,023,251 (8)
-------------- -------------- -------------- -------------- --------------
Income from operations..................... 3,457,903 2,161,529 1,868,934 4,254,281 11,742,647
Interest expense, net...................... (614,822) (2,862,218) (51,832) 2,046,587 (4) (11,539,735)
(1,145,673)(9)
(8,911,777)(10)
Other income (expense), net................ 30,345 (30,173) 20,837 (4,832)(4) 16,177
-------------- -------------- -------------- -------------- --------------
Income (loss) before taxes................. 2,873,426 (730,862) 1,837,939 (3,761,414) 219,089
Provision (benefit) for income taxes....... 1,178,000 342,000 12,504 (1,442,678)(11) 89,826
-------------- -------------- -------------- -------------- --------------
Net income (loss).......................... $ 1,695,426 $ (1,072,862) $ 1,825,435 $ (2,318,736) $ 129,263
============== ============== ============== ============== ==============
Diluted income (loss) per common
share (12)............................... $ 0.10 $ 0.01
============== ==============
Shares used to compute diluted
income per common share.................. 17,081,983 17,146,267
============== ==============
<FN>
----------
* The historical statements of operations data for Novacare O&P, as
adjusted to conform with Hanger's financial statement classifications.
Adjustments primarily relate to the following reclassifications:
o Administrative salary expense of $4.4 million, rent expense
of $3.2 million and other administrative expenses of $7.0
million reclassified from cost of products and services sold
to selling, general & administrative expense.
o Depreciation and amortization expense of $0.8 million
reclassified from cost of products and services sold to
depreciation & amortization expense.
o Royalty fee expense of $3.8 million reclassified from other
expense to selling, general & administrative expense.
(1) Other Acquired Companies (along with NovaCare O&P, the "Acquired
Companies") for the three months ended March 31, 1998 represent the
results of operations of such companies from January 1, 1998 to the
earlier of their respective dates of acquisition or March 31, 1998. Each
of the acquisitions has been accounted for as a purchase. Accordingly,
the results of operations of each of the Acquired Companies are included
in the historical results of operations of the Company from the date of
its acquisition.
Results of operations of the companies acquired by Hanger during the
period January 1, 1998 through March 31, 1999 ("Other Acquired Companies
(Hanger)") prior to their acquisition dates for the periods presented
are as follows:
</FN>
</TABLE>
<TABLE>
<CAPTION>
Company Acquired as of Net Sales Net Income (Loss)
------- -------------- --------- -----------------
<S> <C> <C> <C>
Wayne Rosen.................................................. January 14, 1998 $ 38,061 $ (1,964)
NOPS......................................................... March 4, 1998 1,069,662 (156,803)
Teufel....................................................... March 31, 1998 1,005,452 16,711
Hattiesberg.................................................. April 30, 1998 87,867 25,804
Augusta Brace................................................ May 15, 1998 146,389 (20,229)
P&O Rehab. Tech.............................................. June 11, 1998 132,651 (1,665)
Associated O&P............................................... June 19, 1998 304,336 52,337
Orthotics Techniques......................................... July 17, 1998 82,114 7,055
Seattle Limb System.......................................... August 1, 1998 4,165,775 1,143,803
Advanced Prosthetics......................................... September 25, 1998 384,689 184,632
Orthopedic Services.......................................... September 30, 1998 642,550 120,144
Fessenden O&P................................................ November 13, 1998 346,549 113,328
Baltimore Orthotics.......................................... December 1, 1998 272,909 19,097
Manasota Orthopedic.......................................... December 4, 1998 90,703 (6,572)
OST Patient Advocates........................................ December 11, 1998 152,651 (38,760)
Thornton Orthopedic.......................................... January 5, 1999 196,177 9,717
Carolina..................................................... January 6, 1999 376,576 90,808
Universal O&P................................................ January 29, 1999 205,419 (1,942)
Medical Center Brace......................................... February 12, 1999 881,950 2,184
------------ -----------
Total................................................... $ 10,582,480 $ 1,557,685
============ ===========
</TABLE>
F-22
<PAGE>
Results of operations of the companies acquired by NovaCare O&P during the
period January 1, 1998 through March 31, 1999 ("Other Acquired Companies
(NovaCare O&P)") prior to their acquisition dates for the periods presented
are as follows:
<TABLE>
<CAPTION>
Company Acquired as of Net Sales Net Income (Loss)
------- -------------- --------- -----------------
<S> <C> <C> <C>
Kroll's........................................................ January 1, 1998 $ -- $ --
Atlanta Prosthetics............................................ January 1, 1998 -- --
TD Rehab Systems............................................... January 1, 1998 -- --
Shamp Prosthetics-Orthotics.................................... January 1, 1998 -- --
Cajon Orthotics and Prosthetics................................ January 1, 1998 -- --
Cahill Orthopedic Laboratory................................... February 1, 1998 138,793 4,324
CPO Prosthetics and Orthotics.................................. February 1, 1998 392,244 (24,025)
Kessler Associates............................................. March 1, 1998 126,000 10,858
University O&P Consultants..................................... April 1, 1998 381,332 (23,708)
Advanced Orthopedic Systems.................................... May 1, 1998 125,701 481
Central Valley Prosthetics & Orthotics......................... May 1, 1998 99,923 36,153
Meadowbrook Orthopedics........................................ May 1, 1998 238,829 7,192
O.S. Orthotics & Prosthetics................................... May 1, 1998 199,685 56,896
Binghamton Limb & Brace........................................ June 1, 1998 435,710 58,042
Stockton Orthopedic............................................ June 1, 1998 267,337 14,476
Protech O&P Center............................................. June 1, 1998 381,979 24,830
American Rehabilitation Systems................................ June 1, 1998 217,406 5,198
Orthopedic Laboratories........................................ June 1, 1998 120,667 6,449
Columbus Orthopaedic Prosthetic & Orthotic Center.............. June 1, 1998 543,698 34,257
Tuscon Limb & Brace............................................ June 1, 1998 647,119 27,510
Physical Restoration Laboratories.............................. June 1, 1998 414,122 28,817
------------ -----------
Total..................................................... $ 4,730,545 $ 267,750
============ ===========
</TABLE>
(2) Reflects the elimination of profit on intercompany sales during the
period presented. Net sales and cost of products and services sold have
been reduced by $1,391,929 and $1,351,882, respectively.
(3) Reflects a net reduction in cost of products and services sold and
selling, general and administrative expense of $389,174 and $875,901,
respectively, for employee and practitioner salaries of the Acquired
Companies to reflect the difference between such historical amounts and
amounts specified in employment contracts for comparable employment
positions with the Company.
<TABLE>
<CAPTION>
Three Months Ended
Company March 31, 1998
------- --------------
<S> <C>
Other Acquired Companies (Hanger)................................... $ 666,346
Other Acquired Companies (NovaCare O&P)............................. 598,729
------------
Total........................................................... $ 1,265,075
============
</TABLE>
(4) Adjustments to selling, general and administrative expense, interest
expense and other income to reflect the elimination of historical income
and expense generated from assets not acquired and/or liabilities not
assumed:
<TABLE>
<CAPTION>
Selling,
general and Interest
Company Administrative expense Other
------- -------------- -------- -----
<S> <C> <C> <C>
NovaCare O&P................................................... $ -- $2,024,541 $ --
Other Acquired Companies (Hanger).............................. 2,518 (18,088) 4,832
Other Acquired Companies (NovaCare O&P)........................ 11,273 40,134
-------- ----------- -------
Total...................................................... $13,791 $2,046,587 $ 4,832
======== =========== =======
</TABLE>
(5) Adjustment to reduce selling, general and administrative expense by the
royalty fee of $3,829,500 charged by NovaCare, Inc. to NovaCare O&P.
(6) Reduction in selling, general and administrative expense related to
elimination of intercompany profit of $230,228 previously allocated to
NovaCare O&P for personnel provided by a subsidiary of NovaCare.
(7) Reflects increases in historical amounts of the Acquired Companies for
amortization expense resulting from non-compete agreements signed in
connection with acquisitions, as follows:
<TABLE>
<CAPTION>
Three Months Ended
Company March 31, 1998
------- --------------
<S> <C>
Other Acquired Companies (Hanger)..................................... $ 21,015
</TABLE>
F-23
<PAGE>
(8) Reflects additional amortization over a 40-year period, as if such
Acquired Companies were acquired as of the beginning of the period
presented, as follows:
<TABLE>
<CAPTION>
Three Months Ended
Company March 31, 1998
------- --------------
<S> <C>
NovaCare O&P................................................... $ 701,509
Other Acquired Companies (Hanger).............................. 224,654
Other Acquired Companies (NovaCare O&P)........................ 97,088
-----------
Total...................................................... $ 1,023,251
===========
</TABLE>
(9) Reflects additional interest expense that would have been incurred if
the consideration (in the form of cash and promissory notes) for the
Other Acquired Companies had been paid at January 1, 1998. The interest
rates used to calculate pro forma interest on the assumed additional
debt required to fund the cash payments reflects the Company's
approximate borrowing rate.
<TABLE>
<CAPTION>
Three Months Ended
Company March 31, 1998
------- --------------
<S> <C>
Other Acquired Companies (Hanger)............................. $ 870,463
Other Acquired Companies (NovaCare O&P)....................... 275,210
------------
Total..................................................... $ 1,145,673
===========
</TABLE>
(10) Represents the interest expense on the financing for the Acquisition as
of the beginning of the period presented.
<TABLE>
<CAPTION>
Source Amount Interest Rate Interest
------ ------ ------------- --------
<S> <C> <C> <C>
Revolving Credit Facility............................... $ 12,429,594 8.16% $ 363,027(a)
Tranche A Term Facility................................. 100,000,000 8.16% 2,040,000
Tranche B Term Facility................................. 100,000,000 9.16% 2,290,000
Notes................................................... 150,000,000 11.25% 4,218,750
-----------
Total............................................... $ 8,911,777
===========
</TABLE>
----------
(a) Interest expense includes $109,463 related to the unused
portion not borrowed under the Revolving Credit Facility.
An increase or decrease of 0.125% in the assumed interest rate on the
Revolving Credit Facility, Tranche A Term Facility and Tranche B Term
Facility would change the pro forma interest expense by $66,000 for the
three months ended March 31, 1998.
(11) To reflect income taxes as if the Company and Acquired Companies were a
C Corporation for the period presented, at an effective tax rate of 41%.
(12) Historical and pro forma diluted income per share, is computed by
dividing net income adjusted for preferred stock dividends by the number
of weighted average common and common-equivalent shares outstanding for
the period. The shares used in the computation of net income per common
share on a pro forma basis also include common stock issued in
connection with acquisitions.
If approved by the Company's stockholders in the future, the Company may, at
its option, make the 7% Redeemable Preferred Stock convertible into the
Company's Common Stock. The computation of net income per common share on a
pro forma basis does not include the common stock into which such shares of 7%
Redeemable Preferred Stock would be convertible. If such shares were included
in the computation, there would be an immaterial impact on pro forma EPS.
(13) The unaudited pro forma amounts exclude potential future contingent
consideration to be paid to former shareholders of acquired companies
based on prescribed formulas. Contingent consideration is to be
accounted for as additional purchase price consideration if and when it
becomes probable.
(14) Does not reflect reductions to historical amounts as a result of future
termination of employment of certain employees, the closure of certain
facilities and management's estimate of certain costs that were
previously allocated to Novacare O&P. Following is a summary of
estimated cost savings not reflected in the historical amounts and the
related impact on pro forma EBITDA, net income and EPS:
<TABLE>
<S> <C>
Employee terminations............................................................. $ 1,589,544
Closure of NovaCare O&P facilities................................................ 186,894
Elimination of corporate allocations of parent of NovaCare O&P 242,699
------------
$ 2,019,137
EBITDA............................................................................ $17,052,114
Adjusted EBITDA................................................................... $19,071,251
Net income (loss)................................................................. $ 129,263
Adjusted net income............................................................... $ 2,148,400
EPS............................................................................... $ 0.01
Adjusted EPS...................................................................... $ 0.13
Reported EPS...................................................................... $ 0.10
</TABLE>
F-24
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
Hanger Novacare Other
Orthopedic Orthotics and Acquired Pro Forma Pro Forma
Group, Inc. Prosthetics Inc.* Companies(1) Adjustments (13)(14)
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net sales.............................. $ 49,144,593 $ 67,684,837 $ 505,078 $ (48,863)(2) $ 117,285,645
Cost of products & services sold....... 24,888,376 32,051,014 340,370 (47,389)(2) 57,232,371
-------------- -------------- -------------- -------------- --------------
Gross profit........................... 24,256,217 35,633,823 164,708 (1,474) 60,053,274
Selling, general & administrative...... 17,099,004 30,919,529 126,485 (65,934)(3) 41,673,340
(1,259)(4)
(4,104,485)(5)
(2,300,000)(6)
Depreciation & amortization............ 1,705,046 2,874,628 3,685 1,087 (7) 5,046,329
461,883 (8)
-------------- -------------- -------------- -------------- --------------
Income from operations................. 5,452,167 1,839,666 34,538 6,007,234 13,333,605
Interest expense, net.................. (287,754) (2,540,406) (3,344) 1,872,700 (4) (9,552,672)
(32,600)(9)
(8,561,268)(10)
Other income (expense), net............ 37,582 (44,038) 199 (6,257)
-------------- -------------- -------------- -------------- --------------
Income (loss) before taxes............. 5,201,995 (744,778) 31,393 (713,934) 3,774,676
Provision (benefit) for income taxes... 2,081,000 299,000 4,724 (874,854)(11) 1,509,870
-------------- -------------- -------------- -------------- --------------
Net income (loss)...................... $ 3,120,995 $ (1,043,778) $ 26,669 $ 160,920 $ 2,264,806
============== ============== ============== ============== ==============
Diluted income per common share (12)... $ 0.15 $ 0.11
============== ==============
Shares used to compute diluted income per
Common share......................... 20,201,380 20,205,090
============== ==============
<FN>
----------
* The historical statements of operations data for NovaCare O&P, as
adjusted to conform with Hanger's financial statement classifications.
Adjustments primarily relate to the following reclassifications:
o Administrative salary expense of $7.5 million, rent expense
of $3.6 million and other administrative expenses of $5.3
million reclassified from cost of products and services sold
to selling, general & administrative expense.
o Depreciation and amortization expense of $0.8 million
reclassified from cost of products and services sold to
depreciation & amortization expense.
o Royalty fee expense of $4.1 million reclassified from other
expense to selling, general & administrative expense.
(1) Other Acquired Companies (along with NovaCare O&P, the "Acquired
Companies") for the quarter ended March 31, 1999 represent the results
of operations of such companies from January 1, 1999 to the earlier of
their respective dates of acquisition or March 31, 1999. Each of the
acquisitions has been accounted for as a purchase. Accordingly, the
results of operations of each of the Acquired Companies are included in
the historical results of operations of the Company from the date of its
acquisition. NovaCare O&P did not make any acquisitions during the
period from January 1, 1999 through March 31, 1999.
Results of operations of Other Acquired Companies acquired during the
period January 1, 1999 through March 31, 1999 prior to their acquisition
dates for the periods presented are as follows:
</FN>
</TABLE>
<TABLE>
<CAPTION>
Company Acquired as of Net Sale Net Income
------- -------------- -------- ----------
<S> <C> <C> <C>
Thornton Orthopedic............................... January 5, 1999 $ -- $ --
Carolina.......................................... January 6, 1999 -- --
Universal O&P..................................... January 29, 1999 49,625 17,326
Medical Center Brace.............................. February 12, 1999 455,453 9,343
--------- --------
Total............................................. $ 505,078 $ 26,669
========= ========
</TABLE>
(2) The adjustments to reduce net sales $48,863 and cost of products and
services sold $47,389 reflect the elimination of profit on intercompany
sales during the period presented.
(3) Reflects a net reduction to historical amounts of $65,934 for employee
and practitioner salaries of the Other Acquired Companies to reflect the
difference between such historical amounts and amounts specified in
employment contracts for comparable employment positions with the
Company.
(4) Adjustments to selling, general and administrative expense and interest
expense to reflect the elimination of historical expense generated from
assets not acquired and/or liabilities not assumed:
<TABLE>
<CAPTION>
Selling,
general and Interest
Company Administrative Expense
------- -------------- --------
<S> <C> <C>
NovaCare O&P...................................................... -- $ 1,872,700
Other Acquired Companies.......................................... $ 1,259
Total........................................................ $ 1,259 $ 1,872,700
======== ===========
</TABLE>
(5) Adjustment to reduce selling, general and administrative expense by the
royalty fee of $4,104,485 charged by NovaCare to NovaCare O&P.
F-25
<PAGE>
(6) Reduction in selling, general and administrative expense related to
elimination of intercompany profit of $2,300,000 previously allocated to
NovaCare O&P for personnel provided by a subsidiary of NovaCare.
(7) Reflects increases in historical amounts of the Acquired Companies for
amortization expense resulting from non-compete agreements signed in
connection with Acquisitions as follows:
<TABLE>
<CAPTION>
Three Months Ended
Company March 31, 1999
------- --------------
<S> <C>
Other Acquired Companies.......................................... $ 1,087
</TABLE>
(8) Reflects additional amortization over a 40-year period, as if such
Acquired Companies were acquired as of the beginning of the period
presented, as follows:
<TABLE>
<CAPTION>
Three Months Ended
Company March 31, 1999
------- --------------
<S> <C>
NovaCare O&P................................................. $ 447,594
Other Acquired Companies..................................... 14,289
---------
Total.................................................... $ 461,883
=========
</TABLE>
(9) Reflects additional interest expense that would have been incurred if
the consideration (in the form of cash and promissory notes) for the
Other Acquired Companies had been paid at January 1, 1999. The interest
rates used to calculate pro forma interest on the assumed additional
debt required to fund the cash payments reflects the Company's
approximate borrowing rate.
<TABLE>
<CAPTION>
Three Months Ended
Company March 31, 1999
------- --------------
<S> <C>
Other Acquired Companies (Hanger)................................. $ 32,600
</TABLE>
(10) Represents the interest expense on the financing for the Acquisition as
of the beginning of the period presented.
<TABLE>
<CAPTION>
Source Amount Interest Rate Interest
------ ------ ------------- --------
<S> <C> <C> <C>
Revolving Credit Facility............................... $ 12,429,594 7.50% $ 342,518(a)
Tranche A Term Facility................................. 100,000,000 7.50% 1,875,000
Tranche B Term Facility................................. 100,000,000 8.50% 2,125,000
Notes................................................... 150,000,000 11.25% 4,218,750
Total.............................................. $ 8,561,268
===========
</TABLE>
(a) Interest expense includes $109,463 related to the unused
portion not borrowed under the Revolver.
An increase or decrease of 0.125% in the assumed interest rate on the
Revolving Credit Facility, Tranche A Term Facility and Tranche B Term
Facility would change the pro forma interest expense by $66,000 for the
three months ended March 31, 1999.
(11) To reflect income taxes as if the Company and Acquired Companies were a
C Corporation for the period presented, at an effective tax rate of 40%.
(12) Historical and pro forma diluted income per share, which has been
adjusted for preferred stock dividends, is computed by dividing net
income by the number of weighted average common and common-equivalent
shares outstanding for the period. The shares used in the computation of
net income per common share on a pro forma basis also include common
stock issued in connection with acquisitions.
If approved by the Company's stockholders in the future, the Company
may, at its option, make the 7% Redeemable Preferred Stock convertible
into the Company's Common Stock. The computation of net income per
common share on a pro forma basis does not include the common stock into
which such shares of 7% Redeemable Preferred Stock would be convertible.
If such shares were included in the computation, there would be an
immaterial impact on pro forma EPS.
(13) The unaudited pro forma amounts exclude potential future contingent
consideration to be paid to former shareholders of acquired companies
based on prescribed formulas. Contingent consideration is to be
accounted for as additional purchase price consideration if and when it
becomes probable.
F-26
<PAGE>
(14) Does not reflect reductions to historical amounts as a result of future
termination of employment of certain employees, the closure of certain
facilities and management's estimate of certain costs that were
previously allocated to Novacare O&P. Following is a summary of
estimated cost savings not reflected in the historical amounts and the
related impact on pro forma EBITDA, net income and EPS:
<TABLE>
<S> <C>
Employee terminations.................................................... $ 1,589,544
Closure of NovaCare O&P facilities....................................... 186,894
Elimination of corporate allocations of parent of NovaCare O&P 242,699
-----------
$ 2,019,137
EBITDA................................................................... $18,379,934
Adjusted EBITDA.......................................................... $20,399,071
Net income............................................................... $ 2,264,806
Adjusted net income...................................................... $ 4,283,943
EPS...................................................................... $ 0.11
Adjusted EPS............................................................. $ 0.21
Reported EPS............................................................. $ 0.15
</TABLE>
F-27
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
Hanger Novacare Other
Orthopedic Orthotics and Acquired Pro Forma Pro Forma
Group, Inc. Prosthetics Inc.* Companies(1) Adjustments (13)(14)
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net sales................................. $ 196,264,887 $ 278,750,002 $ 18,766,746 $ (1,680,190)(2) $ 492,101,445
Cost of products & services sold.......... 96,488,390 141,739,890 8,711,226 (1,327,586)(2) 245,453,468
(158,452)(3)
-------------- -------------- -------------- -------------- --------------
Gross profit.............................. 99,776,497 137,010,112 10,055,520 (194,152) 246,647,977
Selling, general & administrative......... 65,882,054 110,199,824 6,249,916 (1,037,079)(3) 159,736,622
(11,812)(4)
(16,380,610)(5)
(5,165,671)(6)
Depreciation & amortization............... 6,226,817 11,833,655 468,767 32,642 (7) 20,741,150
2,179,269 (8)
-------------- -------------- -------------- -------------- --------------
Income from operations.................... 27,667,626 14,976,633 3,336,837 20,189,109 66,170,205
Interest expense, net..................... (1,575,247) (10,979,059) (66,950) 7,998,181 (4) (41,416,615)
(1,358,863)(9)
(35,434,677)(10)
Other expense, net........................ (308,100) (196,813) (69,490) (3,321)(4) (577,724)
-------------- -------------- -------------- -------------- --------------
Income (loss) before taxes 25,784,279 3,800,761 3,200,397 (8,609,571) 24,175,866
Provision (benefit) for income taxes 10,519,000 4,128,000 42,851 (4,758,880)(11) 9,930,971
-------------- -------------- -------------- -------------- --------------
Net income (loss)......................... $ 15,265,27 $ (327,239) $ 3,157,546 $ (3,850,691) $ 14,244,895
============== ============== ============== ============== ==============
Diluted income per common share (12) $ 0.76 $ 0.71
============== ==============
Shares used to compute diluted income per
Common share............................ 20,201,380 20,205,090
============== ==============
<FN>
----------
* The historical statements of operations data for NovaCare O&P, as
adjusted to conform with Hanger's financial statement classifications.
Adjustments primarily relate to the following reclassifications:
o Administrative salary expense of $23.3 million, rent expense
of $13.6 million and other administrative expenses of $21.3
million reclassified from cost of products and services sold
to selling, general & administrative expense.
o Depreciation and amortization expense of $3.6 million
reclassified from cost of products and services sold to
depreciation & amortization expense.
o Royalty fee expense of $16.4 million reclassified from other
expense to selling, general & administrative expense.
(1) Other Acquired Companies (along with NovaCare O&P, the "Acquired
Companies") for the twelve months ended March 31, 1999 represent the
results of operations of such companies from April 1, 1998 to the
earlier of their respective dates of acquisition or March 31, 1999. Each
of the acquisitions has been accounted for as a purchase. Accordingly,
the results of operations of each of the Acquired Companies are included
in the historical results of operations of the Company from the date of
its acquisition.
Results of operations of the companies acquired by Hanger during the
period April 1, 1998 through March 31, 1999 ("Other Acquired Companies
(Hanger)") prior to their acquisition dates for the periods presented
are as follows:
</FN>
</TABLE>
<TABLE>
<CAPTION>
Company Acquired as of Net Sale Net Income
------- -------------- -------- ----------
<S> <C> <C> <C>
Hattiesberg........................................... April 30, 1998 $ 29,289 $ 8,601
Augusta Brace......................................... May 15, 1998 73,195 (10,115)
P&O Rehab. Tech....................................... June 11, 1998 106,121 (1,332)
Associated O&P........................................ June 19, 1998 270,520 46,521
Orthotics Techniques.................................. July 17, 1998 98,536 9,065
Seattle Limb System................................... August 1, 1998 5,693,225 1,563,197
Advanced Prosthetics.................................. September 25, 1998 760,829 365,160
Orthopedic Services................................... September 30, 1998 1,306,518 244,294
Fessenden O&P......................................... November 13, 1998 874,073 285,840
Baltimore Orthotics................................... December 1, 1998 742,920 51,987
Manasota Orthopedic................................... December 4, 1998 249,939 (18,110)
OST Patient Advocates................................. December 11, 1998 432,510 40,852
Thornton Orthopedic................................... January 5, 1999 738,409 29,962
Carolina.............................................. January 6, 1999 1,174,612 306,194
Universal O&P......................................... January 29, 1999 665,883 11,502
Medical Center Brace.................................. February 12, 1999 3,310,095 57,302
----------- ------------
Total............................................. $16,526,674 $ 2,990,920
=========== ============
</TABLE>
Results of operations of the companies acquired by NovaCare O&P during
the period April 1, 1998 through March 31, 1999 ("Other Acquired
Companies (NovaCare)") prior to their acquisition dates for the periods
presented are as follows:
F-28
<PAGE>
<TABLE>
<CAPTION>
Company Acquired as of Net Sale Net Income
------- -------------- -------- ----------
<S> <C> <C> <C>
University O&P Consultants............................. April 1, 1998 $ -- $ --
Advanced Orthopedic Systems............................ May 1, 1998 41,900 160
Central Valley Prosthetics & Orthotics................. May 1, 1998 33,308 12,051
Meadowbrook Orthopedics................................ May 1, 1998 79,610 2,397
O.S. Orthotics & Prosthetics........................... May 1, 1998 66,562 18,965
Binghamton Limb & Brace................................ June 1, 1998 290,473 38,695
Stockton Orthopedic.................................... June 1, 1998 178,225 9,651
Protech O&P Center..................................... June 1, 1998 254,653 16,553
American Rehabilitation Systems........................ June 1, 1998 144,937 3,465
Orthopedic Laboratories................................ June 1, 1998 80,444 4,299
Columbus Orthopaedic Prosthetic & Orthotic Center...... June 1, 1998 362,465 22,838
Tuscon Limb & Brace.................................... June 1, 1998 431,413 18,340
Physical Restoration Laboratories...................... June 1, 1998 276,082 19,212
----------- ---------
Total.............................................. $ 2,240,072 $ 166,626
=========== =========
</TABLE>
(2) Reflects the elimination of profit on intercompany sales during the
period presented. Net sales and cost of products and services sold have
been reduced by $1,680,190 and $1,327,586, respectively.
(3) Reflects a net reduction in cost of products and services sold and
selling, general and administrative expense of $158,452 and $1,037,079,
respectively, for employee and practitioner salaries of the Acquired
Companies to reflect the difference between such historical amounts and
amounts specified in employment contracts for comparable employment
positions with the Company.
<TABLE>
<CAPTION>
Twleve Months Ended
Company March 31, 1999
------- --------------
<S> <C>
Other Acquired Companies (Hanger)................................. $ 951,759
Other Acquired Companies (NovaCare O&P)........................... 243,772
-----------
Total......................................................... $ 1,195,531
===========
</TABLE>
(4) Adjustments to selling, general and administrative expense, interest
expense and other income to reflect the elimination of historical income
and expense generated from assets not acquired and/or liabilities not
assumed:
<TABLE>
<CAPTION>
Selling,
general and Interest
Company Administrative Expense Other
------- -------------- -------- -----
<S> <C> <C> <C>
NovaCare O&P $ -- $ 7,938,449 $ --
Other Acquired Companies (Hanger).................................. 8,814 36,204 3,321
Other Acquired Companies (NovaCare O&P)............................ 2,998 23,528
-------- ----------- -------
Total.......................................................... $ 11,812 $ 7,998,181 $ 3,321
======== =========== =======
</TABLE>
(5) Adjustment to reduce selling, general, and administrative expense by the
royalty fee of $16,380,610 charged by NovaCare, Inc. to NovaCare O&P.
(6) Reduction in selling, general and administrative expense related to
elimination of intercompany profit of $5,165,671 previously allocated to
NovaCare O&P for personnel provided by a subsidiary of NovaCare.
(7) Reflects increases in historical amounts of the Acquired Companies for
amortization expenses resulting from non-compete agreements signed in
connection with acquisitions, as follows:
<TABLE>
<CAPTION>
Twleve Months Ended
Company March 31, 1999
------- --------------
<S> <C>
Other Acquired Companies (Hanger)........................................ $ 32,642
</TABLE>
(8) Reflects additional amortization over a 40-year period, as if such
Acquired Companies were acquired as of the beginning of the period
presented, as follows:
<TABLE>
<CAPTION>
Twleve Months Ended
Company March 31, 1999
------- --------------
<S> <C>
NovaCare O&P............................................................. $ 1,766,278
Other Acquired Companies (Hanger)........................................ 370,462
Other Acquired Companies (NovaCare O&P).................................. 42,529
-----------
Total................................................................ $ 2,179,269
===========
</TABLE>
(9) Reflects additional interest expense that would have been incurred if
the consideration (in the form of cash and promissory notes) for the
Other Acquired Companies had been paid at January 1, 1998. The interest
rates used to calculate pro forma interest on the assumed additional
debt required to fund the cash payments reflects the Company's
approximate borrowing rate.
F-29
<PAGE>
<TABLE>
<CAPTION>
Twleve Months Ended
Company March 31, 1999
------- --------------
<S> <C>
Other Acquired Companies (Hanger)................................... $ 1,234,837
Other Acquired Companies (NovaCare O&P)............................. 124,026
------------
Total........................................................... $ 1,358,863
============
</TABLE>
(10) Represents the interest expense on the Financing for the Acquisition as
of the beginning of the period presented.
<TABLE>
<CAPTION>
Source Amount Interest Rate Interest
------ ------ ------------- --------
<S> <C> <C> <C>
Revolving Credit Facility.................................. $ 12,429,594 8.06% $ 1,439,677 (a)
Tranche A Term Facility.................................... 100,000,000 8.06% 8,060,000
Tranche B Term Facility.................................... 100,000,000 9.06% 9,060,000
Notes...................................................... 150,000,000 11.25% 16,875,000
Total.................................................. $35,434,677
============
</TABLE>
----------
(a) Interest expense includes $437,852 related to the unused portion
not borrowed under the Revolving Credit Facility.
An increase or decrease of 0.125% in the assumed interest rate on the
Revolving Credit Facility, Tranche A Term Facility and Tranche B Term
Facility would change the pro forma interest expense by $265,000 for the
twelve months ended March 31, 1999.
(11) To reflect income taxes as if the Company and Acquired Companies were a
C Corporation for the period presented, at an effective tax rate of
approximately 41%.
(12) Historical and pro forma diluted income per share is computed by
dividing net income adjusted for preferred stock dividends by the number
of weighted average common and common-equivalent shares outstanding for
the period. The shares used in the computation of net income per common
share on a pro forma basis also include common stock issued in
connection with acquisitions.
If approved by the Company's stockholders in the future, the Company
may, at its option, make the 7% Redeemable Preferred Stock convertible
into the Company's Common Stock. The computation of net income per
common share on a pro forma basis does not include the common stock into
which such shares of 7% Redeemable Preferred Stock would be convertible.
If such shares were included in the computation, pro forma EPS would
decrease from $0.71 to $0.60.
(13) The unaudited pro forma amounts exclude potential future contingent
consideration to be paid to former shareholders of acquired companies
based on prescribed formulas. Contingent consideration is to be
accounted for as additional purchase price consideration if and when it
becomes probable.
(14) Does not reflect reductions to historical amounts as a result of future
termination of employment of certain employees, the closure of certain
facilities and management's estimate of certain costs that were
previously allocated to NovaCare O&P. Following is a summary of
estimated cost savings not reflected in the historical amounts and the
related impact on pro forma EBITDA, net income and EPS:
<TABLE>
<S> <C>
Employee terminations................................................................. $ 6,358,176
Closure of NovaCare O&P facilities.................................................... 747,576
Elimination of corporate allocations of parent of NovaCare O&P 970,797
------------
$ 8,076,549
============
EBITDA................................................................................ $ 86,911,356
Adjusted EBITDA....................................................................... $ 94,987,905
Net income............................................................................ $ 14,244,896
Adjusted net income................................................................... $ 22,321,445
EPS................................................................................... $ 0.71
Adjusted EPS.......................................................................... $ 1.11
Reported EPS.......................................................................... $ 0.76
</TABLE>
F-30
EXHIBIT 2(A)
STOCK PURCHASE AGREEMENT
By and Among
NovaCare, Inc.,
NC Resources, Inc.,
Hanger Orthopedic Group, Inc.
and
HPO Acquisition Corp.
As of April 2, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
I. PURCHASE AND SALE OF THE SHARES............................................ 1
1.01 Purchase and Sale of the Shares..................................... 1
1.02 Purchase Price, Payment and Adjustments............................. 1
1.03 Delivery of the Shares.............................................. 4
1.04 Intercompany Account Obligations.................................... 4
1.05 Guaranties.......................................................... 4
II. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE SELLER................ 4
2.01 Organization and Qualification; Subsidiaries........................ 4
2.02 Conflicts........................................................... 5
2.03 Capitalization...................................................... 5
2.04 Financial Statements; No Undisclosed Liabilities.................... 5
2.05 Accounts Receivable; Inventories.................................... 6
2.06 Absence of Certain Changes.......................................... 6
2.07 Taxes ........................................................... 7
2.08 Real Property Owned or Leased....................................... 8
2.09 Title to Assets..................................................... 8
2.10 Contractual and Other Obligations................................... 8
2.11 Compensation and Employment Agreements.............................. 9
2.12 Employee Benefit Plans.............................................. 9
2.13 Labor Relations..................................................... 10
2.14 Insurance........................................................... 10
2.15 Litigation.......................................................... 11
2.16 Permits; Compliance with Applicable Law............................. 11
2.17 Bank Accounts....................................................... 12
2.18 Trademarks, Patents and Copyrights.................................. 12
2.19 Transactions with Certain Persons................................... 13
2.20 Authority........................................................... 13
2.21 Ownership of Shares................................................. 13
2.22 Consents ........................................................... 13
2.23 Foreign Person...................................................... 13
2.24 Medicare, Medicaid and Third-Party Payors........................... 14
2.25 Disclosure; Year 2000............................................... 14
III. REPRESENTATIONS AND WARRANTIES OF HANGER AND THE PURCHASER................. 15
3.01 Organization........................................................ 15
3.02 Authority........................................................... 15
i
<PAGE>
3.03 Conflicts........................................................... 15
3.04 Litigation; Disputes................................................ 15
3.05 Consents ........................................................... 15
3.06 Investment Purpose.................................................. 16
3.07 Financing........................................................... 16
IV. THE CLOSING................................................................ 16
4.01 Time and Place of the Closing....................................... 16
4.02 Termination......................................................... 16
4.03 Effect on Obligations............................................... 17
4.04 Return of Documentation............................................. 17
4.05 Sole and Exclusive Remedy........................................... 18
V. CONDITIONS TO THE SELLER'S OBLIGATIONS TO CLOSE............................ 18
5.01 Certificates........................................................ 18
5.02 Opinion of the Purchaser's Counsel.................................. 18
5.03 Representations, Warranties and Covenants........................... 18
5.04 No Litigation....................................................... 19
5.05 Approvals........................................................... 19
5.06 Third Party Consents................................................ 19
5.07 HSR Act Approval.................................................... 19
5.08 Releases ........................................................... 19
VI. CONDITIONS TO THE PURCHASER'S OBLIGATION TO CLOSE.......................... 19
6.01 Certificates........................................................ 19
6.02 Opinion of the Parent's Counsel..................................... 20
6.03 Representations, Warranties and Covenants........................... 20
6.04 No Litigation....................................................... 21
6.05 Approvals........................................................... 21
6.06 Third Party Consents................................................ 21
6.07 HSR Act Approval.................................................... 21
6.08 Resignations........................................................ 22
6.09 Discharge of Indebtedness; Release of Liens......................... 22
6.10 Temporary Use of Supplier Reimbursement Numbers..................... 22
6.11 Transition Services Agreement....................................... 22
6.12 Subscriber Services Agreement....................................... 22
6.13 Escrow Agreement.................................................... 22
VII. CONDUCT OF THE BUSINESS.................................................... 22
7.01 Operation of the Business........................................... 23
7.02 No Loans, Advances, Etc............................................. 23
7.03 Capital Expenditures................................................ 23
7.04 Preservation of Organization and Business Relationships............. 23
7.05 Employee Plans...................................................... 23
ii
<PAGE>
7.06 Maintenance of Insurance............................................ 23
7.07 Claims ........................................................... 23
7.08 Sale of Assets...................................................... 23
VIII. OTHER AGREEMENTS OF THE PARTIES 23
8.01 Announcements....................................................... 23
8.02 Employee Obligations................................................ 24
8.03 Labor Relations..................................................... 24
8.04 Access to Information............................................... 24
8.05 Tax Matters......................................................... 26
8.06 Insurance Matters................................................... 28
8.07 Agreement by the Purchaser Regarding No Other Representations or
Warranties by the Parent or the Seller.............................. 29
8.08 Name Change......................................................... 30
8.09 Release of Liens.................................................... 30
8.10 Consents and Approvals.............................................. 30
8.11 Further Assurances.................................................. 30
8.12 Best Efforts........................................................ 31
8.08 Notice of Breach.................................................... 31
8.14 Confidentiality..................................................... 31
8.15 Access to Properties and Records.................................... 31
8.17 Acquisition of Rights to Confidentiality............................ 31
8.17 Financing........................................................... 32
IX. INDEMNIFICATION............................................................ 32
9.01 Indemnification by the Parent and the Seller........................ 32
9.02 Indemnification by the Purchaser.................................... 33
9.03 Procedure for Indemnification....................................... 33
9.04 Limits on the Liability of the Seller............................... 36
9.05 Other Limits on Indemnification..................................... 36
9.06 Losses Net.......................................................... 37
9.07 Sole and Exclusive Remedy........................................... 37
9.08 Limitations on Materiality.......................................... 37
X. BROKERS AND FINDERS........................................................ 37
10.01 The Parent's and the Seller's Obligations........................... 37
10.02 The Purchaser's Obligations......................................... 37
XI. MISCELLANEOUS.............................................................. 38
11.01 Notices............................................................. 38
11.02 Entire Agreement.................................................... 39
11.03 Assignment.......................................................... 39
11.04 Further Action...................................................... 39
11.05 Binding Effect...................................................... 39
iii
<PAGE>
11.06 Expenses............................................................ 39
11.07 Arbitration......................................................... 39
11.08 Schedules and Exhibits.............................................. 39
11.09 Invalidity, Etc..................................................... 40
11.10 Headings............................................................ 40
11.11 Governing Law....................................................... 40
11.12 Counterparts........................................................ 40
11.13 Construction........................................................ 40
11.14 Hanger's Guaranty of Purchaser's Obligations........................ 40
11.15 Assignment of Parent Agreements..................................... 40
XII. DEFINITIONS................................................................ 41
12.01 Certain Definitions................................................. 41
</TABLE>
SCHEDULES
Schedule 1.02(a)(1) Principal Amounts of Acquired Company Notes
Schedule 1.02(a)(2) Acquired-company Notes
Schedule 1.02(a)(3) Assumed Severance Obligations
Schedule 1.02(b) Trial Balance
Schedule 2.01 Subsidiaries, Capital Stock
Schedule 2.02 Group Member Conflicts
Schedule 2.03 Capitalization
Schedule 2.04(a) Financial Statements
Schedule 2.04(b) Liabilities
Schedule 2.05(a) Accounts Receivable Exceptions
Schedule 2.05(b) Inventory Exceptions
Schedule 2.06 Certain Changes
Schedule 2.07(a) Taxes
Schedule 2.07(b) Tax Attributes
Schedule 2.08 Real Property
Schedule 2.09 Title; Liens
Schedule 2.10 Contracts
Schedule 2.11 Compensation
Schedule 2.12 Benefit Plans
Schedule 2.13 Labor Relations
Schedule 2.14 Insurance
Schedule 2.15 Litigation
Schedule 2.16 Permits; Environmental
Schedule 2.18 Intellectual Property
Schedule 2.19 Transactions with Certain Persons
Schedule 2.22 Consents
Schedule 2.25 Y2K Compliance
Schedule 9.01 Assumed Litigation
iv
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), made as of the
2nd day of April 1999, by and among NovaCare, Inc., a Delaware corporation
(the "Parent"), NC Resources, Inc., a Delaware corporation (the "Seller"),
Hanger Orthopedic Group, Inc., a Delaware corporation ("Hanger"), and HPO
Acquisition Corp., a Delaware corporation (the "Purchaser"). Capitalized terms
used herein and not defined in the specific Section in which they are used,
shall have the meanings assigned to such terms in Section XII hereof.
W I T N E S S E T H:
WHEREAS, the Seller is the holder of all of the issued and
outstanding shares of common stock, $.01 par value per share (the "Common
Stock"), of NovaCare Orthotics and Prosthetics, Inc., a Delaware corporation
(the "Company");
WHEREAS, the Parent is the holder of all of the outstanding
capital stock of the Seller; and
WHEREAS, the Purchaser desires to acquire from the Seller, and the
Seller desires to sell to the Purchaser, for the consideration hereinafter
provided, all of the outstanding shares of the Common Stock (collectively, the
"Shares").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto, intending
to be legally bound, hereby agree as follows:
SECTION I.
PURCHASE AND SALE OF THE SHARES
1.01 PURCHASE AND SALE OF THE SHARES. Subject to the terms and
conditions of this Agreement and on the basis of the representations,
warranties, covenants and agreements herein contained, at the Closing, the
Seller agrees to sell, assign and convey the Shares to the Purchaser, and the
Purchaser agrees to purchase, acquire and accept the Shares from the Seller.
1.02 PURCHASE PRICE, PAYMENT AND ADJUSTMENTS.
(a) PURCHASE PRICE AND PAYMENT. The Purchaser agrees to provide
the Seller with an aggregate value of Four Hundred Fifty-Five Million Dollars
($455,000,000.00) ("PURCHASE PRICE") for the Shares by: (i) the assumption of
the promissory notes payable by the Company to the sellers of acquired
businesses in a principal amount not to exceed the amount (the "Relevant
Amount") set forth on Schedule 1.02(a)(1) hereto with respect to the relevant
Closing Date (the "Acquired-company Notes") as specifically listed on SCHEDULE
1.02(A)(2) hereto; (ii) the escrow of Ten Million Dollars ($10,000,000.00)
(the "Escrowed Funds") until the determination of any Purchase Price
adjustments as provided in Section 1.02(b) hereof; (iii) the assumption of the
liability of the Parent with respect to the severance amounts calculated as
set forth on SCHEDULE 1.02(A)(3); and (iv) the payment of the balance of the
1
<PAGE>
Purchase Price in cash by wire transfer or delivery of other immediately
available funds at the Closing. In the event that the Closing hereunder shall
occur prior to July 1, 1999, at the request of the Seller, the Purchaser
agrees to use commercially reasonable efforts to deliver, in lieu of the cash
portion of the Purchase Price, a promissory note secured by a letter of credit
(the "Note"), due and payable to the Seller on July 1, 1999 and on terms
otherwise acceptable to the parties; provided, however, that the issuance of
the Note (and the maintenance of the letter of credit with respect thereto)
shall not result in any incremental cost to the Purchaser incurred due to the
delivery of the Note in lieu of cash or provided, further, that the Seller
agrees to bear such incremental costs.
(b) Purchase Price Adjustments. (i) Notwithstanding anything
contained in this Agreement to the contrary, the Seller and Parent guarantee
that the principal amount of the Company's Acquired-company Notes shall not
exceed a maximum of the Relevant Amount measured as of the close of business
on the Closing Date. In the event that the principal amount of the
Acquired-company Notes exceeds the Relevant Amount, then the cash portion of
the Purchase Price payable pursuant to Section 1.02(a) shall be reduced by the
amount, if any, by which the Acquired-company Notes exceed the maximum amount
of the Relevant Amount.
(ii) If, on the Closing Date, Adjusted Working Capital is less
than Ninety-Five Million Five Hundred Seventy-Two Thousand Dollars
($95,572,000.00), then the cash portion of the Purchase Price payable
pursuant to Section 1.02(a) shall be reduced by the amount of such
deficiency (the "Working Capital Deficiency") in Adjusted Working
Capital. If, on the Closing Date, Adjusted Working Capital is greater
than $95,572,000.00, then the cash portion of the Purchase Price payable
pursuant to Section 1.02(a) shall be increased by the amount by which
Adjusted Working Capital exceeds $95,572,000.00 (the "Working Capital
Excess"). Adjusted Working Capital shall be comprised of cash in an
amount of not less than Two Million Dollars ($2,000,000.00), accounts
receivable, inventory, other current assets, accounts payable, and
accrued expenses to third-parties (excluding all inter-company
obligations, accrued but unpaid Taxes and the current portion of the
Acquired- company Notes) of the Company calculated in accordance with
this Agreement and GAAP applied on a basis consistent with the Company's
prior practice. The Adjusted Working Capital shall be initially based
upon an estimated trial balance to be prepared by the Company and
presented to the Purchaser as of the end of the last full month
immediately prior to the month in which the Closing Date occurs. This
trial balance shall be attached hereto as SCHEDULE 1.02(B). At the
Closing, the Company shall present to the Purchaser the Company's
initial calculation of its Adjusted Working Capital as of the Closing
Date.
(iii) The actual Adjusted Working Capital of the Company as of the
Closing Date and the actual amount of Acquired-company Notes shall be
based upon a final Balance Sheet dated as of the Closing Date. The
Purchaser shall have such final Balance Sheet compiled by
PricewaterhouseCoopers LLP ("PWC"). The Purchaser shall deliver to the
Seller the calculation and determination of the actual Adjusted Working
Capital of the Company and Acquired-company Notes as of the Closing Date
as determined by PWC within ninety (90) days after the Closing Date.
2
<PAGE>
Such calculation shall be deemed conclusive and binding on the parties
for purposes of computing the actual Adjusted Working Capital of the
Company and Acquired-company Notes as of the Closing Date unless the
Seller objects by delivering a detailed statement describing the
Seller's objections to the Purchaser within thirty (30) days after
receiving from the Purchaser the determination by PWC of the Adjusted
Working Capital of the Company and Acquired-company Notes as of the
Closing Date. The Purchaser and the Seller will use reasonable efforts
to resolve any such objections themselves. Any dispute regarding the PWC
determination of the Adjusted Working Capital of the Company and
Acquired-company Notes as of the Closing Date shall be resolved in the
manner set forth in Section 1.02(d) hereof. If the Seller does not
provide such written notice to the Purchaser within such 30-day period,
then the Purchaser shall make the appropriate adjustment to the Purchase
Price in accordance with Section 1.02(c) within ten (10) days after the
date by which the Seller was required to provide such written notice
under this Section 1.02(b)(iii).
(c) The amount of any Working Capital Deficiency and the amount
by which the principal amount of the Acquired-company Notes exceeds the
Relevant Amount shall be promptly deducted from the Escrowed Funds and
returned to the Purchaser, with the remaining balance, if any, of the Escrowed
Funds being promptly thereafter released to the Seller. In the event the
Escrowed Funds are less than the subject Working Capital Deficiency and excess
Acquired-company Notes, then all of the Escrowed Funds shall be returned to
the Purchaser and the remaining amount of such Working Capital Deficiency and
excess Acquired-company Notes which is greater than the amount of the Escrowed
Funds shall be paid by the Parent and the Seller to the Purchaser in cash by
wire transfer within thirty (30) days of the final determination of such
amounts as provided under this Section 1.02. If there is no Working Capital
Deficiency and the amount of the Acquired-company Notes does not exceed the
Relevant Amount, then the entire amount of the Escrowed Funds shall be
released to the Seller. The amount of any Working Capital Excess shall be paid
by the Purchaser to the Seller in cash by wire transfer within thirty (30)
days of the final determination of such Working Capital Excess as provided
under this Section 1.02.
(d) Dispute Resolution Mechanism. If the parties do not obtain a
final resolution of a dispute regarding the determination by PWC of the actual
Adjusted Working Capital of the Company and the amount of Acquired-company
Notes as of the Closing Date as provided under Section 1.02(b) hereof within
thirty (30) days after the Purchaser has received the statement of objections
from the Seller, then PWC shall select another nationally-recognized,
independent certified public accounting firm, reasonably satisfactory to the
parties, to resolve any remaining objections. The determination of such second
accounting firm so selected by PWC will be set forth in writing and will be
conclusive and binding upon the parties. The Purchaser will revise the
determination of the actual Adjusted Working Capital of the Company and the
amount of the Acquired-company Notes as of the Closing Date to reflect such
resolution of any objections thereto. The fees and expenses of such second
accounting firm shall be borne 50% by the Purchaser and 50% by the Parent and
Seller.
3
<PAGE>
1.03 DELIVERY OF THE SHARES. At the Closing, the Seller shall deliver
the Shares to the Purchaser by delivering certificates duly endorsed in blank
representing the Shares, each certificate to be accompanied by any requisite
stock transfer tax stamps.
1.04 INTERCOMPANY ACCOUNT OBLIGATIONS. As of the Effective Time, all
then outstanding intercompany obligations, agreements and contracts between
any Group Member and the Parent, the Seller or any of their Affiliates (other
than any Group Member) shall be cancelled or otherwise eliminated, at no cost
to the Purchaser, and in all cases none of the Parent, the Seller, any of
their Affiliates or any Group Member shall have any further liability or
obligation in respect of any such intercompany obligation, agreement or
contract; provided that nothing in this Section 1.04 shall affect any of the
covenants, agreements, obligations or liabilities of the Parent, the Seller or
the Purchaser as set forth in this Agreement.
1.05 GUARANTIES. In the event that the Seller, the Parent or any of
their Affiliates (other than any Group Member) has guaranteed (the entity
obligated under any such guaranty being hereinafter referred to as the
"Guarantor") any obligations (the "Guaranteed Obligations") of any Group
Member outstanding as of the Closing Date, the Purchaser shall use its
commercially reasonable efforts to obtain the release of each Guarantor from
any liability with respect to the Guaranteed Obligations and shall indemnify
and hold harmless each Guarantor harmless from and against any such liability.
SECTION II.
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE SELLER
In connection with the purchase and sale of the Shares hereunder, the
Parent and the Seller, jointly and severally, hereby represent and warrant to
Hanger and the Purchaser, as of the date hereof and as of the Closing Date,
that:
2.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. The Company and each
of its subsidiaries is listed on SCHEDULE 2.01 hereto (each a "Subsidiary" and
collectively, the "Subsidiaries") and is validly existing and in good standing
under the laws of the jurisdiction of its organization, and has all requisite
corporate or partnership (as applicable) power, authority and legal right to
own, operate and lease its assets and properties and to conduct the businesses
in which it is now engaged. Each Group Member is duly qualified to transact
business as a foreign corporation or partnership (as applicable) in all
jurisdictions wherein it is required to be so qualified, except where the
failure to be so qualified would not have a Material Adverse Effect. The
Company does not have any Subsidiaries other than the Subsidiaries. Other than
the Subsidiaries and other than as set forth on SCHEDULE 2.01 hereto, the
Company does not own any capital stock or other proprietary interest, directly
or indirectly, in any corporation, association, trust, partnership, joint
venture, limited liability company or other entity nor is the Company bound by
any agreement to acquire any such capital stock or other proprietary interest.
Copies of the certificate of incorporation and by-laws, or other
organizational documents, of the Company and each Subsidiary have been made
available to the Purchaser on or prior to the Closing Date, which copies are
complete and correct and include all amendments, modifications or supplements
thereto.
4
<PAGE>
2.02 CONFLICTS. Neither the execution and delivery of this Agreement by
the Parent and the Seller, nor the consummation of the transactions
contemplated hereby to be consummated by the Parent or the Seller, (a)
violates any provision of the certificate of incorporation or by-laws or other
organizational documents of the Parent, the Seller or any Group Member or (b)
constitutes a violation of any Applicable Law. Except as set forth on SCHEDULE
2.02 hereto, neither the execution and delivery of this Agreement by the
Parent and the Seller nor the consummation of the transactions contemplated
hereby to be consummated by the Parent or the Seller violates, conflicts with,
results in any breach of any of the terms of, or results in the termination
of, or the creation of any material Lien pursuant to the terms of, any
Contract or any material contract or other obligation to which the Parent or
the Seller is subject except where such violation, conflict, breach,
termination or Lien would not have a Material Adverse Effect.
2.03 CAPITALIZATION. The authorized, issued and outstanding capital
stock or other equity interests of the Company and each Subsidiary is as set
forth on SCHEDULE 2.03 hereto. All of the outstanding shares of the Common
Stock and all of the outstanding shares of capital stock of each corporate
Subsidiary have been duly and validly authorized and issued and are fully paid
and non-assessable and are owned of record by the Seller, the Company or a
Subsidiary, as the case may be. Except as set forth on SCHEDULE 2.03 hereto,
as of the Closing Date, there are no outstanding subscriptions, warrants,
options, calls, commitments, convertible or exchangeable securities, or other
rights or agreements to purchase or acquire shares of capital stock or other
equity interests of any Group Member to which any Group Member, the Parent or
the Seller is a party. Except as set forth on SCHEDULE 2.03 hereto, as of the
Closing Date, there are no agreements concerning the issuance, voting,
transfer, acquisition or disposition of shares of capital stock or other
equity interests of any Group Member to which any Group Member, the Parent or
the Seller is a party.
2.04 FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. (a) The
Company's audited consolidated balance sheets as of June 30, 1997 and 1998 and
related consolidated statements of income and cash flows for each of the years
ended June 30, 1996, 1997 and 1998, and the unaudited consolidated balance
sheet as at December 31, 1998 and the related unaudited consolidated
statements of income and cash flows for the six months then ended
(collectively, the "Financial Statements") are attached hereto as SCHEDULE
2.04(A). The Financial Statements have been prepared in accordance with GAAP,
consistently applied, in all material respects, except that the Financial
Statements as of December 31, 1998 do not contain footnotes. The balance
sheets constituting a part of the Financial Statements fairly present in all
material respects the consolidated financial condition of the Group as at the
date of such balance sheets and the other related statements included in the
Financial Statements fairly present in all material respects the consolidated
results of operations and cash flows of the Group for the periods then ended.
(b) Except as set forth in SCHEDULE 2.04(B) hereto, no Group
Member has any material liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, except for:
(i) liabilities and obligations set forth or adequately reserved
against in the Financial Statements;
5
<PAGE>
(ii) liabilities and obligations incurred in the ordinary course
of business subsequent to the date of the Financial Statements; and
(iii) liabilities and obligations described or otherwise disclosed
on the Schedules to this Agreement.
(c) Except for indebtedness for borrowed money to be cancelled
or otherwise eliminated as set forth in Section 1.04 hereof and except for
indebtedness for borrowed money among Group Members, no Group Member has any
indebtedness for borrowed money.
2.05 ACCOUNTS RECEIVABLE; INVENTORIES.
(a) All accounts receivable of the Group Members reflected on
the balance sheet included in the Financial Statements as of December 31,
1998, and all accounts receivable which have arisen since December 31, 1998,
are valid accounts receivable subject to no known setoff or counterclaim and
have arisen only from bona fide arm's-length transactions in the ordinary
course of the business of the Group Members, consistent with past practices
and recorded in accordance with GAAP, consistently applied, and subject only
to the reserves reflected on the Financial Statements, except only as provided
in SCHEDULE 2.05(A).
(b) The inventories reflected on the balance sheet included in
the Financial Statements, or thereafter acquired by the Group Members (and not
subsequently disposed of in the ordinary course of business), consist of items
that are saleable in all material respects in the ordinary course of business
for the purpose for which they were procured or manufactured, and none of
which is damaged or defective, nor subject to any security interest, except as
otherwise provided in SCHEDULE 2.05(B). The values at which inventories are
carried on the balance sheet included in the Financial Statements, or in the
case of inventories acquired following December 31, 1998 on the books and
records of the applicable Group Member, reflect the normal inventory valuation
policy of the Group Members of stating inventories at the lower of cost or
market (on a first-in, first-out method) in accordance with GAAP.
2.06 ABSENCE OF CERTAIN CHANGES. Except as set forth in SCHEDULE 2.06,
since December 31, 1998 there has not been any (a) adverse change in the
assets, properties, results of operations or financial condition of the Group
which has resulted or is likely to result in a Material Adverse Effect; (b)
material damage to or destruction of the assets or properties of the Group,
whether or not insured; (c) material changes in the Group's customary methods
of operations or the manner in which their business is conducted; or (d)
except in the ordinary course of business, sale or transfer of material
tangible or intangible assets of the Group, or mortgage, pledge or imposition
of any Lien on such assets except for Permitted Liens.
2.07 TAXES. Except as set forth in SCHEDULE 2.07(A) hereto:
(a) Each Group Member has filed or caused to be filed on a
timely basis all returns, reports or other declarations relating to Taxes
required to be filed by it (the "Tax Returns"), except for any such Tax
Returns which the Company or the Seller are not aware were required to be
filed and the failure to file which would not have, in the aggregate, a
Material Adverse Effect, and each of the Group Members has timely paid or
caused to be paid all Federal, state, local and foreign taxes (including, but
not limited to, income, franchise, property (real, tangible and intangible),
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sales, use, unemployment, withholding, gross receipts, business license,
transfer, capital, net worth, gains, excise, social security and workers'
compensation taxes and estimated income and franchise tax payments, and
penalties, interest and fines with respect to any thereof) (collectively,
"Taxes") set forth on such Tax Returns as due and payable by it with respect
to the periods covered by such Tax Returns. All of such Tax Returns are true
and correct in all material respects, except where the failure to be so would
not have, individually or in the aggregate, a Material Adverse Effect. Since
their respective dates of acquisition, the taxable income of each of the Group
Members has been included in the consolidated Federal income Tax Returns of
the Parent to the extent required to be included under the Code and in the
consolidated, combined or unitary state income Tax Returns of the Parent to
the extent required to be included under applicable state income Tax rules.
(b) With respect to any Taxes of any Group Member not yet due
and payable, adequate reserves and accruals in all material respects for such
Taxes have been made in the Financial Statements or in the books and records
of the applicable Group Member.
(c) Neither the Seller, nor the Parent, nor any Group Member has
received written notice from any taxing authority of any material deficiency,
claim or other dispute relating to the payment or assessment of any Taxes for
any period which remains unsettled at the date hereof, and to the Knowledge of
the Parent no such deficiency exists materially in excess of reserves and
accruals set forth in the Financial Statements.
(d) Neither the Seller, nor the Parent, nor any Group Member has
executed any waiver of any statute of limitations on the assessment or
collection of Taxes with respect to any Group Member or executed any agreement
now in effect extending the period of time to assess or collect any Taxes with
respect to any Group Member.
(e) There are no Liens for Taxes (other than Permitted Liens)
upon or, to the Knowledge of the Parent, threatened against any assets of the
Group, other than Liens which would not have a Material Adverse Effect.
(f) None of the Seller, the Parent or any Group Member is a
party to any pending or, to the Knowledge of the Parent, threatened action,
proceeding or assessment by any taxing authority, foreign or domestic,
relating to any Group Member.
(g) Except for the Tax Sharing Agreement which shall be
cancelled as of the Closing Date without any effect whatsoever on any Group
Member for any taxable year, no Group Member is a party to any tax sharing
agreement.
(h) No election under Section 341(f) of the Code has been or
will be made to treat any Group Member as a "consenting corporation" as
defined in such Section 341(f).
(i) No Group Member is or has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code.
(j) SCHEDULE 2.07(B) hereto sets forth a summary of the Federal
and state tax attributes (net operating losses, etc.) available to each Group
Member and not less than five (5) days prior to the Closing Date, the Seller
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shall deliver to the Purchaser a schedule of the subsidiary stock basis for
each Group Member.
2.08 REAL PROPERTY OWNED OR LEASED. A list of all real property owned
or leased by each Group Member is set forth in SCHEDULE 2.08 hereto. Except as
set forth in SCHEDULE 2.08 hereto, all such leased real property is held
subject to written leases under which the applicable Group Member has not
received a written notice of any existing defaults or events of default or
events which with notice or lapse of time or both would constitute defaults on
the part of the applicable Group Member, nor has the applicable Group Member
done any act or omitted to do any required act which would result in a
default, except for any such default which would not have a Material Adverse
Effect. Furthermore, except as set forth in SCHEDULE 2.08 hereto, no lease
agreement relating to real property to which a Group Member is a party
contains a provision requiring approval by or consent of the lessor to a
change in control or ownership of the lessee or an increase in rental, fee
payable or other modification of the terms of such agreement as a result
thereof, which provision would be applicable to the transactions contemplated
by this Agreement.
2.09 TITLE TO ASSETS. Except as set forth in SCHEDULE 2.09 hereto, each
Group Member has good and valid title to all of the properties and assets
owned by it, free and clear of all Liens except for Permitted Liens. Each
Group Member leases, owns or has the right to use all properties and assets
used in the operation of its business as currently conducted. Except as set
forth on SCHEDULE 2.09, the assets of the Company and its Subsidiaries are
sufficient and adequate in all material respects to carry on their respective
businesses as presently conducted.
2.10 CONTRACTUAL AND OTHER OBLIGATIONS. Set forth in SCHEDULE 2.10
hereto is a list as of December 31, 1998 of all (a) contracts, agreements,
leases and guarantees to which any Group Member is a party or by which any
Group Member or any of their respective assets is bound, in any case with
respect to which the unperformed obligation of the applicable Group Member is
in excess of $100,000 in the aggregate (excluding contracts and agreements
referred to in Section 2.11 or 2.12 hereof) and (b) uncompleted orders for the
purchase by any Group Member of materials, supplies, equipment and services
for the requirements of its business, and all work-in-progress and open
customer orders, in any case with respect to which the unperformed obligation
of the applicable Group Member is in excess of $100,000 in the aggregate; all
of the foregoing required to be listed on SCHEDULE 2.10 hereto being
hereinafter collectively referred to as the "Contracts". To the Knowledge of
the Parent, neither any Group Member nor any other party to a Contract is in
default in the performance of any Contract nor done any act or failed to do
any required act which would result in a default, no written notice of such a
default has been received by any Group Member, the Seller or the Parent and
none of the Seller, the Parent or any Group Member has received written notice
of an event the occurrence of which with the giving of notice or the lapse of
time would constitute a default under any covenant or condition under any
Contract, except in each case for any default which would not have a Material
Adverse Effect. Except as set forth on SCHEDULE 2.10 or SCHEDULE 2.22 hereto,
no consents are required (except for any such consents as shall have been
obtained prior to the Closing Date), and no event of default will occur, under
any Contract as a result of the sale and transfer of the Shares from the
Seller to the Purchaser, and the change in control of the Company and the
Group Members as a result of the sale and transfer of the Shares from the
Seller to the Purchaser will not give any person or entity the right to
renegotiate, change or void any terms of, or accelerate any amounts under, any
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Contract, any Acquired-company Notes or any non-competition agreement or
clause to which the Company and/or any Group Member is a party.
2.11 COMPENSATION AND EMPLOYMENT AGREEMENTS. Set forth in SCHEDULE 2.11
hereto is (a) a list as of the date hereof of all written agreements, plans or
arrangements by which any Group Member is bound with regard to compensation,
bonus, incentive, stock option, stock purchase, severance pay or other
benefits or perquisites, other than any agreements, plans or arrangements
listed in SCHEDULE 2.12 hereto and (b) a list as of the date hereof of all
employees of each Group Member who received compensation (excluding
compensation deemed to be received upon the exercise of stock options) in
excess of $50,000 during the most recently completed fiscal year and their
respective current positions and annual salaries and any other compensation
which is reasonably expected to be paid this year. SCHEDULE 2.11 hereto also
sets forth the names of all employees of the Company and each Group Member who
is a party to an employment, confidentiality or other agreement with the
Company or any Group Member, together with the terms of such agreement,
including non-competition scope and duration, and not less than five (5) days
prior to the Closing Date, the Seller shall deliver to the Purchaser a list of
the governing law, confidentiality and/or restrictive covenant provisions with
respect to such employment, confidentiality or other agreements. Except as set
forth in SCHEDULE 2.11 hereto, no employment agreement, severance agreement or
other agreement of any type to which any officer or employee of the Company or
any Group Member is a party contains any provision terminating or otherwise
calling for renegotiation, modification or payments under the terms of any
such agreement in the event of a change in control or ownership of the Company
or the subject Group Member. Except as set forth in SCHEDULE 2.11 hereto,
there are no contracts, agreements, plans or arrangements covering any
employee or former employee of the Company or any Group Member with "change of
control" or similar provisions. There is no contract, agreement, plan or
arrangement covering any employee or former employee of the Company that
individually or collectively could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G of the Code.
Neither the Company nor any trade or business (whether or not incorporated)
under common control with the Company within the meaning of Section 4001 of
ERISA has incurred any liability under the Worker Adjustment and Retraining
Act or any similar state law relating to employment termination in connection
with a mass layoff, plant closing or similar event.
2.12 EMPLOYEE BENEFIT PLANS.
Except as set forth in SCHEDULE 2.12 hereto:
(a) No Group Member maintains or sponsors, nor is it required to
make contributions to, any pension, profit-sharing, bonus, incentive, welfare
or other employee benefit plan within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") (such
plans and related trusts, insurance and annuity contracts, funding media and
related agreements and arrangements, other than any "multiemployer plan"
(within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA), being
hereinafter referred to as the "Benefit Plans" and such multiemployer plans
being hereinafter referred to as the "Multiemployer Plans");
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(b) Each Benefit Plan complies in all respects with all
requirements of ERISA and the Code except where the failure to so comply would
not have a Material Adverse Effect;
(c) Each Benefit Plan that is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service as to such qualification within the period of
time prescribed by law;
(d) No Group Member maintains, sponsors or contributes to (nor
is required to contribute to) any Multiemployer Plan;
(e) No Benefit Plan is a "defined benefit plan" (within the
meaning of Section 3(35) of ERISA);
(f) None of the Parent, the Seller or any Group Member has
engaged in, and the Parent has no knowledge of any fiduciary or other
"disqualified person or party in interest" of any Benefit Plan of any Group
Member that has engaged in, any "prohibited transaction" (within the meaning
of Section 406 of ERISA or Section 4975(c) of the Code);
(g) Each Benefit Plan that is intended to be qualified under
Section 501(a) of the Code as an organization described in Code Section
501(c)(9) has received a favorable determination letter from the Internal
Revenue Service as to the tax-exempt status of the organization, within the
period of time prescribed by law; and
(h) The account balance of the VEBA Trust as of March 31, 1999
is $-0-. To the extent that the portion of the assets held by the VEBA Trust
attributable to Employees, Former Employees and Beneficiaries exceeds the
amount required to fund run-out claims of Employees, Former Employees and
Beneficiaries from the Health Plan, that portion of the assets will be
spun-off to fund a separate VEBA to benefit Employees, Former Employees and
Beneficiaries.
2.13 LABOR RELATIONS. Except as set forth on SCHEDULE 2.13 hereto, no
Group Member is subject to any labor strikes, stoppages or lockouts and none
of them is a party to any contract or agreement with any labor organization or
other representative of its employees.
2.14 INSURANCE. Set forth on SCHEDULE 2.14 hereto is a list as of the
date hereof of the property and casualty insurance policies maintained by each
of the Group Members, the coverages of such policies, the annual premium
amounts, any unpaid premium amounts, the dates of renewal and expiration, and
the dates, if any, of any gaps or lapses in such insurance coverage. SCHEDULE
2.14 also sets forth all insurance policies covering any Group Member that
will not continue to remain in effect after the Closing Date.
2.15 LITIGATION. Except as set forth in SCHEDULE 2.15 hereto, there is
no litigation, arbitration or other legal proceeding (collectively, "Actions")
pending or, to the Knowledge of the Parent, threatened against any Group
Member or any material portion of the assets or properties of the Group,
except for Actions covered by insurance policies maintained by or for the
benefit of the Group Members (including insurance policies which are subject
to applicable deductibles, liability retentions or other reimbursement
obligations).
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2.16 PERMITS; COMPLIANCE WITH APPLICABLE LAW.
(a) GENERAL. Except as set forth in SCHEDULE 2.15 hereto, each
Group Member is in compliance with all Applicable Law relating to such Group
Member and its respective assets and properties, except where the failure to
be in compliance would not have a Material Adverse Effect.
(b) PERMITS. The permits, licenses, approvals, franchises and
authorizations (collectively, but excluding Environmental Permits, the
"Permits") issued to the Group Members are all the Permits required for the
ownership, operation and use by the Group Members of their properties and
assets and for the conduct of the business in which the Group Members are
presently engaged, except for such Permits which the failure to have would not
have a Material Adverse Effect. All the Permits are in full force and effect,
except where the failure to be in effect would not have a Material Adverse
Effect.
(c) ENVIRONMENTAL. Except as set forth in SCHEDULE 2.16 hereto:
(i) Each Group Member is in compliance with the provisions of
all Federal, state and local environmental laws, codes and ordinances
and all rules and regulations promulgated thereunder (the "Environmental
Laws"), including with respect to the real property leased by Group
Members listed on SCHEDULE 2.08 hereto and the improvements thereon (all
such leased real property and improvements thereon hereinafter referred
to collectively as the "Premises"), except where the failure to be in
compliance would not have a Material Adverse Effect.
(ii) Each Group Member has obtained all required Federal, state
and local permits, licenses, certificates and approvals (the
"Environmental Permits") relating to (A) air emissions, (B) discharges
to surface water or ground water, (C) noise emissions, (D) solid or
liquid waste disposal, and (E) the use, generation, storage,
transportation or disposal of toxic or hazardous substances or wastes
(intended hereby and hereafter to include any and all such materials
listed in any Environmental Law, as hazardous or potentially hazardous
(including, without limitation, (1) any chemical, compound, material or
substance that is defined, listed in, or otherwise classified pursuant
to, any of the Environmental Laws as a "hazardous substance", "hazardous
material", "hazardous waste", "toxic substance" or "toxic pollutant" and
(2) petroleum, natural gas, natural gas liquids, liquified natural gas,
and synthetic gas) (collectively, "Hazardous Substances")), except where
the failure to have obtained or maintained any such Environmental Permit
would not have a Material Adverse Effect.
(iii) To the Knowledge of the Parent, no violation of any
Environmental Law exists, and no Group Member has received any written
notice of violations of any Environmental Law which have not been cured,
relating to the use, ownership or occupancy of any of the Premises,
except for any violations which would not have a Material Adverse
Effect.
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(iv) No Group Member has engaged in the generation, storage,
treatment, recycling, transportation or disposal of any Hazardous
Substance, except in compliance with applicable Environmental Laws,
except where the failure to be in compliance would not have a Material
Adverse Effect.
(v) None of the Premises, nor, to the Knowledge of the Parent,
any real property to which any Group Member has, directly or indirectly,
transported or arranged for the transportation of any Hazardous
Substances, is listed on the National Priorities List promulgated
pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), on CERCLIS (as defined in
CERCLA) or on any similar Federal, state or foreign list of sites
requiring investigation or clean-up.
2.17 BANK ACCOUNTS. Not less than five (5) days prior to the Closing
Date, the Seller shall deliver to the Purchaser a list as of such date of all
bank and securities accounts and lockboxes maintained by any Group Member, a
list of persons authorized to sign on behalf of each Group Member with respect
to each such account, a list of persons with authorized access to each such
lockbox and a list of the balances in such accounts and lockboxes as of the
most recent reasonably practicable dates (the Seller may comply with the
foregoing requirement as to balances by attaching a copy of the most recent
bank statements for such accounts and lockboxes).
2.18 TRADEMARKS, PATENTS AND COPYRIGHTS. SCHEDULE 2.18 hereto sets
forth a list as of the date hereof of all registrations of patents and pending
applications therefor, all registrations of trademarks, tradenames and service
marks and all pending applications therefor, all registrations of copyrights
and all pending applications therefor (collectively, "Intellectual Property"),
all to the extent that the foregoing items are used in the business of the
Group Members and are owned in whole or in part by any Group Member. To the
Knowledge of the Parent, all of the patents, trademarks, tradenames, service
marks, copyrights and licenses or other agreements listed in SCHEDULE 2.18
hereto are valid and in full force and effect, except as otherwise noted on
SCHEDULE 2.18 hereto. To the Knowledge of the Parent, no Group Member is
infringing upon, or otherwise violating, the rights of any third party with
respect to any Intellectual Property and no third party is infringing on the
rights of any Group Member.
2.19 TRANSACTIONS WITH CERTAIN PERSONS. Except with respect to
insurance arrangements set forth on SCHEDULE 2.14 hereto or referred to in
Section 8.06 hereof and the Tax Sharing Agreement, and except as set forth on
SCHEDULE 2.19 hereto, no executive officer, director or Affiliate of the
Parent, the Seller or any Group Member is presently a party to any agreement
with any Group Member regarding the payment of money or the transfer of
property by any Group Member to such person which will survive the Closing,
other than employment agreements all of which shall survive Closing without
change, except as otherwise provided on SCHEDULE 2.11.
2.20 AUTHORITY. Each of the Parent and the Seller has the corporate
power and authority to execute and deliver this Agreement and to perform its
covenants and agreements hereunder. The execution and delivery of this
Agreement by each of the Parent and the Seller, the performance by each of the
Parent and the Seller of its covenants and agreements hereunder and the
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consummation by each of the Parent and the Seller of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action. This Agreement constitutes a valid and legally binding obligation of
the Parent and the Seller, enforceable against the Parent and the Seller in
accordance with its terms.
2.21 OWNERSHIP OF SHARES. As of the Effective Time, the Seller will own
all of the issued and outstanding shares of Common Stock, free and clear of
any Lien, and the Seller will have the unrestricted right and power to sell
and transfer such shares of Common Stock to the Purchaser. Upon transfer of
such Shares to the Purchaser in accordance with the terms hereof, the
Purchaser will acquire good and valid title to such Shares, free and clear of
any Lien, except those Liens created by the Purchaser or its Affiliates. As of
the Closing Date, the Seller will not own any shares of capital stock of the
Company other than the shares of Common Stock and will not have any option or
other right to acquire from any person or obligation or commitment to sell or
otherwise transfer to any person any shares of capital stock of the Company
owned by the Seller. As of the Effective Time, the Company, or one of its
direct or indirect wholly owned Subsidiaries, will own all of the issued and
outstanding shares of capital stock or other equity interests of each
Subsidiary, free and clear of any Lien, except that the Company only owns
(indirectly through its Subsidiaries) 50% of the equity interests in each of
Orthomedics-Voner (Rancho) and Orthomedics-Voner (Whittier), each California
general partnerships.
2.22 CONSENTS. Except as may be required under The Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR"), and except as set
forth on SCHEDULE 2.22 hereto, no consents, approvals or authorizations of, or
filings with, any Governmental Authority or any other person or entity are
required in connection with the execution and delivery of this Agreement by
the Parent and the Seller and the consummation of the transactions
contemplated hereby to be consummated by the Parent or the Seller, except
where the failure to obtain such consents, approvals, or authorizations, or
make such filings, would not have a Material Adverse Effect.
2.23 FOREIGN PERSON. Neither the Parent nor the Seller is a foreign
person within the meaning of Section 1445(f)(3) of the Code.
2.24 MEDICARE, MEDICAID AND THIRD-PARTY PAYORS. Each Group Member has
complied with all laws, rules and regulations of Medicaid and Medicare and all
applicable policies and procedures of third-party payors with which any Group
Member has conducted business and/or issued an invoice for services or
products, and has filed all returns, cost reports and other filings in the
manner prescribed, except where the failure to do so would not have,
individually or in the aggregate, a Material Adverse Effect. All returns, cost
reports and other filings made by each Group Member to Medicare, Medicaid, any
other governmental health or welfare related entity or any third-party payor
are true and complete, except where the failure to be so would not have,
individually or in the aggregate, a Material Adverse Effect. No deficiency in
any such returns, cost reports and other filings, including deficiencies for
late filings, has been asserted or, to the best Knowledge of the Parent,
threatened by any Federal or state agency or instrumentality or other provider
reimbursement entities relating to Medicare, Medicaid or any third-party payor
claims, and, to the best Knowledge of the Parent, there is no basis for any
claims or requests for reimbursement from any such agency, instrumentality or
entity except for any deficiencies which would not have, individually or in
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the aggregate, a Material Adverse Effect. No Group Member has been subject to
any investigation of any type or any audit relating to fraudulent Medicare,
Medicaid or any third-party payor procedures or practices, except for audits
which would not have, individually or in the aggregate, a Material Adverse
Effect.
2.25 DISCLOSURE; YEAR 2000. (a) No representation or warranty made by
the Parent or the Seller herein, nor any certificate, Schedule or exhibit
prepared and furnished by the Parent, the Seller, the Company or any Group
Member or its respective representatives pursuant hereto, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements of fact contained herein or therein not misleading in
light of the circumstances under which they were furnished.
(b) All items, products, software, components and systems used
in the operation of the business of the Company, which incorporate the
processing of dates or date-related data (including, but not limited to,
representing, calculating, comparing and sequencing), including, but not
limited to, computer systems, infrastructure items, software applications,
hardware and related equipment and utilities ("Components"), developed, in
whole or part, by the Company and its Subsidiaries are currently
Y2K-compliant, except as set forth in SCHEDULE 2.25 and except for such
non-compliance as would not have a Material Adverse Effect. The Company has
used commercially reasonable efforts to obtain (i) commitments that all its
vendors are or will be Y2K-compliant by June 30, 1999, and (ii) enforceable
agreements with each such vendor setting forth details of plans and schedules
to achieve Y2K-compliance and agreed-upon penalties for failure to achieve
full compliance pursuant to such schedules. The Seller agrees to cause the
TOPS hardware and software to become Y2K-compliant on or before the Closing
Date or, to the extent such software and hardware programs are not so
compliant by such time, notwithstanding the provisions of Section 9.05 hereof,
the Seller agrees to indemnify the Purchaser for the reasonable cost of making
such programs so compliant.
SECTION III.
REPRESENTATIONS AND WARRANTIES OF HANGER AND THE PURCHASER
In connection with the purchase and sale of the Shares hereunder, each
of Hanger and the Purchaser, jointly and severally, hereby represents and
warrants to the Parent and the Seller, as of the date hereof and as of the
Closing Date, that:
3.01 ORGANIZATION. Each of Hanger and the Purchaser is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation.
3.02 AUTHORITY. Each of Hanger and the Purchaser has the requisite
corporate power and authority to execute and deliver this Agreement and to
perform its covenants and agreements hereunder. The execution and delivery of
this Agreement by each of Hanger and the Purchaser, the performance by each of
Hanger and the Purchaser of its covenants and agreements hereunder and the
consummation by each of Hanger and the Purchaser of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action. This Agreement constitutes a valid and legally binding obligation of
each of Hanger and the Purchaser, enforceable against each of Hanger and the
Purchaser in accordance with its terms.
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3.03 CONFLICTS. Neither the execution and delivery of this Agreement by
Hanger and the Purchaser, nor the consummation of the transactions
contemplated hereby to be consummated by Hanger and the Purchaser, (a)
violates any provision of the certificate of incorporation or by-laws of
either of Hanger or the Purchaser or (b) constitutes a violation of any
Applicable Law. Neither the execution and delivery of this Agreement by Hanger
and the Purchaser nor the consummation of the transactions contemplated hereby
to be consummated by Hanger and the Purchaser violates, conflicts with,
results in any breach of any of the terms of or results in the termination of
or the creation of any material Lien pursuant to the terms of any material
contract, commitment, agreement, or lease of any kind to which Hanger or the
Purchaser is a party or by which Hanger or the Purchaser or any of their
respective assets are bound.
3.04 LITIGATION; DISPUTES. There are no Actions pending or, to the
knowledge of Hanger or the Purchaser, threatened, against or affecting Hanger
or the Purchaser which challenge the validity of this Agreement, or which if
adversely determined, would materially adversely affect their ability to
consummate the transactions contemplated by this Agreement or to perform their
respective covenants and agreements under this Agreement.
3.05 CONSENTS. Except as may be required under HSR, no consents,
approvals or authorizations of, or filings with, any Governmental Authority or
any other person or entity are required in connection with the execution and
delivery of this Agreement by Hanger and the Purchaser and the consummation of
the transactions contemplated hereby to be consummated by them.
3.06 INVESTMENT PURPOSE. The Purchaser is purchasing the Shares
pursuant to this Agreement for investment for its own account and not with a
view to the distribution of all or any part thereof as such term is used in
Section 2(11) of the Securities Act of 1933, as amended (the "Securities
Act"). The Purchaser is a sophisticated investor and capable of evaluating the
merits and the risks of acquiring the Shares. The Purchaser acknowledges that:
the Shares are "restricted securities (as defined under the rules and
regulations promulgated under the Securities Act); that the Shares have not
been issued or sold pursuant to any registration or similar filing, listing,
prospectus or document, or pursuant to any delivery requirements under the
laws of any Governmental Authority or the rules, regulations or guidelines of
any stock exchange or quotation system; and that it and its Affiliates and
representatives has each had access to information which it considers
necessary or advisable to enable it to make a decision concerning the purchase
of the Shares provided, however, such access shall in no way affect or
diminish the representations, warranties and covenants of the Parent and the
Seller in this Agreement.
3.07 FINANCING. The Purchaser and/or Hanger has available all funds, or
has written binding commitments from financial institutions or other sources
to obtain all funds on or prior to the Closing Date, necessary to pay the
Purchase Price as provided herein and otherwise to consummate the transactions
contemplated hereby in accordance with the terms and conditions hereof.
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SECTION IV.
THE CLOSING
4.01 TIME AND PLACE OF THE CLOSING. The closing of the purchase and
sale of the Shares as set forth herein (herein referred to as the "Closing")
shall be held at the offices of Haythe & Curley, 237 Park Avenue, New York,
New York 10017 at 10:00 a.m., local time, on the later of (i) June 15, 1999
(provided, that the Purchaser may require the Closing to be held on an earlier
date upon giving three (3) business days' notice to the Seller at any time
after the conditions precedent to the Closing have been satisfied) or (ii) the
date which is three (3) business days after the conditions precedent to the
Closing have been satisfied, or such other time, place and date as the
Purchaser and the Seller may agree (such date upon which the Closing occurs is
herein referred to as the "Closing Date") and, for accounting purposes, the
Closing shall be effective as of a mutually agreeable date.
4.02 TERMINATION. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by written agreement of the
Seller and the Purchaser;
(b) unless extended by written agreement of the Seller and the
Purchaser, at any time after December 31, 1999 (the "Termination Date"), by
either the Seller or the Purchaser in writing, if the transactions
contemplated by this Agreement have not been consummated on or before such
date and such terminating party is not then in material breach of this
Agreement;
(c) at any time before the Closing, by the Purchaser or the
Seller in writing, in the event that any Governmental Authority shall have
issued an order, decree, ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become
final and nonappealable;
(d) at any time before the Closing, by the Purchaser in writing
pursuant to Section 6.03 hereof; and
(e) at any time before the Closing, by either the Purchaser or
the Seller in writing, without liability to the terminating party on account
of such termination, if such terminating party is not then in material breach
of this Agreement and the nonterminating party shall (i) fail to perform in
any material respect its agreements contained herein required to be performed
on or prior to the Closing Date and such nonterminating party has not cured in
all material respects such breach on or prior to the date which is 30 days
after such nonterminating party has received written notice from the
terminating party of such failure to perform or such longer period in the
event that such breach cannot reasonably be expected to be cured within such
30-day period and such nonterminating party is diligently pursuing such cure,
but in no event later than the Termination Date or (ii) subject to Section
6.03 hereof, breach in any material respect any of its representations or
warranties contained herein and such nonterminating party has not cured in all
material respects such breach on or prior to the date which is 30 days after
such nonterminating party has received written notice from the terminating
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party of such breach or such longer period in the event that such breach
cannot reasonably be expected to be cured within such 30-day period and such
nonterminating party is diligently pursuing such cure, but in no event later
than the Termination Date.
4.03 EFFECT ON OBLIGATIONS. Termination of this Agreement pursuant to
Section 4.02 shall terminate all obligations and liabilities of the parties to
each other hereunder, except for the obligations under Sections 4.04, 8.01, X,
XI and XII, provided that in the event of a termination of this Agreement
pursuant to subsection 4.02(e) above under circumstances where the
nonterminating party has breached its obligation to close the transactions
contemplated hereby (notwithstanding that the nonterminating party's
conditions to such obligation to close contained in Section V or VI, as the
case may be, have been satisfied or that the terminating party stands ready,
willing and able to satisfy such conditions but for such breach), the
terminating party may exercise all available rights and remedies at law.
4.04 RETURN OF DOCUMENTATION. Following a termination in accordance
with Section 4.02, the Purchaser shall return, and shall cause all of its
representatives and Affiliates to return, all agreements, documents,
contracts, instruments, books, records, materials and all other information of
the Group, any Group Member, the Seller, the Parent or any of their Affiliates
provided by any Group Member, the Seller, the Parent or by any representative
of any Group Member, the Parent or the Seller to the Purchaser or any
representative or Affiliate of the Purchaser in connection with the
transactions contemplated by this Agreement, and the Seller and the Parent
shall return, and shall cause all of its representatives and Affiliates to
return, all agreements, documents, contracts, instruments, books, records,
materials and all other information of the Purchaser provided by the Purchaser
or any representative of the Purchaser to the Seller or the Parent in
connection with the transactions contemplated by this Agreement.
4.05 SOLE AND EXCLUSIVE REMEDY. Prior to the Closing, each party hereto
acknowledges and agrees that such party's sole and exclusive remedy with
respect to Damages and any and all claims for any breach or liability under
this Agreement or otherwise relating to the subject matter of this Agreement
and the transactions contemplated hereby shall be solely in accordance with,
and limited by, Sections 4.02 and 4.03 hereof.
SECTION V.
CONDITIONS TO THE SELLER'S OBLIGATIONS TO CLOSE
The obligation of the Seller to sell the Shares and otherwise to
consummate the transactions contemplated by this Agreement at the Closing is
subject to the following conditions precedent, any or all of which may be
waived by the Seller in the Seller's sole discretion, and each of which the
Purchaser hereby agrees to use its best efforts to satisfy at or prior to the
Closing:
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5.01 CERTIFICATES. The Seller shall have received:
(a) Certificates of incumbency executed by the Secretary of the
Purchaser in form and substance reasonably acceptable to the Seller;
(b) Certificate of the Secretary of the Purchaser certifying as
to a true and correct copy of the duly adopted resolutions of the board of
directors of the Purchaser, in form and substance reasonably acceptable to the
Seller, with respect to the consummation of the transactions contemplated by
this Agreement and that such resolutions continue in full force and effect,
without amendment, as of the Closing Date; and
(c) Such other certificates, instruments and other documents, in
form and substance reasonably satisfactory to the Seller and counsel for the
Seller, as the Seller shall have reasonably requested in connection with the
transactions contemplated hereby.
5.02 OPINION OF THE PURCHASER'S COUNSEL. The Seller shall have received
an opinion of Freedman, Levy, Kroll & Simonds, counsel for Hanger and the
Purchaser, dated the Closing Date and covering the matters set forth in
Sections 3.01, 3.02 and 3.03 hereof.
5.03 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties of the Purchaser contained herein shall be true and correct in all
material respects at and as of the Closing Date with the same effect as though
all such representations and warranties were made at and as of the Closing
Date, except to the extent that any of such representations and warranties
are, by their terms, made expressly as of the date of this Agreement or
another date, in which case such representations and warranties shall have
been true and correct in all material respects as of the date hereof or such
other date, as applicable, and the Purchaser shall have complied in all
material respects with all of its covenants and agreements contained herein
required to be complied with on or prior to the Closing Date, and on the
Closing Date, the Purchaser shall deliver to the Seller a certificate dated
the Closing Date to such effect.
5.04 NO LITIGATION. No action, suit, proceeding, writ, judgment,
injunction, decree or similar order of any Governmental Authority restraining,
enjoining or otherwise preventing the consummation of any of the transactions
contemplated by this Agreement, or seeking any Damages or any other relief as
a result of this Agreement or any of the transactions contemplated hereby
shall be pending.
5.05 APPROVALS. All governmental filings, authorizations and approvals
(if any) that are required for the consummation of the transactions
contemplated hereby shall have been duly made and obtained in form and
substance reasonably satisfactory to the Seller and the Seller's counsel.
5.06 THIRD PARTY CONSENTS. All consents of third parties set forth on
SCHEDULES 2.02 AND 2.22 hereto which are indicated by an asterisk shall have
been obtained.
5.07 HSR ACT APPROVAL. All waiting periods applicable to this Agreement
and the transactions contemplated hereby under HSR shall have expired or been
waived.
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5.08 RELEASES. The Seller shall have received general releases executed
by the Group Members and the Purchaser, in form and substance satisfactory to
the Seller, of all officers and directors of each Group Member who do not
remain in the employ of any Group Member immediately subsequent to the
Closing, with respect to acts or omissions occurring on or prior to the
Closing Date.
SECTION VI.
CONDITIONS TO THE PURCHASER'S OBLIGATION TO CLOSE
The obligation of the Purchaser to purchase the Shares and otherwise to
consummate the transactions contemplated by this Agreement at the Closing is
subject to the following conditions precedent, any or all of which may be
waived by the Purchaser in its sole discretion, and each of which the Seller
and the Parent hereby agree to use their respective best efforts to satisfy at
or prior to the Closing:
6.01 CERTIFICATES. The Purchaser shall have received:
(a) A true and correct copy of the certificate of incorporation
of the Company and each Subsidiary, certified as true and correct by the
Secretary of State or other appropriate governmental official of its
jurisdiction of organization, and a copy of the applicable by-laws as
certified as true and correct by its Secretary;
(b) Certificate of incumbency executed by the Secretary of the
Seller in form and substance reasonably acceptable to the Purchaser;
(c) Certificate of incumbency executed by the Secretary of the
Parent in form and substance reasonably acceptable to the Purchaser;
(d) Certificate of the Secretary of the Seller certifying as to
a true and correct copy of the duly adopted resolutions of the board of
directors and the duly adopted resolutions of the sole stockholder of the
Seller and a certificate of the Secretary of the Parent certifying as to a
true and correct copy of the duly adopted resolutions of the board of
directors of the Parent, each in form and substance reasonably acceptable to
the Purchaser, with respect to the consummation of the transactions
contemplated by this Agreement and that such resolutions continue in full
force and effect, without amendment, as of the Closing Date; and
(e) Such other certificates, instruments and other documents, in
form and substance reasonably satisfactory to the Purchaser and counsel for
the Purchaser, as the Purchaser shall have reasonably requested in connection
with the transactions contemplated hereby.
6.02 OPINION OF THE PARENT'S COUNSEL. The Purchaser shall have received
an opinion of Haythe & Curley, special counsel for the Parent and the Seller,
reasonably satisfactory to Purchaser's counsel and dated the Closing Date and
covering the matters set forth in the first two sentences of Section 2.01,
Section 2.02, the first two sentences of Section 2.03, Section 2.15, Section
2.20 and the second sentence of 2.21 hereof.
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6.03 REPRESENTATIONS, WARRANTIES AND COVENANTS. Subject to the next
succeeding sentence, the representations and warranties of the Parent and the
Seller contained herein shall be true and correct in all material respects at
and as of the Closing Date, except to the extent that any of such
representations and warranties are, by their terms, made expressly as of the
date of this Agreement or another date, in which case such representations and
warranties shall have been true and correct in all material respects as of the
date hereof or such other date, as applicable, and the Parent and the Seller
shall have complied in all material respects with all their respective
covenants and agreements contained herein required to be complied with on or
prior to the Closing Date, and on the Closing Date, the Parent and the Seller
shall each deliver to the Purchaser a certificate dated the Closing Date to
such effect. The Parent and the Seller shall deliver to the Purchaser a
notification, from time to time, on or before the date which is three business
days prior to the Closing Date, which notification (each, an "Update Notice")
shall (i) disclose information the existence of which does or may result in a
breach of the Parent's and the Seller's representations and warranties
contained in Section II hereof and (ii) update, modify or supplement the
Schedules and, upon delivery of such Update Notice, the applicable
representations and warranties (and the applicable Schedules), for all
purposes of this Agreement, shall be deemed to be amended to be consistent
with each such Update Notice; provided, however, that the delivery of any such
Update Notice shall not relieve the Parent and/or the Seller from any breach
of their respective representations and warranties contained in this Agreement
or the Schedules attached hereto. In the event that the Purchaser receives an
Update Notice which sets forth the occurrence or existence of events or
circumstances which, but for the delivery of an Update Notice, would have
resulted in a breach of any of the Parent's and the Seller's representations
and warranties set forth in Section II hereof which is reasonably likely to or
does result in a Material Adverse Effect the Purchaser shall (after providing
the Parent and the Seller with written notice and an opportunity to modify the
Update Notice or to cure any such breach and the Parent and the Seller shall
not have modified the Update Notice or cured such breach on or prior to the
date which is 60 days after the Parent and the Seller have received such
written notice or such longer period in the event that such breach cannot
reasonably be expected to be cured within such 60-day period and the Parent
and the Seller are diligently pursuing such cure, but in no event later than
the Termination Date) have no obligation to complete the Closing of the
transactions contemplated by this Agreement; the Purchaser's sole and
exclusive remedy in such event shall be to terminate this Agreement pursuant
to Section 4.02(d) above; provided, however, that notwithstanding the
foregoing, in the event an Update Notice sets forth the occurrence or
existence of events or circumstances which relate to a time period prior to
the date of this Agreement and which are a breach of any of the Parent's
and/or the Seller's representations and warranties contained in this Agreement
or the Schedules attached hereto prior to the delivery of such Update Notice
which is reasonably likely to or does result in a Material Adverse Effect,
then the Purchaser shall have no obligation to complete the Closing of the
transactions contemplated by this Agreement and the Parent and the Seller
shall be liable to the Purchaser for all damages incurred by the Purchaser as
a result thereof, including but not limited to the fees and costs incurred by
the Purchaser up to that time in its pursuit of the transactions contemplated
by this Agreement.
6.04 NO LITIGATION. No action, suit, proceeding, writ, judgment,
injunction, decree or similar order of any Governmental Authority restraining,
enjoining or otherwise preventing the consummation of any of the transactions
contemplated by this Agreement, or seeking any Damages or any other relief as
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a result of this Agreement or any of the transactions contemplated hereby
shall be pending.
6.05 APPROVALS. All governmental filings, authorizations and approvals
(if any) that are required for the consummation of the transactions
contemplated hereby will have been duly made and obtained in form and
substance reasonably satisfactory to the Purchaser and the Purchaser's
counsel.
6.06 THIRD PARTY CONSENTS. All consents of third parties set forth on
SCHEDULES 2.02 AND 2.22 hereto which are indicated by an asterisk shall have
been obtained.
6.07 HSR ACT APPROVAL. All waiting periods applicable to this Agreement
and the transactions contemplated hereby under HSR shall have expired or been
waived.
6.08 RESIGNATIONS. At the request of the Purchaser, all officers and
all directors of each Group Member shall have executed and delivered to each
Group Member, as applicable, resignations effective as of the Effective Time.
6.09 DISCHARGE OF INDEBTEDNESS; RELEASE OF LIENS. The Parent shall have
performed, or caused the Company to perform, all acts necessary to discharge
all of the Company's obligations under all loan agreements, guarantees
relating to borrowed funds, pledge agreements relating to borrowed funds,
promissory notes and other agreements relating to borrowed funds, other than
the Acquired-company Notes listed on SCHEDULE 1.02(A)(2) hereto, and the
Parent and the Seller shall have terminated and released all Liens, security
interests, charges, interests or other encumbrances on the Shares or any
asset, real or personal, tangible or intangible, of the Company arising
therefrom, and shall have provided the Purchaser with evidence reasonably
satisfactory to the Purchaser to such effect.
6.10 TEMPORARY USE OF SUPPLIER REIMBURSEMENT NUMBERS. The Parent and
the Seller shall have executed the letter attached hereto as Exhibit 6.10 with
Hanger with respect to the temporary use by Hanger and its subsidiaries of
supplier reimbursement numbers, if any, of the Parent or any of its Affiliates
(other than any Group Member) used by the Company and any Group Member prior
to the Closing Date.
6.11 TRANSITION SERVICES AGREEMENT. The Parent, the Seller, Hanger and
the Purchaser agree to execute the Transition Services Agreement substantially
in the form attached hereto as Exhibit 6.11 and containing such other terms
and provisions as are mutually acceptable to the parties thereto.
6.12 SUBSCRIBER SERVICES AGREEMENT. The Parent agrees to cause NovaCare
Employee Services, Inc., a Delaware corporation ("NCES") and a subsidiary of
the Parent, and the Company to execute a Subscriber Services Agreement
containing substantially the terms in the term sheet attached hereto as
Exhibit 6.12 to provide for their agreement for NCES to provide certain
services to the Company and containing such other terms and provisions as are
mutually acceptable to the parties thereto.
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6.13 ESCROW AGREEMENT. The Purchaser and the Seller shall have executed
an Escrow Agreement with respect to the Escrowed Funds on mutually agreeable
terms, with a mutually agreeable escrow agent that is a commercial bank or
trust company.
SECTION VII.
CONDUCT OF THE BUSINESS
The Seller and the Parent, jointly and severally, hereby covenant and
agree with the Purchaser that, except as hereafter consented to in writing by
the Purchaser (which consent shall not be unreasonably withheld or delayed),
from and after the date of this Agreement and until the Effective Time, the
Seller and the Parent shall cause each Group Member not to:
7.01 OPERATION OF THE BUSINESS. Subject to the further limitations
contained in this Section VII, conduct any business other than in the ordinary
course of business.
7.02 NO LOANS, ADVANCES, ETC. Make or incur any lease, loan, Lien or
other obligation to or from a third party, or make loans or advances or grant
any pay raises, bonuses or awards, or make any other material payments,
whatsoever directly or indirectly, to any officer, employee or director of any
Group Member other than paying existing compensation amounts as set forth in
SCHEDULE 2.11 hereof and other than routine increases in any such person's
compensation in the ordinary course of business not in excess of 4%.
7.03 CAPITAL EXPENDITURES. Make any commitments for capital
expenditures for additions to property, plant or equipment in excess of
$50,000.
7.04 PRESERVATION OF ORGANIZATION AND BUSINESS RELATIONSHIPS. Fail to
use its reasonable efforts to (a) preserve its present business organization
intact, and (b) preserve present relationships with entities or persons having
business dealings with it except, in either case, where such failure would not
have a Material Adverse Effect.
7.05 EMPLOYEE PLANS. Enter into any material plan, arrangement or
commitment whatsoever with any of its employees, officers or consultants with
regard to compensation, benefits or perquisites.
7.06 MAINTENANCE OF INSURANCE. Fail to maintain through, but not after,
the Effective Time, insurance of the type and with such coverage amounts as is
maintained as of the date hereof.
7.07 CLAIMS. Waive, cancel, sell or otherwise dispose of for less than
the face value thereof any material claim or right it has against third
parties.
7.08 SALE OF ASSETS. Sell, buy, merge or dispose of all or any material
portion of the assets of any Group Member other than in the ordinary course of
business; nor amend the charter or by-laws of any Group Member or permit any
dividends or other distributions by any Group Member (except to another Group
Member).
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SECTION VIII.
OTHER AGREEMENTS OF THE PARTIES
8.01 ANNOUNCEMENTS. The Parent and the Purchaser will consult with each
other before any issuance by them or any of their Affiliates of, and will
provide each other the opportunity to review, comment upon and concur with,
any press release or other public statements with respect to the transactions
contemplated by this Agreement, and shall not issue any such press release or
make any such public statement prior to such consultation, except as either
party may determine is required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange. The parties agree that the initial press release to be issued with
respect to the transactions contemplated by this Agreement shall be in the
form heretofore agreed to by the parties. In addition, the Purchaser shall
comply with the Confidentiality Agreement.
8.02 EMPLOYEE OBLIGATIONS. Except as specifically provided herein
(including in Section 8.06 hereof) and except in respect of the Parent's
401(k) plan covering a portion of the employees of the Group, and without
limiting the obligations and liabilities of any Group Member arising by
operation of law or under the terms of this Agreement, after the Closing, each
of the Group Members is and shall remain liable for and the Group Members and
the Purchaser shall be responsible only to the extent set forth in the
Schedules attached to this Agreement for and shall promptly discharge all
liabilities, duties and claims (by or to an Employee, Former Employee,
Beneficiary, Governmental Authority or otherwise) arising out of or relating
to the employment relationship between any Group Member and an Employee or
Former Employee, whether made to or imposed upon any Group Member, the Seller
or the Parent (or any Affiliate thereof), including, without limitation,
liabilities, duties and claims: (i) for deferred compensation, incentive
compensation, retirement benefits, health and life benefits, severance
arrangements and benefits, disability benefits and other fringe benefits under
any employee benefit plan, fund, program, arrangement, policy or practice;
(ii) relating to continuation health coverage pursuant to ss. 4980B of the
Code and Title I, Subtitle B, Part 6 of ERISA; (iii) for unemployment and
workers' compensation or similar benefits; and (iv) to file any and all annual
reports, filings or notices that may be required to be filed with Governmental
Authorities or provided to participants and beneficiaries after the Closing
Date.
8.03 LABOR RELATIONS. The Purchaser hereby agrees to defend and
indemnify the Seller Indemnified Parties, and to hold each Seller Indemnified
Party harmless, from and against all Damages that are sustained or incurred by
any Seller Indemnified Parties by reason of or in connection with any claim,
proceeding or suit brought against any Seller Indemnified Parties under the
Worker Adjustment Retraining and Notification Act, or any other local, state,
Federal or foreign law, which relates to actions taken by the Purchaser or any
Group Member at any time after the Effective Time with regard to any site of
employment or one or more facilities or operating units within any site of
employment of any Group Member.
8.04 ACCESS TO INFORMATION. (a) For a period of six years from the
Closing Date, the Purchaser shall (and shall cause each of the Group Members
to), during normal business hours and upon reasonable notice, make available
and provide the Parent and its representatives (including, without limitation,
counsel and independent auditors) with access to the facilities and properties
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of each of the Group Members and to all information, files, documents and
records (written and computer) relating to any Group Member or any of its
businesses or operations for any and all periods prior to or including the
Closing Date which the Parent (or any Affiliate of the Parent) requires with
respect to any reasonable business purpose, and shall (and shall cause each of
the Group Members to) cooperate fully with the Parent and its representatives
(including, without limitation, its counsel and independent auditors) in
connection with the foregoing, including, without limitation, by making tax,
accounting and financial personnel and other appropriate employees and
officers of each Group Member available to the Parent and its representatives
(including, without limitation, counsel and independent auditors), with regard
to any reasonable business purpose.
(b) Without limiting the generality of Section 8.04(a), from and
after the Closing Date, the Purchaser shall (and shall cause each of the Group
Members to) cooperate fully with and assist, and shall cause its officers and
employees (and the officers and employees of the Group Members) to cooperate
fully with and assist, the Parent and its representatives (including, without
limitation, its counsel and independent auditors), in connection with:
(i) the preparation by the Parent at its sole cost of the Group
Members' (or any Group Member's) portion of any Federal consolidated
income Tax Return, report or declaration, and of any state consolidated,
combined or unitary income Tax Return, report or declaration, for any
Seller Tax Period;
(ii) any Tax audit, examination or proposed or final assessment
or the like (including without limitation any Tax Claim) relating to the
Seller, the Parent, the Group or any Group Member, and to any Seller Tax
Period;
(iii) the preparation of any financial statements of the Group
Members (or any Group Member) for (or including) any period (or portion
thereof) ending on or before the Effective Time, and to that end the
Purchaser shall cause each Group Member to prepare for and to deliver to
the Parent any financial information of the type historically prepared
by any Group Member for all periods (or portions thereof) ending on or
before the Effective Time and to cause the officers and employees of any
Group Member to cooperate fully and assist the Parent in its review and
verification of the same;
(iv) the preparation of any statement, report, notice, response
or other document for filing with the Securities and Exchange
Commission, any state or foreign securities commission or authority, any
other Governmental Authority or any securities exchange or market,
domestic or foreign, including, without limitation, in connection with
any comments, requests for information, inquiries, investigations or
proceedings, formal or informal, by any of the foregoing; or
(v) the investigation, prosecution or defense of or response to
any Actions, claims or inquiries commenced by any Governmental Authority
or any other person or entity, against the Parent or the Seller (or any
other Seller Indemnified Party or any Affiliate thereof).
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(c) The cooperation and assistance of the Purchaser and the
Group Members and their respective officers and employees under this Section
8.04 shall be rendered during normal business hours and in a manner which does
not materially disrupt the business and operations of the applicable Group
Member, and the Purchaser shall use its best efforts in the case of the
preparation of any Tax Return, report or declaration and any financial
statements, to cause such cooperation and assistance to be rendered without
adverse consequences to the Seller or the Parent during the period that each
of the Group Members has normally assisted the Seller or the Parent in the
preparation by the Parent of Tax Returns, reports or declarations and
financial statements. The Parent shall reimburse the Group Members for any
out-of-pocket expenses paid by them, including reasonable accounting and
attorney's fees and costs, in the cooperation and assistance by the Purchaser
and the Group Members with the Parent' preparation of any such Tax Returns,
reports or declarations and any such financial statements.
(d) Without limiting the generality of subsection (a) of this
Section 8.04, following the Closing, the Purchaser shall not (and shall cause
the Group Members not to) destroy any information, files, documents or records
(written and computer) relating to any Group Member or any of its businesses
or operations without giving at least 30 days' prior written notice to the
Parent and shall (and shall cause the Group Members to) permit the Parent to
examine, duplicate (at the Parent's expense) and/or transfer (at the Parent's
expense) to the Parent or its representatives any of such information, files,
documents or records (written and computer).
8.05 TAX MATTERS. (a) The Seller, the Parent and the Purchaser
acknowledge and agree that, for Federal income tax purposes, the taxable year
of each Group Member will close on the Closing Date and that, for certain
state income tax purposes, the taxable year of some or all of the Group
Members may also close on the Closing Date. The Parent shall be responsible
for preparing and filing any and all of the foregoing income Tax Returns,
reports and declarations that include the Group Members for the periods ending
on or before the Closing Date, and shall be responsible for and shall pay all
Taxes payable by the Group Members with respect to such returns, the
determination of which taxes shall be solely within the Parent's control;
provided, however, that all such returns shall be prepared, and all Taxes
shall be calculated, lawfully and in a manner consistent with past practice
and the Seller shall not make any Tax elections or change any Tax accounting
methods (to the extent such changes would be binding on the Purchaser) without
the express written consent of the Purchaser. Without limiting the generality
of Section 8.04 hereof, the Purchaser shall fully cooperate with and assist
the Parent (including, without limitation, allowing access by the Parent and
its representatives (including its counsel and independent auditors) to the
books and records (written and computer) of the Group Members and allowing the
Parent at its sole cost to make copies thereof) in connection with the
preparation by the Parent of any income Tax Returns, reports and declarations
required to be prepared by the Parent or the Seller hereunder; and except as
provided in Section 8.04(c), neither the Parent nor the Seller shall be
charged with any cost or expense for the assistance rendered by the Purchaser
or any of the Group Members in connection therewith.
(b) Except as provided in clause (a) of this Section 8.05, the
Purchaser agrees to cause the Group Members to file all Tax Returns, reports
and declarations not related to income taxes required to be filed by any of
them after the Closing Date and to pay all such Taxes due and payable by any
of them after the Closing Date, including any such Taxes that accrued prior to
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the Closing Date or that are otherwise allocable to any Seller Tax Period that
does not end on or before the Closing Date. Without limiting the generality of
Section 8.04 or this Section 8.05, the Parent shall be given the opportunity
to review, comment upon and suggest changes or corrections to, any Tax
Returns, reports and declarations covered by this Section 8.05(b) which
include any Seller Tax Period (and the work papers of the Group Members and
their accountants used in the preparation thereof), in each case prior to the
filing thereof (but in no event less than 30 days prior to such filing). In
the event of any dispute regarding the matters set forth in the immediately
preceding sentence, then PWC (or if PWC shall decline to arbitrate such
dispute, then another nationally recognized accounting firm selected by the
Parent) shall be requested to make a determination resolving any such dispute;
and the determination by PWC (or such other accounting firm) of any such
dispute shall be final and binding on the parties hereto. The fees and
expenses of PWC (or such other accounting firm) in resolving such dispute
shall be borne by the non-prevailing party.
(c) Any refunds or credits of Taxes of any Group Member for any
Seller Tax Period shall be for the account of the Parent. Applications for
refunds of Taxes, and the filing of amended Tax Returns with respect to any
Seller Tax Period shall be made and prosecuted only by the Parent or the
Seller. Without limiting the provisions of Section 8.04, the Purchaser shall
provide and shall cause each Group Member to provide to the Parent full
cooperation and assistance in connection with any application for refund or
amendment made or proposed to be made by the Parent or the Seller as shall be
requested by the Parent, including by causing each Group Member to authorize
by appropriate powers of attorney such person as the Parent shall designate to
represent such Group Member with respect to such refund claim, without charge
for any cost or expense for assistance rendered by officers and employees of
the Group Members in connection therewith. Neither the Parent nor the Seller
shall seek any Tax refund, or amend any Tax Return, which would have the
effect of increasing the Taxes of any Group Member for any taxable period (or
portion thereof) beginning after the Closing Date; however, the foregoing
shall not apply to any amended Tax Return which may be required by law
following resolution of a Tax dispute. Neither the Purchaser nor any Group
Member shall amend, or take any similar action with respect to, any Tax Return
filed by the Parent, the Seller or by any Group Member with respect to any
Seller Tax Period without the prior written consent of the Parent; provided
that the foregoing shall not apply to any amended Tax Return which may be
required by law following resolution of a Tax dispute conducted in accordance
with this Agreement. The Purchaser shall or shall cause each Group Member to
forward to the Parent any refund of Taxes of any Group Member allocable to any
Seller Tax Period within five days after such refund is received (or reimburse
the Parent for any credit within five days after the credit is allowed or
applied against other Tax liability). Notwithstanding the foregoing, the
control of the prosecution of a claim for refund of Taxes paid pursuant to a
deficiency assessed subsequent to the Closing Date as a result of an audit
shall be governed by the provisions of Section 9.03(d) hereof. Notwithstanding
anything contained herein to the contrary, nothing herein shall preclude the
Purchaser from carrying back losses to pre-Closing Tax periods to the extent
that such action does not reduce any attributes or Tax benefits of the Seller.
(d) The Purchaser shall not file an election (or cause a deemed
election) under Section 338 of the Code with respect to its acquisition of the
Group Members or any Group Member hereunder. The Purchaser shall not take any
action, and shall cause the Group Members not to take any action, outside the
ordinary course of the Group Members' business, which would increase the
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amounts included in the gross income of the Parent under Section 551 or
Section 951 of the Code for any Seller Tax Period. Only after the payment of
compensation by the Parent or the Seller to the Purchaser in an amount which
is mutually acceptable to the Purchaser and the Parent, the Purchaser shall
consent to the election under Treasury Regulation ss. 1.1502-20(g)(1) to
re-attribute any net operating losses and/or net capital losses of any Group
Member to the Seller or the Parent, and shall cause the Group Members to
execute and file such statements as may be necessary or appropriate to effect
such election.
(e) Except as required by law, without the Parent's prior
written consent, neither the Purchaser nor any Group Member shall take any
position on any Tax Return, report or other declaration for any taxable period
which might result in any:
(1) increase in Tax (over accruals therefor on the books and
records of the Group Members as of the Effective Time) for any Seller
Tax Period in:
(A) the liability of the Parent, the Seller or any Group Member
in respect of the consolidated Federal income Tax liabilities, or any
state consolidated, combined or unitary income Tax liabilities, of the
Parent's or the Seller's tax group, as applicable, for periods while any
Group Member was part thereof; or
(B) the liability of the Parent, the Seller or any Group Member
in respect of any separate state, local or foreign Tax of any Group
Member; or
(2) reduction in any Tax attributes to which the Parent, the
Seller or any Group Member may be entitled with respect to any Seller
Tax Period.
(f) All Taxes with respect to the income, property or operations
of the Group Members that relate to any taxable year or period beginning
before and ending after the Closing Date shall be apportioned between the
Seller Tax Period and the period beginning the day after the Closing Date as
follows: (A) in the case of Taxes other than income and sales or use Taxes, on
a per diem basis, and (B) in the case of income Taxes (including income Taxes
based on capital or other alternative bases) and sales or use Taxes, as
determined from the books and records of the Parent and the Group Member in
question, as though the taxable year of the Group Member terminated on the
Closing Date, and based on the accounting methods, elections and conventions
used by the Parent and/or the relevant Group Member in prior years.
8.06 INSURANCE MATTERS.
(a) The Purchaser and each Group Member acknowledge and agree
that, effective as of the Effective Time, coverage under all health and
medical insurance plans or programs sponsored or maintained by the Seller or
the Parent for all Employees, Former Employees and their Beneficiaries as
applied to any and all of the Group Members (collectively, the "Seller's
Health Plan") shall terminate and be of no further force or effect.
Notwithstanding the preceding sentence, any expense incurred by an Employee,
Former Employee or Beneficiary prior to the Effective Time that would have
been covered under the Seller's Health Plan shall continue to be the
responsibility of the Seller or the Parent, as applicable. From and after the
Effective Time, the Purchaser shall cause the Group Members to pay to the
Parent any premium or other charges due in respect of coverage of Employees,
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Former Employees or Beneficiaries under the Seller's Health Plan through the
Effective Time within 30 days after receipt of an invoice or statement
relating to the same. The amount of such premiums and charges shall be
calculated in accordance with the Parent's and the Group Member's prior
practices regarding such premiums and charges. The Purchaser agrees to notify
all Employees, Former Employees and their Beneficiaries of the manner in which
pre-Effective Time expenses under the Seller's Health Plan are to be submitted
for reimbursement and to request that all such expenses be submitted within 60
days after the Closing Date. The Purchaser and each Group Member acknowledge
and agree that, effective as of the Effective Time, coverage for all
Employees, Former Employees and their Beneficiaries under all life insurance,
disability, or any other welfare or benefit plans or programs sponsored or
maintained by the Seller or the Parent as applied to any and all of the Group
Members shall terminate and be of no further force or effect.
(b) From and after the Effective Time, (i) the Group Members
shall cease to be covered with respect to any event or occurrence after the
Effective Time under all insurance policies covering any Group Member (other
than insurance policies described in the first sentence of subsection (a)
above, which shall be subject to the provisions of such subsection) and (ii)
with respect to any event or occurrence prior to the Effective Time, the Group
Members shall, subject to the terms and conditions of such policies, continue
to be entitled to the benefits thereof.
(c) The Purchaser shall cause the Group Members promptly to
notify the Parent of any claims which would be subject to any insurance
coverage maintained by the Parent, the Seller or any of their Affiliates
(other than any Group Member) for the benefit of any Group Member and based on
events or occurrences on or prior to the Closing Date, and shall cause the
Group Members to keep the Parent advised of the status of (and any
developments regarding) any such claims, and to cooperate with the Parent and
any insurance carrier in connection with the investigation and defense of any
such claims, all in accordance and consistent with the standard practices and
procedures established from time to time by the Parent or any such insurance
carrier.
(d) No covenant or agreement by any party hereto to indemnify
any other party hereto shall release, or be deemed to release, any insurer or
indemnitor of any Damages which might be the basis for any Indemnification
Matter.
8.07 AGREEMENT BY THE PURCHASER REGARDING NO OTHER REPRESENTATIONS OR
WARRANTIES BY THE PARENT OR THE SELLER. The Purchaser agrees that except for
the representations and warranties (including the Schedules with respect
thereto) made by the Parent and the Seller and expressly set forth in Section
II of this Agreement (as such representations and warranties are modified
pursuant to the provisions of Section 6.03 hereof), neither the Parent nor the
Seller nor any Affiliate or representative of either has made and shall not be
construed as having made to the Purchaser or to any representative or
Affiliate thereof, and neither the Purchaser nor any Affiliate nor any
representative thereof has relied upon, any representation or warranty of any
kind. Without limiting the generality of the foregoing, and notwithstanding
any otherwise express representations and warranties made by the Parent and
the Seller in Section II hereof, the Purchaser agrees that neither the Parent
nor the Seller nor any Affiliate or representative of either makes or has made
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any representation or warranty to the Purchaser or to any representative or
Affiliate thereof with respect to:
(i) any projections, estimates or budgets contained in that
certain Confidential Information Memorandum relating to the Group
Members or otherwise heretofore or hereafter delivered to or made
available to the Purchaser or its counsel, accountants, advisors,
lenders, representatives or Affiliates of future revenues, expenses or
expenditures, future results of operations (or any component thereof),
future cash flows (or any component thereof) or future financial
condition (or any component thereof) of the Group or any Group Member or
the future business, operations or affairs of the Group or any Group
Member; and
(ii) any other information, statements or documents heretofore or
hereafter delivered to or made available to the Purchaser or its
counsel, accountants, advisors, lenders, representatives or Affiliates
(including, without limitation, the Confidential Information Memorandum
relating to the Group Members) with respect to the Group or any Group
Member or the business, operations or affairs of the Group or any Group
Member.
8.08 NAME CHANGE. The Purchaser shall take all steps necessary or
appropriate to cause the Company and each other Group Member, as applicable,
to change its name at or immediately after the Closing Date to another
corporate name not containing the name "NovaCare" or any variation thereof and
to cease conduct of business from and after the Closing Date under any assumed
or trade name containing the name "NovaCare" or any variation thereof.
Notwithstanding the foregoing, the Purchaser, the Company and the Group
Members may continue to utilize all boxes, labels, products and other assets
bearing the "NovaCare" name (the "Supplies") until depleted. The Purchaser
agrees to use its best efforts to utilize the Supplies as expeditiously as
possible and will indemnify the Parent from any and all liabilities arising
out of such use except to the extent that such liability arises from a product
liability claim which would constitute a breach of a representation or
warranty of the Parent or the Seller hereunder.
8.09 RELEASE OF LIENS. From and after the Closing Date, the Parent
agrees to do all acts necessary to continue to extinguish and pay-off all
Liens (other than Permitted Liens) against all assets of the Company and all
assets of each Group Member which existed as of the Closing Date, and the
Parent agrees to indemnify the Purchaser from any liability or Damages due to
such Liens.
8.10 CONSENTS AND APPROVALS. The Parent shall use its best efforts to
obtain all necessary consents, waivers, authorizations and approvals of all
governmental and regulatory authorities, domestic and foreign, and of all
other persons, firms or corporations required in connection with the
execution, delivery and performance by it of this Agreement.
8.11 FURTHER ASSURANCES. Upon the request of a party or parties hereto
at any time after the Closing Date, the other party or parties will forthwith
execute and deliver such further instruments of assignment, transfer,
conveyance, endorsement, direction or authorization and other documents as the
requesting party or parties or its or their counsel may request in order to
perfect title of the Purchaser and its successors and assigns to the Shares or
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otherwise to effectuate the purposes of this Agreement.
8.12 BEST EFFORTS. Upon the terms and subject to the conditions of this
Agreement, each of the parties hereto will use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable consistent with applicable law to consummate
and make effective in the most expeditious manner practicable the transactions
contemplated hereby.
8.13 NOTICE OF BREACH. Through the Closing Date, each of the parties
hereto shall promptly give to the other parties written notice with
particularity upon having knowledge of any matter that may constitute a breach
of any representation, warranty, agreement or covenant contained in this
Agreement.
8.14 CONFIDENTIALITY. Except as required by law, each party hereto
shall not, directly or indirectly, disclose to any person or entity or use any
information not in the public domain or generally known in the industry, in
any form, whether acquired prior to or after the Closing Date, received from
another party hereto relating to the business and operations of the Company,
the Parent, their respective subsidiaries or affiliates, including but not
limited to information regarding customers, vendors, suppliers, trade secrets,
training programs, manuals or materials, technical information, contracts,
systems, procedures, mailing lists, know-how, trade names, financial or other
data (including the revenues, costs or profits associated with any of the
Company's products or services), business plans, code books, invoices and
other financial statements, computer programs, software systems, databases,
discs and printouts, plans (business, technical or otherwise), customer and
industry lists, correspondence, internal reports, personnel files, sales and
advertising material, telephone numbers, names, addresses or any other
compilation of information, written or unwritten, which is or was used in the
business of the Company or any of its Subsidiaries.
8.15 ACCESS TO PROPERTIES AND RECORDS. The Parent shall afford to the
Purchaser, and to the accountants, counsel and representatives of the
Purchaser, reasonable access during normal business hours upon reasonable
notice throughout the period prior to the Closing Date to all properties,
books, contracts, commitments, and records of the Company and its Subsidiaries
and, during such period, shall furnish promptly to the Purchaser all other
information concerning the business, its properties and its personnel as the
Purchaser may reasonably request, including but not limited to monthly
financial statements consisting of balance sheets, income statements and cash
flow statements for each month subsequent to the period covered by the
Financial Statements attached hereto as SCHEDULE 2.04(A) and continuing for
each month thereafter up to the last full month prior to the Closing Date;
provided that no investigation or receipt of information pursuant to this
Section 8.15 shall qualify any representation or warranty of the Parent or the
Seller or the conditions to the obligations of the Purchaser.
8.16 ACQUISITION OF RIGHTS TO CONFIDENTIALITY. At the Closing, the
Parent shall assign, grant and convey to the Purchaser all its rights under
confidentiality agreements between it and persons other than the Purchaser
that were entered into in connection with or relating to a possible sale of
the Shares or any part thereof (collectively, "Other Confidentiality
Letters"), including the right to enforce all terms of the Other
Confidentiality Letters. At the Closing, the Parent shall deliver to the
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Purchaser copies of the Other Confidentiality Letters to the extent permitted
by the terms thereof; provided that if any Other Confidentiality Letter shall
not be assignable, the Parent shall disclose to the Purchaser the parties to
such letter agreement.
8.17 FINANCING. The Parent shall cooperate with Hanger in all
reasonable respects to enable Hanger to obtain the financing contemplated by
Section 3.07 (the "Financing"), including using its best efforts to (i)
prepare interim financial statements for the Company and its Subsidiaries
("Interim Financials"), if required in connection with the Financing, (ii)
obtain consents of its independent public accountants and comfort letters,
when required, with respect to the Financial Statements and any Interim
Financials, at Hanger's cost, so that such financial statements can be used in
Rule 144A offering memoranda and registration statements filed under the
Securities Act of 1933, as amended, and reports under the Securities Exchange
Act of 1934, as amended ("Public Filings"), issued or filed by Hanger, (iii)
cooperate with Hanger so Hanger can obtain information sufficient for Hanger
to comply with the requirements of the Management's Discussion and Analysis
portion of the Public Filings, as it may relate to the Company and its
Subsidiaries, (iv) compile the requisite financial information, including
supplying financial information for purposes of comfort letters to be issued
in connection with the Public Filings, (vi) request the independent public
accountants of the Company to give full and complete access to Hanger and its
agents and representatives to its work papers and any other supporting
information relating to the Financial Statements or the Interim Financials,
subject to customary agreements sought by independent public accountants in
connection with giving such access, (vii) sign customary management
representation letters relating to the Financial Statements and the Interim
Financials, (viii) cooperate in the preparation of financial statements for
the Company and its Subsidiaries that are suitable for inclusion by Hanger in
the Public Filings, including compliance with the applicable provisions of
Regulation S-X, and (ix) provide reasonable assistance to Hanger in connection
with any roadshow, rating agency or lender presentations and meetings relating
to the Financing.
SECTION IX.
INDEMNIFICATION
9.01 INDEMNIFICATION BY THE PARENT AND THE SELLER. After the Closing
Date, the Parent and the Seller, jointly and severally, shall indemnify and
hold harmless the Purchaser (and its employees, officers, partners, directors,
shareholders, agents and representatives) and the Group Members (collectively,
the "Purchaser Indemnified Parties") from and against all Damages which are
sustained or incurred by any of the Purchaser Indemnified Parties, to the
extent that the Damages are sustained or incurred by reason of (a) the breach
by the Parent or the Seller of any of its covenants or agreements hereunder to
be performed after the Closing Date, or, subject to the limitations of Section
9.05(c), the breach by the Parent or the Seller of any of its Pre-Closing
Covenants, (b) the breach of any of the representations or warranties made by
the Parent and the Seller in Section II hereof (as modified by Section 6.03
hereof), (c) any liability (as a result of Treasury Regulation ss. 1.1502-
6(a) or otherwise) for Taxes of the Parent or the Seller or any other
corporation which is or has been affiliated with the Parent or the Seller
(other than any of the Group Members) or (d) the litigation set forth on
SCHEDULE 9.01.
9.02 INDEMNIFICATION BY THE PURCHASER. After the Closing Date, Hanger
and the Purchaser, jointly and severally, shall indemnify and hold harmless
the Parent, the Seller and their respective employees, officers, partners,
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directors, shareholders, agents and representatives (collectively, the "Seller
Indemnified Parties") from and against all Damages which are sustained or
incurred by any of the Seller Indemnified Parties, to the extent that such
Damages are sustained or incurred by reason of (a) the breach by either of
Hanger or the Purchaser of any of its covenants or agreements hereunder to be
performed after the Closing Date, or, subject to the limitations of Section
9.05(c), the breach by either of Hanger or the Purchaser of any of its
Pre-Closing Covenants, (b) the breach of any of the representations or
warranties made by either of Hanger or the Purchaser in Section III hereof or
(c) any liability of the Parent or any of its Affiliates (other than any Group
Member) arising out of (i) those certain agreements (the "Parent Agreements"),
none of which are material, to which the Parent or any of its Affiliates
(other than any Group Member) is a party and which relate solely to the
business of the Company (or any other Group Member), it being understood and
agreed that the Parent shall deliver to the Purchaser a schedule of the Parent
Agreements (which the Parent shall use its reasonable best efforts to ensure
is complete) not less than five (5) days prior to the Closing Date, (ii)
severance payments due to employees performing all or substantially all their
services on behalf of the Company or any other Group Member, more particularly
set forth on SCHEDULE 2.11, who are terminated at any time subsequent to the
Closing Date, (iii) any litigation set forth in SCHEDULE 2.15 (other than any
litigation set forth on SCHEDULE 9.01) to which the Parent or any of its
Affiliates (other than any Group Member) is or becomes a party, (iv)
obligations under the employment agreements set forth on SCHEDULE 1.02(A)(3)
assumed by the Purchaser pursuant to Section 1.02(a), or (v) the operations of
the business of the Company or any Group Member subsequent to the Closing
Date.
9.03 PROCEDURE FOR INDEMNIFICATION. (a) Except as provided in clause
(d) of this Section 9.03, in the event that any party hereto or other
Purchaser Indemnified Party or Seller Indemnified Party reasonably believes
that such party has a claim for Damages in respect of which indemnity may be
sought by such party pursuant to Section 8.03, this Section IX or Section X
(each, an "Indemnification Matter"), the party indemnified hereunder (the
"Indemnitee") shall notify the party(s) providing indemnification
(collectively, the "Indemnitor") by sending written notice to the Indemnitor
(an "Indemnity Notice"). In the case of third party claims, which, if
successful, could result in an indemnity payment hereunder, an Indemnity
Notice shall be given within 30 days after the discovery by the Indemnitee of
the filing or assertion of any claim against the Indemnitee stating the nature
and basis of such claim; provided, however, that any delay or failure to
notify any Indemnitor of any claim shall not relieve it from any liability
except to the extent that the Indemnitor demonstrates that the defense of such
action is prejudiced by such delay or failure to notify. Any Indemnity Notice
(i) shall state (with reasonable specificity) the basis on which
indemnification is being asserted, (ii) shall set forth the amount of Damages
for which indemnification is being asserted and (iii) in the case of third
party claims, shall be accompanied by copies of all relevant pleadings,
demands and other papers served on the Indemnitee.
(b) Except as provided in clause (d) of this Section 9.03, in
the case of third party claims the Indemnitee shall give the Indemnitor the
right (i) to control and conduct any proceedings or negotiations in connection
therewith and necessary or appropriate to defend the Indemnitee (provided such
are pursued in a professional manner), (ii) to take all other reasonable steps
or proceedings to settle or defend any such claims, provided that the
Indemnitor shall not settle any such claim without the prior written consent
of the Indemnitee, which consent will not be unreasonably withheld or delayed,
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unless, in the case that the Parent or the Seller is the Indemnitor, such
settlement only involves the payment of money (all of which shall be payable
by the Parent or the Seller), in which event the Parent and the Seller shall
have the right to settle any such claim without the consent of the Indemnitee,
and (iii) to employ counsel selected by the Indemnitor, after reasonable
consultation with the Indemnitee, to contest any such claim or liability in
the name of the Indemnitee or otherwise. Notwithstanding the Indemnitor's
election to appoint counsel to represent the Indemnitee in an action, the
Indemnitee shall have the right to employ separate counsel and the Indemnitor
shall bear the reasonable fees, costs and expenses of such separate counsel,
if the Indemnitee determines, based upon the advice of counsel, that a
conflict or potential conflict of interest exists between the Indemnitor and
the Indemnitee in such action. The Indemnitor shall, within 30 days of receipt
of an Indemnity Notice in respect of such claim (the "Indemnity Notice
Period"), notify the Indemnitee in writing of its intention to assume the
defense of such claim. In the event that the Indemnitor does assume the
defense as provided above, the Indemnitee shall have the right to participate
fully in such defense (including, without limitation, with counsel of its
choice), at its sole expense, and the Indemnitor shall cooperate fully with
the Indemnitee in connection with such participation. If the Indemnitor does
not deliver to the Indemnitee within the Indemnity Notice Period written
notice that the Indemnitor will assume the defense of any such claim or
litigation resulting therefrom, the Indemnitee may defend against any such
claim or litigation in such manner as it may deem appropriate and the
Indemnitee may settle such claim or litigation, provided that the Indemnitee
shall not settle any such claim without the prior written consent of the
Indemnitor, which consent will not be unreasonably withheld or delayed. In the
event that the Indemnitor does not assume the defense as provided above, the
Indemnitor shall have the right to participate fully in such defense
(including, without limitation, with counsel of its choice), at its sole
expense, and the Indemnitee shall cooperate fully with the Indemnitor in
connection with such participation, and in all cases the Indemnitee shall keep
the Indemnitor fully informed as to all matters concerning such third party
claim and shall promptly notify the Indemnitor in writing of any and all
significant developments relating thereto. Within 30 days after the
Determination Date with respect to a third party claim, the Indemnitor shall
pay the Indemnitee the amount of Damages sustained or incurred by the
Indemnitee.
(c) In the event that liability hereunder does not involve a
third party claim, the Indemnitor shall within 30 days after the date of
receipt of an Indemnity Notice respond in writing to the Indemnitee (the
"Indemnity Response") and set forth with reasonable specificity those items in
the Indemnity Notice to which the Indemnitor does not agree as well as the
summary basis upon which such disagreement is founded. Within 30 days
following the receipt of the Indemnity Response by the Indemnitee,
representatives of the Indemnitor and the Indemnitee shall meet to attempt to
resolve through good faith negotiations the applicable Indemnification
Matters. The parties shall negotiate in good faith for up to 60 days in an
attempt to reach a settlement of any disputed matter. In the event that such
good faith negotiations are unsuccessful or in the event of any other dispute
under this Section IX, the parties shall proceed in accordance with Section
11.07 of this Agreement.
(d) (i) If a claim shall be made by any taxing authority, which,
if successful, might result in an indemnity payment to any Purchaser
Indemnified Party, the Purchaser shall promptly notify the Parent in writing
(a "Tax Notice") of such claim (a "Tax Claim"). If a Tax Notice is not given
to the Parent within a sufficient period of time to allow the Parent or the
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Seller effectively to contest such Tax Claim, or in reasonable detail to
apprise the Parent of the nature of the Tax Claim, in each case taking into
account the facts and circumstances with respect to such Tax Claim, neither
the Parent nor the Seller shall be liable to any Purchaser Indemnified Party
to the extent that the Parent's or the Seller's position is prejudiced as a
result thereof.
(ii) With respect to any Tax Claim, the Parent and the Seller
shall have the right to control and conduct all proceedings and
negotiations in connection with such Tax Claim (including, without
limitation, selection of counsel) and, without limiting the foregoing,
may in the Parent's sole discretion pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with any
taxing authority with respect thereto, and may, in the Parent's sole
discretion, either pay the Tax claimed and sue for a refund where
applicable law permits such refund suits or contest the Tax Claim in any
permissible manner. The Parent shall, within 30 days of receipt of a Tax
Notice with respect to a Tax Claim (the "Tax Notice Period"), notify the
Purchaser in writing of its intention to control and conduct the
proceedings and negotiations in connection with such Tax Claim. In the
event that the Parent does notify the Purchaser of its intention to
control and conduct the proceedings and negotiations in connection with
any Tax Claim as provided above, the Purchaser shall have the right to
participate fully in such proceedings and negotiations (including,
without limitation, with counsel of its choice), at its sole expense,
and the Parent and the Seller shall cooperate fully with the Purchaser
in connection with such participation. If the Parent does not deliver to
the Purchaser within the Tax Notice Period written notice that it will
control and conduct the proceedings and negotiations in connection with
a Tax Claim, the Purchaser may control, or cause the applicable Group
Member to control, and conduct such proceedings and negotiations in such
manner as it may deem appropriate. In the event that the Parent or the
Seller do not exercise their right to control and conduct the
proceedings and negotiations in connection with any Tax Claim as
provided above, the Parent and the Seller shall have the right to
participate fully in such proceedings and negotiations (including,
without limitation, with counsel of its choice), at their sole expense,
and the Purchaser shall, and shall cause each Group Member to, cooperate
fully with Parent and the Seller and their accountants and other
representatives in connection with such participation, and in all cases
the Purchaser shall keep the Parent fully informed as to all matters
concerning such Tax Claim and shall promptly notify the Parent in
writing of any and all significant developments relating thereto.
Without limiting Sections 8.04 and 8.05, the Purchaser and each of its
Affiliates shall (and the Purchaser shall cause the Group Members to)
cooperate fully with the Parent and the Seller in contesting any Tax
Claim, which cooperation shall include, without limitation, the
retention and (upon the Parent's request) the provision to the Parent of
records and information which are relevant to such Tax Claim, and making
officers and employees available on a timely and mutually convenient
basis to provide additional information or explanation of any material
provided hereunder or to testify at proceedings relating to such Tax
Claim.
(iii) Notwithstanding anything to the contrary contained herein,
in no event shall the Purchaser or any Group Member settle or otherwise
compromise any Tax Claim without the Parent's prior written consent
which shall not be unreasonably withheld. The Parent agrees to either
give its consent or the reasonable basis for withholding its consent
within 15 days of the receipt of any notice by the Parent from the
Purchaser, the Company or any Group Member.
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9.04 LIMITS ON THE LIABILITY OF THE SELLER. Subject to the terms hereof
(including Sections 4.05 and 9.07 hereof), the aggregate liability of the
Parent and the Seller for Damages or otherwise with respect to the subject
matter of this Agreement and the transactions contemplated hereby is, and
shall be, limited to an aggregate amount (the "Seller's Liability Amount")
equal to $100,000,000, and the Purchaser, on behalf of itself, its Affiliates
and all Purchaser Indemnified Parties, agrees not to seek any Damages in
excess of the Seller's Liability Amount for any and all Damages sustained or
incurred by any Purchaser Indemnified Party for any breach or liability under
this Agreement or otherwise with respect to the subject matter of this
Agreement and the transactions contemplated hereby or otherwise.
9.05 OTHER LIMITS ON INDEMNIFICATION.
(a) Notwithstanding anything in Section 8.03, this Section IX or
Section X to the contrary and subject to the final sentence of this Section
9.05(a), no Purchaser Indemnified Party shall be entitled to indemnification
pursuant to Section 9.01 hereof unless and until the aggregate amount of all
Damages to which the indemnity set forth in Section 9.01(b) relates sustained
or incurred by all Purchaser Indemnified Parties exceeds an aggregate amount
(the "Basket Amount") equal to $1,500,000. Subject to Section 9.04 above, if
such Damages exceed the Basket Amount, then the Seller's liability for
indemnification under Section 9.01(b) shall be limited to the amount of such
Damages sustained or incurred which exceeds the Basket Amount. Notwithstanding
anything contained herein to the contrary, there shall be no limitation on the
liability of the Seller and the Parent under either Section 9.04 or this
Section 9.05 for Damages of the Purchaser which relate to Section 9.01(a)
[breaches of covenants], Section 9.01(c) [Tax liabilities], Section 9.01(b)
(insofar as it relates to breaches of Sections 2.01, 2.02, 2.03, 2.04 or 2.21)
and/or the last sentence of Section 6.03 hereof as therein provided.
(b) The representations and warranties contained in or made
pursuant to this Agreement shall expire 15 months from the Closing Date, or if
at the end of such 15 month period the Parent shall be continuing to operate
one or more businesses for profit, such period shall be extended during the
operation thereof for up to an additional three months, provided that the
representations and warranties contained in Sections 2.07, 2.16(c), 2.21 and
2.24 shall survive for the applicable statute of limitations, and provided
further that if written notice is properly given under this Section IX with
respect to any alleged breach of a representation or warranty to which such
party is entitled to be indemnified hereunder prior to the applicable
expiration date, such representation or warranty with respect to such
specified matter only shall continue indefinitely until the applicable claim
is finally resolved.
(c) With respect to any claim by the Parent or the Seller, on
the one hand, or the Purchaser, on the other hand, against the other based
upon a breach of any covenant or agreement of the other herein which is
required to be performed on or prior to the Closing Date (the "Pre-Closing
Covenants"), such Pre-Closing Covenant shall not survive the Closing and the
breach thereof shall be deemed to have been waived by the party for whose
benefit such Pre-Closing Covenant exists; provided that in the event that such
breach has had a Material Adverse Effect and the party who has breached such
Pre-Closing Covenant has taken actions to intentionally conceal the existence
of such breach from the party for whose benefit such Pre-Closing Covenant
exists, and provided further that the party for whose benefit such Pre-Closing
Covenant exists has sustained or incurred Damages that would otherwise
constitute an Indemnification Matter covered by the provisions of Section 9.01
35
<PAGE>
or 9.02, as the case may be, then the applicable Pre-Closing Covenant shall be
deemed to have survived the Closing.
9.06 LOSSES NET. The amount of any Damages for which indemnification is
provided under Section 8.03, this Section IX or Section X shall be net of Tax
benefits to be received by the Indemnitee, and net of any amounts recoverable
by the Indemnitee under insurance policies with respect to such Damages.
9.07 SOLE AND EXCLUSIVE REMEDY. After the Closing Date, each party
hereto acknowledges and agrees that such party's sole and exclusive remedy
with respect to Damages and any and all other claims relating to the subject
matter of this Agreement and the transactions contemplated hereby (other than
disputes arising under the second sentence of Section 8.05(b) hereof which
disputes shall be resolved as set forth in such Section) shall be in
accordance with, and limited by, the indemnification provisions set forth in
Section 8.03, this Section IX and Section X.
9.08 LIMITATIONS ON MATERIALITY. For purposes of the indemnification
provided in this Article 9, in determining whether the representations and
warranties of the Parent or the Seller have been breached or are inaccurate or
the amount of any Damages, no effect will be given to any materiality
(including Material Adverse Effect) qualification set forth in such
representations and warranties.
SECTION X.
BROKERS AND FINDERS
10.01 THE PARENT'S AND THE SELLER'S OBLIGATIONS. Neither the Purchaser
nor any Group Member shall have any obligation to pay any financial advisory,
finder's fee or other compensation to any person, firm or corporation claiming
by, through or under the Parent, the Seller or any Group Member in connection
with the sale of the Shares contemplated by this Agreement and the
transactions contemplated herein, and the Parent and the Seller, jointly and
severally, hereby agree to defend, indemnify and hold the Purchaser and each
Group Member harmless from any Damages sustained or incurred by the Purchaser
or such Group Member by reason of any such claim for any such fee or other
compensation. It is understood and agreed that the Parent shall be solely
responsible for the fees and the expenses of Salomon Smith Barney, Inc.,
Lehman Brothers, Wasserstein Perella & Co., Inc. and Warburg Dillon Reed LLC
in connection with this Agreement and the transactions contemplated hereby.
10.02 THE PURCHASER'S OBLIGATIONS. Neither the Parent nor the Seller
shall have any obligation to pay any financial advisory, finder's fee or other
compensation to any person, firm or corporation claiming by, through or under
the Purchaser (or any Affiliate thereof) in connection with this Agreement and
the transactions contemplated herein, and the Purchaser hereby agrees to
defend, indemnify and hold the Parent and the Seller harmless from any Damages
sustained or incurred by the Seller by reason of any such claim for any such
fee or other compensation.
36
<PAGE>
SECTION XI.
MISCELLANEOUS
11.01 NOTICES. All notices, requests or instructions hereunder shall be
in writing and delivered personally or sent by telecopy or registered or
certified mail, postage prepaid, return receipt requested, or by FedEx or
other recognized overnight courier as follows:
(a) if to the Seller or the Parent:
NovaCare, Inc.
1016 West Ninth Avenue
King of Prussia, Pennsylvania 19406
Attention: Chief Executive Officer
Telecopy: (610) 992-0310
with a copy to:
Haythe & Curley
237 Park Avenue
New York, New York 10017
Attention: Andrew J. Beck, Esq.
Telecopy: (212) 682-0200
(b) if to the Purchaser:
Hanger Orthopedic Group, Inc.
7700 Old Georgetown Road
Bethesda, Maryland 20814
Attention: Chief Executive Officer
Telecopy: (301) 986-0702
with a copy to:
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Suite 825
Washington, D.C. 20036
Attention: Jay W. Freedman, Esq.
Telecopy: (202) 457-5151
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, on the date of receipt, if telecopied, three business days
after the date of mailing, if mailed by registered or certified mail, return
receipt requested, and one business day after the date of sending, if sent by
FedEx or other recognized overnight courier.
37
<PAGE>
11.02 ENTIRE AGREEMENT. This Agreement, the Schedules and the Exhibits
hereto contain the entire agreement among the parties hereto with respect to
the transactions contemplated hereby, and, except for that certain
Confidentiality Agreement dated December 15, 1998 between Salomon Smith
Barney, Inc., on behalf of the Parent, and Hanger, which shall remain in full
force and effect, supersede all prior agreements, understandings, negotiations
and discussions, whether written or oral, of the parties, and, except as
otherwise provided in Section 6.03 hereof, no modification hereof shall be
effective unless in writing and signed by the party against which it is sought
to be enforced.
11.03 ASSIGNMENT. This Agreement shall not be assignable by any of the
parties hereto except pursuant to a writing executed by all of the parties
hereto, provided that the Purchaser may without such prior consent, for
collateral security purposes, assign its rights (but not its obligations) to
providers of financing in connection with the purchase of the Shares.
11.04 FURTHER ACTION. Each of the parties hereto shall use such party's
best efforts to take such actions as may be necessary or reasonably requested
by the other parties hereto to carry out and consummate the transactions
contemplated by this Agreement.
11.05 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
permitted assigns.
11.06 EXPENSES. Each of the parties hereto shall bear such party's own
expenses in connection with this Agreement and the transactions contemplated
hereby whether or not the Closing occurs. In the event that there are any
direct or indirect real property transfer, personal property transfer or other
similar transfer taxes payable in connection with the transactions
contemplated hereby, such taxes shall be paid by the Seller.
11.07 ARBITRATION. Subject to Sections 8.05(b) and 9.03(c) hereof, the
parties agree that they shall submit any dispute arising out of or relating to
this Agreement, or any breach hereof, to arbitration in accordance with the
rules of the American Arbitration Association then in effect. The parties
further agree that judgment upon an award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The arbitration shall be
held in the District of Columbia.
11.08 SCHEDULES AND EXHIBITS. All Schedules and Exhibits to this
Agreement are integral parts of this Agreement.
11.09 INVALIDITY, ETC. Should any provision of this Agreement be held by
a court or arbitration panel of competent jurisdiction to be enforceable only
if modified, such holding shall not affect the validity of the remainder of
this Agreement, the balance of which shall continue to be binding upon the
parties hereto with any such modification to become a part hereof and treated
as though originally set forth in this Agreement. The parties further agree
that any such court or arbitration panel is expressly authorized to modify any
such unenforceable provision of this Agreement in lieu of severing such
unenforceable provision from this Agreement in its entirety, whether by
rewriting the offending provision, deleting any or all of the offending
provision, adding additional language to this Agreement, or by making such
other modifications as it deems warranted to carry out the intent and
agreement of the parties as embodied herein to the maximum extent permitted by
38
<PAGE>
law. The parties expressly agree that this Agreement as so modified by a court
or arbitration panel shall be binding upon and enforceable against each of
them. In any event, should one or more of the provisions of this Agreement be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions hereof,
and if such provision or provisions are not modified as provided above, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provisions had never been set forth herein.
11.10 HEADINGS. The headings of this Agreement are for convenience of
reference only and are not part of the substance of this Agreement.
11.11 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without giving effect to
the conflicts of laws provisions and principles thereof that would apply the
laws of any other jurisdiction.
11.12 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
11.13 CONSTRUCTION. The parties hereto agree that this Agreement is the
product of negotiations among sophisticated parties, each of whom was
represented by counsel, and each of whom had an opportunity to participate in,
and did participate in, the drafting of each provision hereof. Accordingly,
ambiguities in this Agreement, if any, shall not be construed strictly or in
favor of or against any party hereto but rather shall be given a fair and
reasonable construction without regard to the rule of CONTRA PROFERENTEM.
11.14 HANGER'S GUARANTY OF PURCHASER'S OBLIGATIONS. Hanger hereby
unconditionally guaranties to the Parent and the Seller the due and timely
performance by the Purchaser of all of the Purchaser's obligations under this
Agreement.
11.15 ASSIGNMENT OF PARENT AGREEMENTS. The Parent hereby assigns to the
Company, and the Company hereby accepts and assumes, all the Parent's rights
and obligations pursuant to the Parent Agreements. To the extent that any
Parent Agreement to be assigned to the Company hereunder requires the consent
to such assignment by any third party thereto, the Parent shall cooperate
fully with the Company in attempting to procure any such consent and in any
reasonable arrangement designed to provide the Company with the benefits under
any such Parent Agreement. The failure of the Company or the Parent to obtain
any such consent shall in no way relieve the Company from its obligation to
assume such Parent Agreement and the Company shall fully and faithfully
perform, observe and fulfill all the unfulfilled obligations of the Parent
under such Parent Agreements. From and after the Closing Date, the Company
shall use commercially reasonable efforts to obtain promptly and deliver to
the Parent, written releases in favor of the Parent with respect to any such
obligations and liabilities under all Parent Agreements.
39
<PAGE>
SECTION XII.
DEFINITIONS
12.01 CERTAIN DEFINITIONS. The following terms when used herein shall
have the meanings assigned to them below (certain other terms are defined
elsewhere herein):
"Actions" shall have the meaning set forth in Section 2.15 hereof.
"Affiliate" means a person or entity who directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, another person.
"Applicable Law" shall mean the collective reference to any law, rule,
regulation, ordinance, writ, judgment, injunction, decree, determination,
award or other order of any Governmental Authority, in each case excluding any
and all Environmental Laws.
"Beneficiary" shall mean the person(s) or entity(ies) designated by an
Employee or Former Employee, by operation of law or otherwise, as the party
entitled to compensation, benefits, damages, insurance coverage, payments,
indemnification or any other goods or services as a result of any liability or
claim under any applicable welfare or benefit plan or program.
"Benefit Plan" shall have the meaning set forth in Section 2.12 hereof.
"Best Efforts" or "best efforts" shall mean diligently, promptly and in
good faith taking all actions which are reasonable, necessary and appropriate
to accomplish the objective requiring the use of best efforts, but shall not
include any obligation (a) to make any payment, incur any costs, commit
available resources, or forego the receipt of any payment, which in any case
is material in amount in light of the required objective, (b) to initiate any
lawsuit or other proceeding to achieve the required objective, or (c) to take
any action which is unlawful.
"Closing" and "Closing Date" shall have the meanings set forth in
Section 4.01 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall have the meaning set forth in the recitals hereof.
"Confidentiality Agreement" shall have the meaning set forth in Section
11.02 hereof.
"Contracts" shall have the meaning set forth in Section 2.10 hereof.
"Control" (including the terms "controlling", "controlled by" and "under
common control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of the
person, whether through stock ownership, voting rights, governing boards or
otherwise.
40
<PAGE>
"Damages" shall mean any and all losses, claims, demands, damages,
liabilities, obligations, costs and expenses, including without limitation,
reasonable fees and disbursements of counsel (however sustained or incurred,
including, without limitation, in any action or proceeding involving any third
party or involving any other party to this Agreement) sustained or incurred by
or claimed against the Purchaser Indemnified Parties (or any of them) or the
Seller Indemnified Parties (or any of them), as the case may be, and other
reasonable out-of-pocket costs and expenses incurred in connection with
investigating or defending any action, suit or proceeding, commenced or
threatened, but excluding punitive or consequential losses or damages.
"Determination" shall mean (a) the final non-appealable judgment by a
court of competent jurisdiction or arbitrator with respect to any claim
covered by Section IX hereof or (b) a compromise and settlement agreement
executed and delivered by both the Indemnitor and the Indemnitee with respect
to any claim covered by Section IX.
"Determination Date" shall mean the date the Determination is final,
legally binding, and non-appealable.
"Effective Time" shall mean the close of business Eastern Standard Time
on the Closing Date.
"Employees" shall mean all individuals with whom a Group Member
maintains, on the Closing Date, an employer-employee relationship, including
any individuals on lay-off, disability or leave of absence, whether paid or
unpaid.
"Environmental Laws" shall have the meaning set forth in Section 2.16(c)
hereof.
"Environmental Permits" shall have the meaning set forth in Section
2.16(c) hereof.
"ERISA" shall have the meaning set forth in Section 2.12(a) hereof.
"Financial Statements" shall have the meaning set forth in Section 2.04
hereof.
"Former Employees" shall mean all individuals as to whom an
employer-employee relationship with any Group Member existed prior to the
Closing Date, but does not exist on the Closing Date, who remain entitled to
benefits under any applicable welfare or benefit plan or program.
"GAAP" shall mean generally accepted accounting principles.
"Governmental Authority" shall mean the collective reference to any
court, tribunal, government, or governmental agency, authority or
instrumentality, domestic or foreign.
"Group" shall mean the Company and its Subsidiaries, taken as a whole.
"Group Member" shall mean, individually, the Company and each of its
Subsidiaries.
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"Indemnification Matter" shall have the meaning set forth in Section
9.03 hereof.
"Knowledge of the Parent" shall mean, with respect to a particular fact
or other matter, that (i) an individual who is a director or executive officer
of the Parent, the Seller, the Company or any Group Member is actually aware
of such fact or other matter or (ii) a reasonably prudent individual in the
satisfaction of his or her duties as a director or executive officer of the
Parent, the Seller, the Company or any Group Member would be reasonably
expected to discover or otherwise become aware of such fact or other matter in
the course of conducting a reasonable investigation.
"Lien" shall mean any mortgage, pledge, encumbrance, charge or other
security interest of any kind or nature whatsoever.
"Material Adverse Effect" shall mean a material adverse effect on the
assets, properties, businesses, results of operations or financial condition
of the Group, taken as a whole, and in any case after application of the
proceeds of any insurance or indemnity under any contract or agreement to
which any Group Member, the Parent or the Seller (or any Affiliate thereof) is
a party or, for purposes of Section 6.03, a material adverse effect on the
ability of the Parent or the Seller to consummate the sale of the Shares as
provided in this Agreement; provided that the term "Material Adverse Effect"
as used herein shall not include any effect attributable to changes in the
economy (of the United States or any other country) generally, changes in the
industries in which any Group Member engages, or seasonality of the businesses
of any Group Member.
"Permits" shall have the meaning set forth in Section 2.16(b) hereof.
"Permitted Liens" shall mean:
(a) Liens for Taxes not yet due or which are being contested in
good faith by appropriate proceedings, provided that adequate reserves with
respect to contested taxes are maintained on the books of any Group Member;
(b) pledges or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other social
security legislation;
(c) easements, rights-of-way, restrictions and other similar
encumbrances previously incurred in the ordinary course of business which, in
respect of properties or assets of the Group are not material, and which, in
the case of such encumbrances on the assets or properties of any Group Member,
do not materially detract from the value of any such properties or assets or
materially interfere with any present use of such properties or assets;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
which are not overdue for a period of more than 90 days or which are being
contested in good faith by appropriate proceedings;
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(e) deposits to secure the performance of bids, contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(f) statutory and contractual Liens on the property of any Group
Member in favor of landlords securing leases; and
(g) Liens in existence on the Closing Date listed on SCHEDULE 2.09
hereto.
"Pre-Closing Covenants" shall have the meaning set forth in Section
9.05(c) hereof.
"Purchaser Indemnified Parties" shall have the meaning set forth in
Section 9.01 hereof.
"Retro-Premium Insurance Amounts" shall mean any liability or other
obligation paid by the Parent or the Seller (or any Affiliate of the Parent or
the Seller) (whether by reimbursement to any claims security or escrow funds,
any additional premiums on retrospective adjustment or otherwise) under any
policies of insurance maintained by the Parent or the Seller (or any Affiliate
of the Parent or the Seller) for the benefit of any Group Member attributable
to events or occurrences on or prior to the Closing Date.
"Schedules" shall mean the Schedules attached hereto and made a part of
this Agreement.
"Seller Indemnified Parties" shall have the meaning set forth in Section
9.02 hereof.
"Seller's Health Plan" shall have the meaning set forth in Section 8.07
hereof.
"Seller Tax Periods" shall mean and include any and all periods ending
on or before the Closing Date, and in addition, the portion of any taxable
period that includes, but does not end on or before, the Closing Date that
consists of a partial period deemed to end on the Closing Date; provided that
in the case of any Seller Tax Period that does not end on or before the
Closing Date, for purposes hereof the books and records of the relevant Group
Member(s) shall be deemed to have been closed at and as of the Closing Date.
"Shares" shall have the meaning set forth in the recitals hereof.
"Subsidiary" and "Subsidiaries" shall have the meanings set forth in
Section 2.01 hereof.
"Taxes" shall have the meaning set forth in Section 2.07 hereof.
"Tax Claim" shall have the meaning set forth in Section 9.03 hereof.
"Tax Returns" shall have the meaning set forth in Section 2.07 hereof.
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"Tax Sharing Agreement" shall mean the practice employed by the Parent
in causing the Seller and each of the Group Members to pay to the Parent or to
the Seller the separate company liability of each Group Member in respect of
the consolidated Federal income Tax and state income Tax liabilities of the
Parent's or the Seller's tax group, as applicable.
"Y2K-compliant" shall mean able to provide specific dates and calculate
spans of dates, and to record, store, process and provide true and accurate
dates and calculations for dates and spans of dates within and between the
twentieth and twenty-first centuries prior to, including and following January
1, 2000, including by: (i) correctly processing day and date calculations;
(ii) recognizing September 9, 1999 and January 1, 2001 as valid dates; (iii)
recognizing the year 2000 as a leap year having 366 days, and correctly
processing February 29, 2000 as a valid leap year date; (iv) employing only
four-digit year representations in software, components and systems owned or
operated in connection with the Company and its Subsidiaries; and (v)
incorporating interface programs sufficient to translate accurately to
four-digit format (without any burden of interpretation) any two-digit year
representations included in software, components or systems, including but not
limited to external databases, data warehouses, software systems and user
interfaces that send data to or receive data from software, components or
systems used in the Business.
* * *
43
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
SELLER:
NC RESOURCES, INC.
By: /s/TIMOTHY E. FOSTER
------------------------------
Name: Timothy E. Foster
Title: Chief Executive Officer
PARENT:
NOVACARE, INC.
By: /s/TIMOTHY E. FOSTER
------------------------------
Name: Timothy E. Foster
Title: Chief Executive Officer
HANGER ORTHOPEDIC GROUP, INC.
By: /s/IVAN R. SABEL
------------------------------
Name: Ivan R. Sabel
Title: Chief Executive Officer
PURCHASER:
HPO ACQUISITION CORP.
By: /s/IVAN R. SABEL
------------------------------
Name: Ivan R. Sabel
Title: Chief Executive Officer
45
<PAGE>
AMENDMENT NO. 1 TO
STOCK PURCHASE AGREEMENT
AMENDMENT NO. 1 made as of May 19, 1999 ("Amendment No. 1"), by and
among NovaCare, Inc., a Delaware corporation ("Parent"), NC Resources, Inc., a
Delaware corporation (the "Seller"), Hanger Orthopedic Group, Inc., a Delaware
corporation ("Hanger"), and HPO Acquisition Corp., a Delaware corporation (the
"Purchaser"), to the Stock Purchase Agreement, dated as of April 2, 1999, by
and among the Parent, the Seller, Hanger and the Purchaser (the "Stock
Purchase Agreement").
W I T N E S S E T H:
WHEREAS, the parties hereto have entered into the Stock Purchase
Agreement pursuant to which, among other things, the Seller shall sell to the
Purchaser, and the Purchaser shall acquire from the Seller, all of the issued
and outstanding shares of common stock, $.01 par value per share, of NovaCare
Orthotics and Prosthetics, Inc., a Delaware corporation (the "Company"); and
WHEREAS, the parties hereto desire to amend the Stock Purchase Agreement
as hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. DEFINED TERMS. All capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Stock Purchase Agreement.
2. AMENDMENTS TO STOCK PURCHASE AGREEMENT.
(a) Section 1.02(a) of the Stock Purchase Agreement is hereby amended
by deleting Section 1.02(a) thereof in its entirety and substituting therefor
the following:
"(a) PURCHASE PRICE AND PAYMENT. The Purchaser agrees to provide
the Seller with an aggregate value of Four Hundred Forty-Five Million
Dollars ($445,000,000.00) ("PURCHASE PRICE") for the Shares by: (i) the
assumption of the promissory notes payable by the Company to the sellers
of acquired businesses in a principal amount not to exceed the amount
(the "Relevant Amount") set forth on Schedule 1.02(a)(1) hereto with
respect to the relevant Closing Date (the "Acquired-company Notes") as
specifically listed on SCHEDULE 1.02(A)(2) hereto; (ii) the escrow of
Ten Million Dollars ($10,000,000.00) (the "Escrowed Funds") until the
determination of any Purchase Price adjustments as provided in Section
1.02(b) hereof; (iii) the assumption of the liability of the Parent with
respect to the severance amounts calculated as set forth on SCHEDULE
1.02(a)(3); and (iv) the payment of the balance of the Purchase Price in
<PAGE>
cash by wire transfer or delivery of other immediately available funds
at the Closing."
(b) Section 4.01 of the Stock Purchase Agreement is hereby amended by
deleting Section 4.01 in its entirety and substituting therefor the following
paragraph:
"4.01 TIME AND PLACE OF THE CLOSING. The closing of the purchase
and sale of the Shares as set forth herein (herein referred to as the
"Closing") shall be held at the offices of Haythe & Curley, 237 Park
Avenue, New York, New York 10017 at 10:00 a.m., local time, on July 1,
1999, or such other time, place and date as the Purchaser and the Seller
may agree (such date upon which the Closing occurs is herein referred to
as the "Closing Date") and, for accounting purposes, the Closing shall
be effective as of a mutually agreeable date."
(c) Schedule 1.02(a)(2) to the Stock Purchase Agreement is hereby
amended by deleting Schedule 1.02(a)(2) thereof in its entirety and
substituting therefor a new Schedule 1.02(a)(2) in the form attached to this
Amendment No. 1.
3. MISCELLANEOUS.
(a) The parties hereto further agree that all notices, requests or
instructions under this Amendment No. 1 or any other agreement made between
the parties hereto in connection with the Stock Purchase Agreement shall be in
writing and delivered personally, sent by telecopy or sent by registered or
certified mail, postage prepaid, return receipt requested, or by FedEx or
other recognized overnight courier, to the address set forth in Section 11.01
of the Stock Purchase Agreement.
(b) Except as specifically amended herein, the Stock Purchase
Agreement shall remain in full force and effect in accordance with its terms.
(c) This Amendment No. 1 shall be binding upon the parties hereto and
their respective successors and assigns.
(d) This Amendment No. 1 may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to be duly executed on the date first above written.
NC RESOURCES, INC.
By: /s/TIMOTHY E. FOSTER
------------------------------
Name: Timothy E. Foster
Title: Chief Executive Officer
NOVACARE, INC.
By: /s/TIMOTHY E. FOSTER
------------------------------
Name: Timothy E. Foster
Title: Chief Executive Officer
HANGER ORTHOPEDIC GROUP, INC.
By: /s/IVAN R. SABEL
------------------------------
Name: Ivan R. Sabel
Title: Chief Executive Officer
HPO ACQUISITION CORP.
By: /s/IVAN R. SABEL
------------------------------
Name: Ivan R. Sabel
Title: Chief Executive Officer
EXHIBIT 2(B)
CERTIFICATE OF DESIGNATIONS, POWERS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS
AND QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS
OF
7% REDEEMABLE PREFERRED STOCK
OF
HANGER ORTHOPEDIC GROUP, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE I NUMBER OF SHARES AND DESIGNATIONS................................ 1
ARTICLE II DEFINITIONS..................................................... 1
ARTICLE III VOTING RIGHTS.................................................. 10
3.1. GENERAL............................................................ 10
3.2. SPECIAL ELECTION OF DIRECTORS...................................... 10
3.3. PROTECTIVE PROVISIONS.............................................. 11
3.4. COVENANTS IN RELATED DOCUMENTS..................................... 13
ARTICLE IV DIVIDENDS AND DISTRIBUTIONS..................................... 13
4.1. CUMULATIVE DIVIDENDS............................................... 13
4.2. RESTRICTIONS ON DIVIDENDS, ETC..................................... 14
4.3. PARTICIPATING DIVIDENDS............................................ 14
ARTICLE V LIQUIDATION...................................................... 15
5.1. REDEEMABLE PREFERRED STOCK......................................... 15
5.2. ADDITIONAL PAYMENTS................................................ 15
5.3. INSUFFICIENT FUNDS................................................. 15
ARTICLE VI REDEMPTION...................................................... 15
6.1. CHANGE OF CONTROL.................................................. 15
6.2. REDEMPTION OF REDEEMABLE PREFERRED STOCK AT CORPORATION'S OPTION... 18
6.3. MANDATORY REDEMPTION............................................... 18
6.4. REDEMPTION AT HOLDER'S OPTION...................................... 19
6.5. WARRANTS........................................................... 20
6.6. ADDITIONAL PAYMENTS................................................ 21
ARTICLE VII CONVERSION..................................................... 21
7.1. OPTIONAL CONVERSION................................................ 21
7.2. MANDATORY CONVERSION............................................... 22
7.3. ADJUSTMENT OF CONVERSION PRICE..................................... 22
7.4. MECHANICS.......................................................... 27
7.5. RESERVATION OF SHARES.............................................. 28
ARTICLE VIII CERTAIN REGULATORY MATTERS.................................... 29
<PAGE>
CERTIFICATE OF DESIGNATIONS, POWERS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS AND
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF
7% REDEEMABLE PREFERRED STOCK
--------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
--------------------------
HANGER ORTHOPEDIC GROUP, INC., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"CORPORATION"), hereby certifies that the following resolution was duly
adopted by the Board of Directors of the Corporation as required by Section
151 of the Delaware General Corporation Law at a meeting duly called and held
on June 23, 1999.
RESOLVED, that a series of the class of authorized preferred
stock, $.01 par value per share, of the Corporation is hereby created and that
the designations, powers, preferences and relative, participating optional or
other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof, are hereby fixed as follows:
ARTICLE I
NUMBER OF SHARES AND DESIGNATIONS
60,000 of the shares of the Corporation's preferred stock, $.01 par
value per share, are hereby designated 7% Redeemable Preferred Stock.
ARTICLE II
DEFINITIONS
As used herein, the following capitalized terms have the following
meanings:
"AFFILIATE" means, with respect to any Person, (a) a director, officer,
member or general partner of such Person or any Person identified in clause
(c) below, (b) a spouse, parent, sibling or descendant of such Person (or a
spouse, parent, sibling or descendant of any director or officer of such
Person or the general partner or managing member of such Person) and (c) any
other Person that directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with such Person. For
the purpose of the above definition, the term "CONTROL" (including, with
correlative meaning, the terms "controlling," "controlled by" and "under
common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of Voting Securities, by contract or otherwise.
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"AFFILIATE TRANSACTION" has the meaning ascribed to it in SECTION 3.3.
"AMENDED CHARTER" means the Amended and Restated Certificate of
Incorporation, as amended by the Charter Amendment.
"APPLICABLE DIVIDEND RATE" means 7% per annum; PROVIDED that the
Applicable Dividend Rate shall be automatically increased to 10% per annum
from and after the occurrence of an Event of Non-Compliance until such time as
such Event of Non-Compliance shall have been cured or shall otherwise cease to
exist.
"APPLICABLE LAW" means, with respect to any Person, all provisions of
laws, statutes, ordinances, rules, regulations, permits, certificates or
orders of any Governmental Authority applicable to such Person or any of its
assets or property or to which such Person or any of its assets or property is
subject, and all judgments, injunctions, orders and decrees of all courts and
arbitrators in proceedings or actions in which such Person is a party or by
which it or any of its assets or properties is or may be bound or subject.
"BY-LAWS" means the By-laws of the Corporation, as amended and in effect
from time to time.
"BOARD" and "BOARD OF DIRECTORS" means the Board of Directors of the
Corporation.
"CERTIFICATE OF DESIGNATIONS" means a certificate of designations,
powers, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions filed by the
Corporation with respect to any of its Securities.
"CHANGE OF CONTROL" has the meaning ascribed to the term "Change of
Control" in the Indenture.
"CHANGE OF CONTROL OFFER" has the meaning ascribed to it in SECTION
6.1(a).
"CHANGE OF CONTROL PURCHASE PRICE" has the meaning ascribed to it in
SECTION 6.1(a).
"CHANGE OF CONTROL PAYMENT DATE" has the meaning ascribed to it in
SECTION 6.1(b).
"CHARTER AMENDMENT" means the amendment to the Corporation's certificate
of incorporation, in substantially the form attached as EXHIBIT B to the
Securities Purchase Agreement, together with such changes as the parties to
the Securities Purchase Agreement may agree.
"CHASE" means Chase Equity Associates, L.P., a California limited
partnership.
"COMMON STOCK" means shares of Voting Common Stock, Non-Voting Common
Stock and all other classes of capital stock of the Corporation hereafter
authorized that are not limited to a fixed sum or percentage of par or stated
value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution
or winding up of the Corporation; PROVIDED that, the Redeemable Preferred
Stock shall not be deemed to be Common Stock.
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"COMMON STOCK EQUIVALENTS" means all shares of Common Stock outstanding,
all shares of Common Stock issuable (without regard to any present
restrictions on such issuance) upon the conversion, exchange or exercise of
all Securities of the Corporation that are convertible, exchangeable or
exercisable for Common Stock and all Common Stock appreciation rights, phantom
Common Stock rights and other rights to acquire, or to receive or be paid an
amount based on the value (less any exercise, conversion or purchase price)
of, the Common Stock. With respect to the Redeemable Preferred Stock, as of
any date, "Common Stock Equivalents" means the shares of Common Stock issuable
in accordance with this Certificate of Designations upon the conversion of all
of the outstanding shares of Redeemable Preferred Stock on such date
(calculated by assuming that the Convertibility Effective Date had occurred
and that such shares of Redeemable Preferred Stock were converted into shares
of Non-Voting Common Stock which were then immediately converted into shares
of Voting Common Stock).
"COMMON STOCK RIGHTS" means options, rights, warrants or other rights to
acquire shares of Common Stock or Securities directly or indirectly
convertible into, exercisable for or otherwise entitling any Person to receive
any shares of Common Stock.
"CONVERSION PRICE" means $15.50, subject to adjustment in accordance
with SECTION 7.3.
"CONVERTIBILITY EFFECTIVE DATE" means the first date on which (a) the
Corporation shall have obtained the approval of its stockholders for the
effectiveness of the convertibility of shares of Redeemable Preferred Stock
into shares of Non-Voting Common Stock in accordance with ARTICLE VII, (b) the
Charter Amendment shall have become effective in accordance with the laws of
the State of Delaware and (c) the Corporation shall have delivered to the
Holders of the Redeemable Preferred Stock notice of its election to have the
Redeemable Preferred Stock become convertible in accordance with ARTICLE VII.
"CORPORATION" has the meaning ascribed to it in the first paragraph of
this Certificate of Designations.
"CORPORATION REDEMPTION" has the meaning ascribed to it in SECTION
6.2(a).
"CORPORATION REDEMPTION NOTICE" has the meaning ascribed to it in
SECTION 6.2(a).
"CORPORATION REDEMPTION DATE" has the meaning ascribed to it in SECTION
6.2(a).
"DIVIDEND ACCRUAL PERIOD" means, with respect to a share of Redeemable
Preferred Stock, (i) the initial period from and including the Original
Issuance Date of such share to but excluding the first Dividend Payment Date
occurring after such Original Issuance Date, (ii) a period from and including
each Dividend Payment Date to but excluding the next succeeding Dividend
Payment Date while such share remains outstanding and (iii) the final period
ending on, but excluding, the date such share ceases to be outstanding and
beginning on, and including, the Dividend Payment Date immediately preceding
such date.
"DIVIDEND PAYMENT DATE" means each March 31, June 30, September 30 and
December 31, commencing September 30, 1999.
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"EQUITY INCENTIVE PLANS" means any stock option, issuance, appreciation
rights or other equity incentive plan; PROVIDED, HOWEVER, that the maximum
number of shares of Common Stock Equivalents issuable thereunder shall not
exceed 2,362,013 shares and equivalents (subject to PRO RATA adjustment in the
event of any stock dividend or distribution paid in shares of Common Stock or
any stock split or subdivision, reverse stock split or combination or other
similar PRO RATA recapitalization event affecting the Common Stock).
"EVENT OF NON-COMPLIANCE" means any one of the following events,
occurrences or conditions:
(i) any failure by the Corporation, after the fifth anniversary of the
Original Issuance Date, to (A) pay on each of two consecutive Dividend Payment
Dates the full amount of cash dividends accrued on the Redeemable Preferred
Stock for the Dividend Accrual Period ending on such Dividend Payment Date or
(B) declare and set aside funds on the Preferred Record Date for the payment
of the full amount of cash dividends that will be accrued on the Redeemable
Preferred Stock for the then current Dividend Accrual Period if the
Corporation failed to pay the full amount of cash dividends accrued on the
Redeemable Preferred Stock for the Dividend Accrual Period ending on the
immediately preceding Dividend Payment Date;
(ii) any failure by the Corporation to perform or comply in any respect
with any term, provision or covenant contained in any Related Document and,
with respect to any such failure that can be remedied or cured, ten days shall
have elapsed after the time that the Corporation becomes aware of such
failure;
(iii) any representation or warranty made by the Corporation in any
Certificate of Designations or in any Related Document proves to have been
false or incorrect or misleading in any material respect at the time made;
(iv) the Corporation or any of its Significant Subsidiaries shall (A)
voluntarily commence any proceeding or file any petition seeking relief under
Title 11 of the United States Code or any other federal, state or foreign
bankruptcy, insolvency or similar law, (B) consent to the institution of, or
fail to controvert in a timely and appropriate manner, any such proceeding or
the filing of any such petition, (C) apply for or consent to the appointment
of a receiver, trustee, custodian, sequestrator or similar official for any
such Person or for any substantial part of its property or assets, (D) file an
answer admitting the material allegations of a petition filed against it in
any such proceeding, (E) make a general assignment for the benefit of
creditors, (F) fail generally to pay its debts as they become due or (G) take
any action in furtherance of any of the foregoing;
(v) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (A)
relief in respect of the Corporation or any of its Significant Subsidiaries,
or of any substantial part of their respective property or assets, under Title
11 of the United States Code or any other federal, state or foreign
bankruptcy, insolvency or similar law, (B) the appointment of a receiver,
trustee, custodian, sequestrator or similar official for any such Person or
for any substantial part of its property or (C) the winding-up or liquidation
of any such Person, and such proceeding, petition or order shall continue
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<PAGE>
unstayed and in effect for a period of 30 consecutive days;
(vi) the Corporation fails to redeem any share of Redeemable Preferred
Stock on the Corporation Redemption Date, the Mandatory Redemption Date or any
other applicable redemption date (without giving effect to SECTION 6.4(e)); or
(vii) a final judgment for the payment of money in an amount in excess
of $5 million shall be rendered by a court or other tribunal against the
Corporation or any of its Subsidiaries and shall remain undischarged for a
period of 30 consecutive days during which such judgment and any levy or
execution thereof shall not have been effectively stayed or vacated.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any similar federal law then in force.
"FAIR VALUE" means with respect to (i) any Security that is not listed
on any domestic securities exchange or quoted in the NASDAQ System or the
domestic over-the-counter market or (ii) any property or assets other than
cash or Securities, the fair value thereof determined in good faith jointly by
the Corporation and the Requisite Senior Holders; PROVIDED, HOWEVER, that, if
the parties are not able to agree within a reasonable period of time (not to
exceed thirty (30) days) what amount constitutes Fair Value, then the Fair
Value will be determined pursuant to the Valuation Procedure.
"GOVERNMENTAL AUTHORITY" shall mean any Federal, state, municipal or
other government, governmental department, commission, board, bureau, agency
or instrumentality, or any court, in each case whether of the United States of
America or any political subdivision thereof, or of any other country.
"HOLDER REDEMPTION" has the meaning ascribed to it in SECTION 6.3.
"HOLDER REDEMPTION DATE" has the meaning ascribed to it in SECTION 6.3.
"HOLDER REDEMPTION PRICE" means, at any time, for each outstanding share
of Redeemable Preferred Stock, the product of the Market Price of a share of
Voting Common Stock multiplied by the number of Common Stock Equivalents
issuable upon conversion of such share of Redeemable Preferred Stock assuming
that the Convertibility Effective Date had occurred prior to such time.
"HOLDERS" means the holders of shares of the Redeemable Preferred Stock
and/or the Non-Voting Common Stock, as the context shall require.
"HOLDERS DIRECTOR ELECTION NOTICE" has the meaning ascribed to it in
SECTION 3.2(d).
"HOLDERS DIRECTOR REMOVAL NOTICE" has the meaning ascribed to it in
SECTION 3.2(d).
5
<PAGE>
"INDEBTEDNESS" has the meaning ascribed to it in the Indenture;
PROVIDED, HOWEVER, that Indebtedness shall not include any shares of capital
stock of the Corporation or any of its Subsidiaries.
"INDENTURE" means the Indenture dated as of June 16, 1999, among the
Corporation and the other signatories thereto governing the Corporation's 11
1/4 % Senior Subordinated Notes, as such Indenture is in effect on the
Original Issuance Date.
"INVESTOR RIGHTS AGREEMENT" means the Investor Rights Agreement dated as
of the Original Issuance Date, among the Corporation and the other parties
named therein, as amended, modified or supplemented from time to time.
"JUNIOR STOCK" means all shares of capital stock ranking junior to the
Redeemable Preferred Stock with respect to dividends or a Liquidation.
"LIEN" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest of any kind
whatsoever in or on such asset (including the filing of or agreement to give
any financing statement under the Uniform Commercial Code of any
jurisdiction), (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement relating to such
asset and (c) in the case of Securities, any purchase option, call,
appreciation right or similar right of a third party with respect to such
Securities.
"LIQUIDATION" means any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation.
"LIQUIDATION AMOUNT" means with respect to each share of Redeemable
Preferred Stock, the Original Cost of such share plus an amount equal to all
accrued and unpaid dividends on such share, whether or not declared.
"MANDATORY REDEMPTION" has the meaning ascribed to it in SECTION 6.3.
"MANDATORY REDEMPTION DATE" means the eleventh anniversary of the
Original Issuance Date.
"MARKET PRICE" means, as to any Security, the average of the closing
prices of such Security's sales on the New York Stock Exchange and on all
other United States securities exchanges on which such Security is at the time
listed, or, if there have been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at
the end of such day, or, if on any day such Security is not so listed, the
average of the representative bid and asked prices quoted in the NASDAQ System
as of 4:00 P.M., New York time, on such day, or, if on any day such Security
is not quoted in the NASDAQ System, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as reported
by the National Quotation Bureau, Incorporated, or any similar or successor
organization, in each such case averaged over a period of 21 days consisting
of the day as of which "Market Price" is being determined and the 20
consecutive trading days prior to such day. With respect to any Security that
is not listed on any domestic securities exchange or quoted in the NASDAQ
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<PAGE>
System or the domestic over-the-counter market, the "Market Price" of such
Security shall be the Fair Value thereof.
"MINIMUM PRICE EVENT" means, on any date after the third anniversary of
the Original Issuance Date, that the Market Price of the Voting Common Stock
as of such date is equal to or greater than 175% of the Conversion Price in
effect on such date (without giving effect to any adjustment pursuant to the
second sentence of SECTION 7.3(a)).
"NON-VOTING COMMON STOCK" means shares of the Corporation's Non-Voting
Common Stock, par value $.01 per share, to be authorized by the Corporation
pursuant to the Charter Amendment.
"ORIGINAL COST" means, with respect to any share of Redeemable Preferred
Stock, as of any particular date, the amount originally paid for such share
when it was originally issued. In the event of any change (by way of any
recapitalization, subdivision or recombination) in the number or kind of
shares of Redeemable Preferred Stock, the Original Cost immediately prior to
such change shall be ratably adjusted.
"ORIGINAL ISSUANCE DATE" means, with respect to a share of Redeemable
Preferred Stock, the date on which such share was first issued.
"PARIBAS" means Paribas North America, Inc.
"PERSON" shall be construed broadly and shall include without limitation
an individual, a partnership, a corporation, an association, a joint stock
company, a limited liability company, a trust, a joint venture, an
unincorporated organization and a Governmental Authority.
"PREFERRED RECORD DATE" has the meaning ascribed to it in SECTION 4.1.
"PUBLIC OFFERING" means an offering of shares of Voting Common Stock in
an underwritten offering registered under the Securities Act.
"PUT EFFECTIVE DATE" has the meaning ascribed to it in SECTION 6.4(a).
"PUT RIGHT" has the meaning ascribed to it in SECTION 6.4(a).
"REDEEMABLE PREFERRED STOCK" means the Corporation's 7% Redeemable
Preferred Stock.
"REGULATED STOCKHOLDER" means Chase, Paribas and any other Person (i)
that is subject to the provisions of Regulation Y of the Board of Governors of
the Federal Reserve System, 12 C.F.R. Part 225 (or any successor to such
Regulation) ("REGULATION Y"), (ii) that holds equity Securities of the
Corporation and (iii) has given written notice to the Corporation that such
Person is a Regulated Stockholder.
"RELATED DOCUMENTS" means, collectively, the Securities Purchase
Agreement, the Investor Rights Agreement, this Certificate of Designations,
the Certificate of Incorporation of the Corporation in effect on the date
hereof, the Amended Charter and the By-laws.
7
7
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"RELINQUISHING HOLDER" means Paribas and its transferees and any other
Holder of a share of Redeemable Preferred Stock that delivers a written notice
to the Corporation to the effect that such Holder elects not to be entitled to
vote with respect to any matter referred to in SECTION 3.2 or SECTION 3.3(c).
"REQUISITE SENIOR HOLDERS" means the Holders of a majority of the
outstanding shares of Redeemable Preferred Stock at the time in question.
"SALE OF THE CORPORATION" means (i) the sale of all or substantially all
of the Corporation's assets, (ii) the sale or transfer of the outstanding
capital stock of the Corporation or (iii) the merger or consolidation of the
Corporation with or into another Person, in each case, in one or a series of
related transactions, and in clauses (ii) and (iii) above, under circumstances
in which the holders of a majority in voting power of the outstanding capital
stock of the Corporation, immediately prior to such transaction, own less than
a majority in voting power of the outstanding capital stock of the Corporation
or the surviving or resulting corporation or acquirer, as the case may be,
immediately following such transaction. A sale (or multiple related sales) of
one or more Subsidiaries of the Corporation (whether by way of merger,
consolidation, reorganization or sale of all or substantially all assets or
Securities) which constitutes all or substantially all of the consolidated
assets of the Corporation shall be deemed a Sale of the Corporation.
"SECURITIES" means "securities" as defined in Section 2(1) of the
Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SECURITIES PURCHASE AGREEMENT" means the Securities Purchase Agreement
dated as of June 16, 1999, between the Corporation and the Holders named
therein, as amended from time to time.
"SIGNIFICANT SUBSIDIARY" means, with respect to any Person, any
Subsidiary of such Person that satisfies the criteria for a "significant
subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Exchange
Act.
"SUBSIDIARY" of any Person means any other Person (i) whose Securities
having a majority of the general voting power in electing the board of
directors or equivalent governing body of such other Person (excluding
Securities entitled to vote only upon the failure to pay dividends thereon or
the occurrence of other contingencies) are, at the time as of which any
determination is being made, owned by such Person either directly or
indirectly through one or more other entities constituting subsidiaries or
(ii) more than a 50% interest in the profits or capital of whom is, at the
time as of which any determination is being made, owned by such Person either
directly or indirectly through one or more other entities constituting
subsidiaries.
"VALUATION PROCEDURE" means the following procedure to determine the
Fair Value (the "VALUATION AMOUNT"). The valuation amount shall be determined
by an Appraiser selected by the Requisite Senior Holders, and set forth in a
written notice delivered to the Corporation (the "APPRAISER SELECTION
NOTICE"); PROVIDED that the Corporation may object to such Appraiser by
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delivering a written notice of such objection to each Holder of shares of
Redeemable Preferred Stock (the "APPRAISER OBJECTION NOTICE "). If the
Corporation does not deliver an appraiser objection notice within 10 days
after delivery by the Requisite Senior Holders of the appraiser selection
notice, then the Appraiser set forth in the appraiser selection notice shall
be the Appraiser. If the Corporation delivers an appraiser objection notice,
then the Appraiser will be selected by an arbitrator located in the City of
New York, New York, selected by the American Arbitration Association (or if
such organization ceases to exist, the arbitrator shall be chosen by a court
of competent jurisdiction). The arbitrator shall select the Appraiser (within
ten (10) days of its appointment) from a list, jointly prepared by the
Corporation and the Requisite Senior Holders, of not more than six Appraisers
of national standing in the United States, of which no more than three may be
named by the Corporation and no more than three may be named by the Requisite
Senior Holders. The arbitrator may consider, within the ten-day period
allotted, arguments from the parties regarding which Appraiser to choose, but
the selection by the arbitrator shall be made in its sole discretion from the
list of six. The Corporation and the Requisite Senior Holders shall submit to
the Appraiser their respective calculations of the valuation amount, and any
supporting arguments and other data as they may desire, within 30 days of the
appointment of the Appraiser, and the Appraiser shall as soon as practicable
thereafter make its own calculation of the valuation amount. The final
valuation amount for purposes hereof shall be the average of the two valuation
amounts closest together, as determined by the Appraiser, from among the
valuation amounts submitted by the Corporation and the Requisite Senior
Holders and the valuation amount calculated by the Appraiser. The
determination of the final valuation amount by such Appraiser shall be final
and binding upon the parties. The Corporation shall pay the fees and expenses
of the Appraiser and arbitrator (if any) used to determine the valuation
amount. If required by any such Appraiser or arbitrator, the Corporation shall
execute a retainer and engagement letter containing reasonable terms and
conditions, including, without limitation, customary provisions concerning the
rights of indemnification and contribution by the Corporation in favor of such
investment banking firm or arbitrator and its officers, directors, partners,
employees, agents and Affiliates. As used herein, "APPRAISER" means (a) with
respect to a determination of the Market Price of a Security, an investment
banking firm experienced in the industry in which the Corporation participates
and (b) with respect to a determination of any other valuation amount, a firm
of the type generally considered to be qualified in making determinations of
the type required.
"VOTING COMMON STOCK" means the Corporation's Common Stock, par value
$.01 per share.
"VOTING SECURITIES" of a Person means all classes of capital stock or
other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof.
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ARTICLE III
VOTING RIGHTS
3.1. GENERAL.
Except as may be required by law or as otherwise provided below, the
Holders of shares of Redeemable Preferred Stock shall not be entitled to vote
on any matter to be voted on by the stockholders of the Corporation, including
any vote to elect directors of the Corporation.
3.2. SPECIAL ELECTION OF DIRECTORS.
From and after the occurrence of an Event of Non-Compliance, the Holders
of Redeemable Preferred Stock (other than the Relinquishing Holders) shall
have the exclusive and special right, voting together as a single class, but
separately from all other classes of capital stock, to elect two directors to
the Board. One of such directors shall be entitled to serve on each committee
of the Board. The Corporation shall take all necessary and desirable actions
in connection with and in furtherance of such rights. Without limiting the
generality of the foregoing, the following procedures shall apply:
(a) At such time as the Holders of shares of Redeemable Preferred
Stock (other than the Relinquishing Holders) have the right to elect directors
as provided in this SECTION 3.2, the size of the Board shall be automatically
increased by two directors.
(b) The Holders of Redeemable Preferred Stock (other than the
Relinquishing Holders) may exercise their rights pursuant to this SECTION 3.2
at a special meeting of such Holders or by delivering a notice to the
Corporation, at any annual meeting of shareholders or by written consent in
accordance with the laws of the State of Delaware.
(c) At any time when the Holders of shares of Redeemable Preferred
Stock (other than the Relinquishing Holders) have the right to elect directors
as provided in this SECTION 3.2, upon delivery of a written request by any
Holder of Redeemable Preferred Stock (other than the Relinquishing Holders),
the President, any Vice President, the Secretary or any Assistant Secretary of
the Corporation shall call a special meeting of the Holders of shares of
Redeemable Preferred Stock for the purpose of electing directors. Such meeting
shall be held at the earliest practicable date at the principal executive
office of this Corporation or at such other location as the Holder(s) of
Redeemable Preferred Stock (other than the Relinquishing Holders) submitting a
written request shall designate. At any meeting held for the purpose of
electing directors at which the Holders of Redeemable Preferred Stock (other
than the Relinquishing Holders) shall have the right to elect two directors as
provided in this SECTION 3.2, the presence, in person or by proxy, of the
holders of a majority of the number of shares of Redeemable Preferred Stock at
the time outstanding (excluding those shares held by the Relinquishing
Holders) shall be required to constitute a quorum of such class for the
election of any director by the Holders of the Redeemable Preferred Stock
(other than the Relinquishing Holders) as a class.
(d) During any period that the Holders of shares of Redeemable
Preferred Stock (other than the Relinquishing Holders) shall have the right to
vote as a class for directors as provided in this SECTION 3.2, (i) each
director so elected shall hold office until such Holders elect a successor
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director but in no event beyond the termination of the right of the Holders of
shares of Redeemable Preferred Stock (other than the Relinquishing Holders) to
vote as a class to elect directors and (ii) any vacancies in the Board so
elected by the Holders of shares of Redeemable Preferred Stock (other than the
Relinquishing Holders) shall be filled only by a vote of a majority (which
majority may consist of only a single director) of the remaining directors
thereof elected by the Holders of shares of Redeemable Preferred Stock or may
be filled by the vote of holders of a majority of the number of shares of
Redeemable Preferred Stock at the time outstanding (excluding those shares
held by the Relinquishing Holders).
(e) Upon the Corporation becoming aware of the occurrence of an Event
of Non-Compliance, it will deliver a notice to each Holder of Redeemable
Preferred Stock.
3.3. PROTECTIVE PROVISIONS.
(a) For so long as any shares of Redeemable Preferred Stock are
outstanding, without first obtaining the affirmative written consent or
approval of the Requisite Senior Holders, the Corporation shall not, and shall
not permit any Subsidiary to:
(i) in any manner authorize, create, designate, issue or sell
any shares of any class or series of capital stock of the Corporation
(including any shares of treasury stock) or rights, options, warrants or
other Securities convertible into or exercisable or exchangeable for
capital stock or any debt Security which by its terms is convertible
into or exchangeable for any equity Security or has any other equity
feature or any Security that is a combination of debt and equity, which,
in each case, as to the payment of dividends, distribution of assets or
redemptions, including, without limitation, distributions to be made
upon a Liquidation, is senior to or on a parity with the Redeemable
Preferred Stock or which in any manner adversely affects the Holders of
Redeemable Preferred Stock;
(ii) in any manner alter or change the terms, designations,
powers, preferences, or the qualifications, limitations or restrictions,
of the Redeemable Preferred Stock or the relative, participating,
optional or other special rights of the Holders of the Redeemable
Preferred Stock in their capacity as such;
(iii) reclassify the shares of any class or series of capital
stock of the Corporation into shares of any other class or series of
capital stock (i) ranking, either as to payment of dividends,
distributions of assets or redemptions, including, without limitation,
distributions to be made upon a Liquidation, senior to or on a parity
with the Redeemable Preferred Stock or (ii) which in any manner
adversely affects the terms, designations, powers or preferences of the
Redeemable Preferred Stock or the relative, participating, optional or
other special rights of the Holders of Redeemable Preferred Stock in
their capacity as such;
(iv) amend, alter or repeal any of the provisions of (i) this
Certificate of Designations, (ii) the Certificate of Incorporation of
the Corporation (as amended, modified or restated from time to time) or
(iii) the By-laws of the Corporation, if such amendment, alteration or
repeal would have an adverse effect on the terms, designations, powers,
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preferences of the Redeemable Preferred Stock or the relative,
participating, optional or other special rights of the Holders of the
Redeemable Preferred Stock in their capacity as such;
(v) agree to or permit to exist, or permit any Subsidiary to
agree to or permit to exist, any provision in any agreement or
understanding that would impose any restriction on the ability of the
Corporation to honor the exercise of any rights of the Holders of the
Redeemable Preferred Stock, other than limitations contained in the
Indenture and the Credit Agreement on the Corporation's ability to make
payments pursuant to SECTION 6.4;
(vi) agree or otherwise commit to take any of the actions set
forth above.
(b) For so long as any shares of Redeemable Preferred Stock are
outstanding, the Corporation shall not take any of the actions set forth in
SECTION 3.3(a) in a manner that treats any Holder of a share of Redeemable
Preferred Stock different in any material respect from any other Holder
without first obtaining the prior written consent of such other Holder.
(c) For so long as any shares of Redeemable Preferred Stock are
outstanding, without first obtaining the affirmative written consent or
approval of the holders of a majority of the number of shares of Redeemable
Preferred Stock at the time outstanding (other than the Relinquishing
Holders), the Corporation shall not, and shall not permit any Subsidiary to:
(i) permit any Subsidiary to issue any capital stock to any
Person other than the Corporation or a direct or indirect wholly owned
Subsidiary of the Corporation;
(ii) enter into or permit to exist any transaction or series of
related transactions, including, without limitation, any purchase, sale,
lease or exchange of property, the rendering of any service or the
payment of any management, advisory or similar fees, with or for the
benefit of any Affiliate of the Company (an "AFFILIATE TRANSACTION"),
unless such Affiliate Transaction is permitted by the terms and
conditions of the Indenture; PROVIDED that in lieu of delivering to the
Trustee (as defined in the Indenture) a favorable opinion as to the
fairness to the Corporation of any such Affiliate Transaction, the
Holders of Redeemable Preferred Stock shall have received a copy of such
opinion;
(iii) directly or indirectly create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or
otherwise become responsible for payment of Indebtedness which is not
permitted by the terms and conditions of the Indenture;
(iv) merge, consolidate or amalgamate with any Person, except
that any wholly-owned Subsidiary of the Corporation may be merged or
consolidated with or into any Person in connection with any acquisition
permitted under SECTION 3.3(j);
(v) acquire or dispose of any business or assets in a single
transaction or a series of related transactions with an aggregate value
in such transaction or series of related transactions in excess of $100
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million (including all assumed debt, all cash payments, and the fair
market value of all Securities or other property issued as
consideration);
(vi) engage in any business other than one or more of the
businesses in which the Corporation or any of its Subsidiaries are
engaged in on the Original Issuance Date or any business reasonably
related thereto;
(vii) effect, approve or authorize any Liquidation or any
recapitalization or reorganization of the Company or any Subsidiary; or
(viii) agree or otherwise commit to take any of the actions set
forth above.
3.4. COVENANTS IN RELATED DOCUMENTS.
For so long as any shares of Redeemable Preferred Stock are outstanding,
the Corporation shall, and, if applicable, shall cause each of its
Subsidiaries to, comply with and perform its obligations under each Related
Document.
ARTICLE IV
DIVIDENDS AND DISTRIBUTIONS
4.1. CUMULATIVE DIVIDENDS.
(a) During each Dividend Accrual Period, dividends shall accrue on a
daily basis at the Applicable Dividend Rate on the Liquidation Amount as of
the beginning of the Dividend Accrual Period. Accrued dividends shall be
payable in cash, on each Dividend Payment Date, when, as, and if declared by
the Board of Directors of the Corporation, out of funds legally available for
that purpose, to the Holders of Redeemable Preferred Stock, before any
dividends shall be declared and paid or set aside for any Junior Stock.
Dividends shall accrue and compound at the Applicable Dividend Rate regardless
of whether the Board of Directors of the Corporation has declared a dividend
payment or whether there are any profits, surplus or other funds of the
Corporation legally available for dividends. Any dividends which accrue
pursuant to this SECTION 4.1 during a Dividend Accrual Period and which shall
not have been paid shall be classified as "accrued dividends" and shall remain
"accrued and unpaid dividends" until paid or otherwise canceled pursuant to
this Certificate of Designations.
(b) Any accrued dividends that are not paid in cash on the applicable
Dividend Payment Date and all accrued dividends on such accrued but unpaid
dividends shall not be payable thereafter in cash and, instead, shall be added
to the Liquidation Amount. Dividends on each share of Redeemable Preferred
Stock shall accrue pursuant to this SECTION 4.1 from and including the
Original Issuance Date to, but excluding, the date such share is redeemed in
full and all accrued but unpaid dividends thereon are also paid in full or
such share is fully converted into shares of Non-Voting Common Stock pursuant
to ARTICLE VII. Upon conversion of any share of Redeemable Preferred Stock,
all accrued and unpaid dividends on such share of Redeemable Preferred Stock
shall be canceled. All payments due under this Section to any Holder shall be
made to the nearest cent. The dividends payable with respect to the Redeemable
Preferred Stock on each Dividend Payment Date shall be paid to the Holders of
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shares of the Redeemable Preferred Stock as they appear on the stock records
of the Corporation on such date (the "PREFERRED RECORD DATE") as shall be
fixed by the Board of Directors, which Preferred Record Date shall be not more
than 60 days prior to the applicable Dividend Payment Date and shall not
precede the date upon which the resolution fixing such Preferred Record Date
is adopted.
4.2. RESTRICTIONS ON DIVIDENDS, ETC.
(a) For so long as any shares of Redeemable Preferred Stock are
outstanding, the Corporation shall not (i) pay, declare or set funds apart for
payment of, any dividend or make any other distribution or other payment on or
with respect to any Junior Stock or (ii) redeem, repurchase, retire or
otherwise acquire any Junior Stock, any Securities convertible into or
exchangeable or exercisable directly or indirectly for Junior Stock or any
appreciation, phantom or other similar rights to receive payment based on the
value of the Common Stock; except (A) repurchases and redemptions of shares of
Redeemable Preferred Stock and shares of Common Stock in accordance with the
terms hereof and of the Amended Charter, as applicable, (B) dividends payable
solely in shares of the class or series upon which such dividends are declared
or paid, (C) dividends payable in shares of Common Stock with respect to any
such Junior Stock, together with cash in lieu of fractional shares or (D) if
there are no accrued and unpaid dividends in respect of any shares of
Redeemable Preferred Stock for the then current Dividend Accrual Period,
dividends or distributions to holders of Junior Stock or redemptions or
repurchases of shares of Junior Stock to the extent that, after giving effect
to prior or concurrent dividend payments with respect to the Redeemable
Preferred Stock, such dividends, distributions, redemptions or repurchases are
permitted under the Indenture.
(b) No dividend or distribution shall be paid to the Holders of
Redeemable Preferred Stock in any form of consideration other than cash unless
the Requisite Senior Holders at the time of the distribution, approve such
distribution (including the valuation of the consideration being distributed).
(c) If at any time the Corporation pays less than the total amount of
dividends then accrued with respect to the Redeemable Preferred Stock, such
payment shall be distributed ratably among the Holders of the Redeemable
Preferred Stock according to the respective amounts which would be payable
with respect to the shares held by them upon such distribution if all amounts
payable on or with respect to said shares were paid in full.
4.3. PARTICIPATING DIVIDENDS.
In addition to all dividends payable pursuant to SECTION 4.1, whenever
the Corporation shall declare or pay any cash dividends on its Common Stock,
at the option of the Corporation, the Holders of the Redeemable Preferred
Stock shall be entitled to receive such dividends on a ratable basis based
upon the Common Stock Equivalents issuable, directly or indirectly, in respect
of the Redeemable Preferred Stock. Dividends payable pursuant to this SECTION
4.3 shall not reduce any dividends payable pursuant to SECTION 4.1. If the
Corporation shall exercise its option not to declare or pay any dividend
pursuant to the first sentence of this SECTION 4.3, the amount of such
dividend which should have been declared or paid to the Holders of Redeemable
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Preferred Stock will be included in the Missed Dividend Amount (in addition to
all non-cash dividends).
ARTICLE V
LIQUIDATION
5.1. REDEEMABLE PREFERRED STOCK.
(a) In the event of any Liquidation occurring prior to the
Convertibility Effective Date, before any payment shall be made to the holders
of any Junior Stock, the Holders of shares of Redeemable Preferred Stock then
outstanding shall be entitled to receive out of the assets of the Corporation
legally available for distribution to its stockholders an amount per share
equal to the greater of (i) the Liquidation Amount and (ii) the Holder
Redemption Price.
(b) In the event of any Liquidation occurring after the Convertibility
Effective Date, before any payment shall be made to the holders of any Junior
Stock, the Holders of shares of Redeemable Preferred Stock then outstanding
shall be entitled to receive out of the assets of the Corporation legally
available for distribution to its stockholders an amount per share equal to
the greater of (i) the Liquidation Amount and (ii) the amount that such Holder
would have received, calculated by assuming such share was converted into
shares of Non-Voting Common Stock immediately prior to such Liquidation.
5.2. ADDITIONAL PAYMENTS.
In the event of any Liquidation, before any payment shall be made to the
holders of any Junior Stock, the former Holders of shares of Redeemable
Preferred Stock that has been redeemed pursuant to SECTION 6.2 or SECTION 6.3
shall be entitled to receive the amounts payable to them pursuant to SECTION
6.6.
5.3. INSUFFICIENT FUNDS.
If, upon any Liquidation, the assets of the Corporation available for
distribution shall be insufficient to pay the Persons entitled to receive the
full amount to which such Persons are entitled to receive pursuant to SECTION
5.1 and SECTION 5.2, then such Persons shall share ratably in any distribution
of assets according to the respective amounts which would be payable to such
Persons upon such distribution with respect to the amounts payable to such
Persons pursuant to such Sections.
ARTICLE VI
REDEMPTION
6.1. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Corporation shall
be obligated to make, in accordance with the procedures set forth in this
SECTION 6.1, an offer to purchase (the "CHANGE OF CONTROL OFFER") the
outstanding Redeemable Preferred Stock on the terms and conditions set forth
in this SECTION 6.1 for a price per share equal to 101% of the Liquidation
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Amount thereof as of the Change of Control Payment Date (the "CHANGE OF
CONTROL PURCHASE PRICE").
(b) Within 30 days of the occurrence of a Change of Control, the
Corporation shall (i) cause a notice of the Change of Control Offer to be sent
at least once to the Dow Jones News Service or similar business news service
in the United States and (ii) send by first-class mail, postage prepaid, to
each Holder of Redeemable Preferred Stock, at the address appearing in the
register maintained by or on behalf of the Corporation, a notice stating:
(i) that the Change of Control Offer is being made pursuant to
this SECTION 6.1 and that all shares of Redeemable Preferred Stock
validly tendered will be accepted for payment;
(ii) the Change of Control Purchase Price and the purchase date
(which shall be a business day not earlier than 30 days nor later than
60 days from the date such notice is mailed (the "CHANGE OF CONTROL
PAYMENT DATE"));
(iii) that any share of Redeemable Preferred Stock not validly
tendered will continue to accrue dividends;
(iv) that, unless the Corporation defaults in the payment of
the Change of Control Purchase Price therefor, any share of Redeemable
Preferred Stock accepted for payment pursuant to the Change of Control
Offer shall cease to accrue dividends on the Change of Control Payment
Date;
(v) that Holders accepting the offer to have their Redeemable
Preferred Stock purchased pursuant to a Change of Control Offer will be
required to surrender their certificates representing shares of
Redeemable Preferred Stock to the Corporation at the address specified
in the notice prior to the close of business on the business day
preceding the Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their acceptance
if the Corporation receives, not later than the close of business on the
third business day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the number of shares of Redeemable Preferred Stock
delivered for purchase, and a statement that such Holder is withdrawing
its election to have such Redeemable Preferred Stock purchased;
(vii) that Holders whose Redeemable Preferred Stock is being
purchased only in part will be issued new certificates representing the
number of shares of Redeemable Preferred Stock equal to the unpurchased
portion of the certificates surrendered; and
(viii) any other procedures that a Holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance.
(c) The Corporation will comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
purchase of the Redeemable Preferred Stock in connection with a Change of
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Control Offer. Without limiting the foregoing, in the event that a Change of
Control occurs and the Holders of Redeemable Preferred Stock exercise their
right to require the Corporation to purchase Redeemable Preferred Stock, if
such purchase constitutes a "tender offer" for purposes of Rule 14e-1 under
the Exchange Act at that time, the Corporation will comply with the
requirements of Rule 14e-1 as then in effect with respect to such purchase.
(d) On the Change of Control Payment Date, the Corporation shall, to
the extent lawful, (i) accept for payment the number of shares of Redeemable
Preferred Stock validly tendered pursuant to the Change of Control Offer and
(ii) promptly mail to each Holder of shares so accepted the Change of Control
Purchase Price therefor and execute and issue a new Redeemable Preferred Stock
certificate representing the number of shares of Redeemable Preferred Stock
equal to any unpurchased shares represented by a certificate surrendered.
Unless the Corporation defaults in the payment for the shares of Redeemable
Preferred Stock accepted for payment pursuant to the Change of Control Offer,
dividends shall cease to accrue with respect to shares of Redeemable Preferred
Stock so accepted and all rights of Holders of such tendered shares shall
terminate, except for the right to receive payment therefor, on the Change of
Control Payment Date.
(e) If any restriction or limitation contained in any agreement or
instrument evidencing or governing any Indebtedness of the Corporation or any
of its Subsidiaries would prevent the Corporation from making a Change of
Control Offer or paying the applicable Change of Control Purchase Price
(including any limitation on dividends or distributions by Subsidiaries),
then, upon a Change of Control, prior to the mailing of the notice to Holders
described in SECTION 6.1(b) above, but in any event within 30 days following
any Change of Control, to the extent required to permit the purchase of
Redeemable Preferred Stock pursuant to this SECTION 6.1, the Corporation shall
be required to (i) cause the obligors thereunder to repay in full all
obligations under such Indebtedness or (ii) cause such obligors to obtain the
requisite consent from the holders of such Indebtedness to permit the purchase
of the Redeemable Preferred Stock as described above and the transactions
contemplated hereunder.
(f) (i) If the Corporation has issued any outstanding Junior Stock,
and the Corporation is required to make a Change of Control Offer or to make a
distribution with respect to such Junior Stock in the event of a Change of
Control, the Corporation shall not consummate any such offer or distribution
with respect to such Junior Stock until such time as the Corporation shall
have paid the applicable Change of Control Purchase Price in full to the
Holders of Redeemable Preferred Stock that have validly accepted the
Corporation's Change of Control Offer and shall otherwise have consummated the
Change of Control Offer made to Holders of the Redeemable Preferred Stock and
(ii) the Corporation will not issue Junior Stock with change of control
provisions requiring the payment of such Junior Stock prior to the payment of
the Redeemable Preferred Stock in the event of a Change of Control under this
SECTION 6.1.
(g) The Corporation will not be required to make a Change of Control
Offer upon a Change of Control if a third party makes such Change of Control
Offer contemporaneously with or upon a Change of Control in the manner, at the
times and otherwise in compliance with the requirements of this SECTION 6.1
and purchases all Redeemable Preferred Stock validly tendered and not
withdrawn under such Change of Control Offer.
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6.2. REDEMPTION OF REDEEMABLE PREFERRED STOCK AT CORPORATION'S OPTION.
(a) At any time and from time to time, the Corporation may elect to
redeem all (but not less than all) of the outstanding shares of Redeemable
Preferred Stock (a "CORPORATION REDEMPTION") at a price per share equal to the
Liquidation Amount thereof on the Corporation Redemption Date by giving notice
to the Holders thereof of such election (the "CORPORATION REDEMPTION NOTICE"),
whereupon such Holders shall sell and transfer such shares of Redeemable
Preferred Stock to the Corporation on such business day (the "CORPORATION
REDEMPTION DATE") as shall be determined by the Corporation and set forth in
the Corporation Redemption Notice, but in any event not earlier than 30 days
and not later than 50 days after the date on which the Corporation Redemption
Notice is delivered to such Holders.
(b) The closing of the Corporation's redemption of the Redeemable
Preferred Stock pursuant to SECTION 6.2(a) shall take place at 10:00 a.m. New
York City time on the Corporation Redemption Date at the Corporation's
principal executive office or place of business. The Corporation Redemption
Notice shall specify the Corporation Redemption Date and the location of the
Corporation's principal executive office or place of business where the
closing will occur. At the closing, the Corporation shall pay to each of the
Holders of the Redeemable Preferred Stock, against the Corporation's receipt
from such Holder of the certificate or certificates representing the shares of
such Redeemable Preferred Stock then held by such Holder, an amount equal to
the aggregate payment due pursuant to this SECTION 6.2 for all such shares, by
wire transfer of immediately available funds, or if such Holder shall not have
specified wire transfer instructions to the Corporation prior to the closing,
by certified or official bank check made payable to the order of such Holder
(c) Anything contained in this SECTION 6.2 to the contrary
notwithstanding, the outstanding shares of Redeemable Preferred Stock shall
remain (i) subject to optional or mandatory conversion pursuant to ARTICLE VII
and (ii) subject to redemption pursuant to SECTION 6.4, in each case, at all
times on or prior to the Corporation Redemption Date.
6.3. MANDATORY REDEMPTION.
(a) The Corporation shall redeem (the "MANDATORY REDEMPTION") all of
the shares of the Redeemable Preferred Stock then outstanding on the Mandatory
Redemption Date for an amount per share equal to the Liquidation Amount
thereof as of the Mandatory Redemption Date. If the funds of the Corporation
legally available for the redemption of shares of Redeemable Preferred Stock
shall be insufficient to permit the payment of the amounts due to such Holders
on the Mandatory Redemption Date, then the Holders of Redeemable Preferred
Stock shall share in any legally available funds ratably according to the
respective amounts which would be payable with respect to such shares if all
amounts payable thereon, including amounts payable pursuant to SECTION 6.4 and
SECTION 6.6, were paid in full. As soon as practicable after the Corporation
has funds legally available therefor, the Corporation shall make the remaining
payments required under this SECTION.
(b) The closing of the Corporation's redemption pursuant to SECTION
6.3(A) shall take place at 10:00 a.m. New York City time on the Mandatory
Redemption Date at the Corporation's principal executive office or place of
business. At the closing, the Corporation shall pay to each Holder of the
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Redeemable Preferred Stock, against the Corporation's receipt from such Holder
of the certificate or certificates representing the shares of such Redeemable
Preferred Stock then held by such Holder, an amount equal to the aggregate
payment due pursuant to this SECTION 6.3 for all such shares, by wire transfer
of immediately available funds, or if such Holder shall not have specified
wire transfer instructions to the Corporation prior to the closing, by
certified or official bank check made payable to the order of such Holder.
6.4. REDEMPTION AT HOLDER'S OPTION.
(a) Each holder of shares of Redeemable Preferred Stock shall have the
right (the "PUT RIGHT") to require the Corporation to redeem its shares of
Redeemable Preferred Stock in accordance with the further provisions of this
SECTION 6.4. The Put Right shall become exercisable, if at all, commencing on
the earliest of (the "PUT EFFECTIVE DATE") (i) the 15-month anniversary of the
Original Issuance Date; (ii) the earliest date at which (A) the Charter
Amendment and/or (B) the approval of the effectiveness of convertibility of
the Redeemable Preferred Stock in accordance with ARTICLE VII have been
submitted to the Corporation's stockholders for a vote and the stockholders
have failed to approve either such matter; and (iii) such time as the
Corporation shall be obligated to deliver a notice of a Change of Control
Offer pursuant to SECTION 6.1(b). Notwithstanding the foregoing, the Put Right
shall cease to be exercisable upon the occurrence of the Convertibility
Effective Date. The redemption price of each share of Redeemable Preferred
Stock redeemed pursuant to the Put Right of the Holder thereof shall be equal
to the Holder Redemption Price.
(b) Each Holder's rights under SECTION 6.4(a) may be exercised from
time to time after the Put Effective Date by giving notice of such election to
the Corporation (the "HOLDER REDEMPTION NOTICE"), whereupon such Holder shall
sell and transfer such shares of Redeemable Preferred Stock on such business
day (the "HOLDER REDEMPTION DATE") as shall be determined by such Holder and
set forth in the Holder Redemption Notice, but in any event not earlier than
10 days and not later than 50 days after the date on which the applicable
Holder Redemption Notice is delivered to the Corporation. Each Holder
Redemption Notice shall set forth the number of shares of the Redeemable
Preferred Stock that the Holder desires to have the Corporation redeem on such
Holder Redemption Date.
(c) The closing of the Corporation's redemption of the Redeemable
Preferred Stock pursuant to SECTION 6.4(a) shall take place at 10:00 a.m. New
York City time on the Holder Redemption Date at the Corporation's principal
executive office or place of business. At the closing, the Corporation shall
pay to the applicable Holder, against the Corporation's receipt from such
Holder of the certificate or certificates representing the shares of
Redeemable Preferred Stock referred to in the Holder Redemption Notice, an
amount equal to the aggregate payment due pursuant to SECTION 6.4(a) for all
shares being redeemed, by wire transfer of immediately available funds, or if
such Holder shall not have specified wire transfer instructions to the
Corporation prior to the closing, by certified or official bank check made
payable to the order of such Holder.
(d) Each Holder shall be entitled to exercise its Put Right with
respect to a share of Redeemable Preferred Stock at any time and from time to
time following the commencement of a Change of Control Offer in lieu of
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exercising its rights to tender its shares of Redeemable Preferred Stock to
the Corporation in connection with such Change of Control Offer.
(e) If any restriction or limitation contained in any agreement or
instrument evidencing or governing any Indebtedness of the Corporation or any
of its Subsidiaries would prevent the Corporation from paying the Holder
Redemption Price (including any limitation on dividends or distributions by
Subsidiaries), then, upon delivery of a Holder Redemption Notice to the
Corporation, to the extent required to permit the purchase of Redeemable
Preferred Stock pursuant to this SECTION 6.4, the Corporation shall be
required to use its best efforts to cause the obligors on such Indebtedness to
obtain the requisite consent from the holders of such Indebtedness to permit
the purchase of the Redeemable Preferred Stock as described above and the
transactions contemplated hereunder. If the Corporation is not able to obtain
the requisite consents from such holders, it shall use its best efforts to
refinance its outstanding Indebtedness so as to permit the purchase of the
Redeemable Preferred Stock as described above and the transactions
contemplated hereunder. If, after using its best efforts, the Corporation is
not able to obtain the requisite consent or refinance its outstanding
Indebtedness, then, to the extent that the Corporation is restricted from
paying the Holder Redemption Price, it shall have no obligation to do so and
the applicable Holder(s) shall be entitled to revoke the exercise of their Put
Rights (which may be exercised again at any time pursuant to this SECTION
6.4). Such revocation may be exercised by delivering a notice to the
Corporation at any time prior to the payment in full of the Holder Redemption
Price.
6.5. WARRANTS.
If, at any time on or after the Convertibility Effective Date, the
Corporation shall redeem the outstanding shares of Redeemable Preferred Stock
pursuant to SECTION 6.2, then, in addition to the cash redemption price
payable pursuant to SECTION 6.2 in respect of the shares of Redeemable
Preferred Stock being redeemed, the Corporation shall also issue warrants to
the Holders of Redeemable Preferred Stock unless either (i) the Corporation
Redemption Notice is delivered after the third anniversary of the Original
Issuance Date and a Minimum Price Event has occurred during the thirty days
immediately preceding the delivery of such Corporation Redemption Notice or
(ii) a Corporation Redemption Notice is given at any time after the fifth
anniversary of the Original Issuance Date.
Such warrant initially shall be exercisable for that number of shares of
Non-Voting Common Stock equal to the number of shares of Non-Voting Common
Stock issuable upon conversion of such Holder's Redeemable Preferred Stock
immediately prior to the redemption thereof. The initial exercise price per
share of Non-Voting Common Stock for such warrant shall be equal to the
Conversion Price in effect immediately prior to the redemption of the
Redeemable Preferred Stock pursuant to SECTION 6.2. Such warrant shall have
customary cashless exercise provisions, customary anti-dilution protections
economically identical to the antidilution protections applicable to the
Redeemable Preferred Stock and shall otherwise be in form and substance
reasonably acceptable to the Corporation and the Requisite Senior Holders. The
warrant shall be delivered to the Holder at the closing of the Corporation
Redemption in exchange for the certificate representing the shares of
Redeemable Preferred Stock surrendered by such Holder.
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6.6. ADDITIONAL PAYMENTS.
If, at any time prior to the Convertibility Effective Date, the
Corporation shall redeem the shares of Redeemable Preferred Stock pursuant to
either SECTION 6.2 or SECTION 6.3, then, in addition to the redemption price
received in such redemption, each Holder of Redeemable Preferred Stock shall
have the right to receive, at such time (the "ADDITIONAL PAYMENT DATE"), on or
after the date of such redemption, as such Holder shall elect, an additional
payment in respect of such share of Redeemable Preferred Stock equal to the
Additional Payment Amount. The "ADDITIONAL PAYMENT AMOUNT", with respect to
any share of Redeemable Preferred Stock, shall be the amount, if any, by which
(a) the Holder Redemption Price for such share, determined as of the
Additional Payment Date as if such share had not previously been redeemed,
exceeds (b) the redemption price paid for such share upon redemption pursuant
to SECTION 6.2 or 6.3, as the case may be. If the Convertibility Effective
Date occurs following any redemption pursuant to SECTION 6.2 or 6.3, then the
Corporation shall be entitled to pay the Additional Payment Amount by issuing
shares of Non-Voting Common Stock having an aggregate Market Price as of the
Additional Payment Date equal to the Additional Payment Amount. A Holder shall
exercise its rights under this SECTION 6.6 by delivering a written notice to
the Company to such effect, indicating the name of the Holder from whom the
shares of Redeemable Preferred Stock had been redeemed and the number of
shares of Redeemable Preferred Stock redeemed by the Company from such Holder.
Notwithstanding anything to the contrary set forth herein, any election
pursuant to this SECTION 6.6 may be revoked at any time after the Additional
Payment Date if the Corporation does not pay the Additional Payment Amount on
the Additional Payment Date.
ARTICLE VII
CONVERSION
7.1. OPTIONAL CONVERSION.
From and after the Convertibility Effective Date, shares of Redeemable
Preferred Stock shall be convertible at the option of the Holder thereof into
shares of Non-Voting Common Stock in accordance with the following.
(a) Subject to and in compliance with the applicable provisions of
this ARTICLE VII, each Holder of shares of Redeemable Preferred Stock shall
have the right, at such Holder's option, at any time and from time to time
from and after the Convertibility Effective Date, to convert each such share
of Redeemable Preferred Stock held by such Holder into that number of fully
paid and nonassessable shares of Non-Voting Common Stock equal to the quotient
of (x) the Liquidation Amount as of the date of conversion of such share of
Redeemable Preferred Stock plus the Missed Dividend Amount as of such date
with respect to such share, divided by (y) the Conversion Price, as last
adjusted and then in effect. The Corporation shall give the Holders reasonable
prior notice of a Sale of the Corporation, including the price and material
terms and conditions thereof, in order to provide the Holders reasonable
opportunity to consider whether to convert shares of the Redeemable Preferred
Stock into shares of Non Voting Common Stock at or prior to such Sale of the
Corporation. If the price or material terms or conditions of such transaction
thereafter change, the Corporation shall promptly deliver written notice to
the Holders specifying such changes.
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(b) The term "MISSED DIVIDEND AMOUNT" means, to the extent that a
Holder does not receive dividends or other distributions pursuant to SECTION
4.3 (whether in cash or otherwise), the Fair Value of all non-cash dividends
or distributions plus the amount of all cash dividends or distributions that
such Holder would have received in respect of the Common Stock Equivalents
held by such Holder in respect of each share of Redeemable Preferred Stock
held by such Holder immediately prior to the record date for such Common Stock
dividend (without giving effect to any prior application of this SECTION
7.1(b)).
7.2. MANDATORY CONVERSION.
From and after the Convertibility Effective Date, shares of Redeemable
Preferred Stock shall be convertible at the option of the Corporation into
shares of Non-Voting Common Stock in accordance with the following:
(a) At any time from and after the third anniversary of the Original
Issuance Date (if the Convertibility Effect Date shall have occurred), the
Corporation may elect to have all (but not less than all) of the then
outstanding shares of Redeemable Preferred Stock converted into that number of
fully paid and nonassessable shares of Non-Voting Common Stock into which such
shares would have been convertible in the event of an optional conversion at
such time pursuant to SECTION 7.1; PROVIDED that during the thirty days
immediately preceding the delivery by the Corporation of a notice of
conversion in accordance with SECTION 7.4(b), a Minimum Price Event shall have
occurred.
(b) Notwithstanding anything to the contrary set forth in this SECTION
7.2, the Corporation may not exercise its rights under this SECTION 7.2 until
such time as a shelf registration statement with respect to the shares of
Non-Voting Common Stock or the shares of Voting Common Stock issuable upon the
exercise thereof shall have been declared effective by the Securities and
Exchange Commission in accordance with the Investor Rights Agreement.
7.3. ADJUSTMENT OF CONVERSION PRICE.
The Conversion Price shall be subject to adjustment from time to time as
follows:
(a) The Conversion Price will be increased by $1.00 if the
Convertibility Effective Date is prior to September 30, 1999. The Conversion
Price will be reduced by (i) $1.00 if the Convertibility Effective Date is
after December 31, 1999 and by an additional (ii) $1.00 for every 90 days
after December 31, 1999 if the Convertibility Effective Date shall not have
occurred prior to any such reduction.
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(b) If the Corporation shall, at any time or from time to time after
the Original Issuance Date, issue any shares of Common Stock or Common Stock
Rights (other than pursuant to an Equity Incentive Plan) without consideration
or for a consideration per share less than (x) the Market Price of a share of
Voting Common Stock or (y) except in the case of an issuance pursuant to a
Public Offering, the Conversion Price in effect immediately prior to the
issuance of such Common Stock or Common Stock Right, then the Conversion Price
in effect immediately prior to each such issuance shall forthwith be lowered
to a price equal to the product of:
(i) the Conversion Price in effect immediately prior to such
calculation, MULTIPLIED BY
(ii) a fraction, (A) the numerator of which is the sum of (I)
the total number of shares of Common Stock outstanding (including any
shares of Common Stock deemed to have been issued pursuant to SECTION
7.3(d)(iii) upon the issuance of a Common Stock Right having a per share
exercise price, conversion price or exchange price equal to or lower
than the Market Price of a share of Voting Common Stock) immediately
prior to such issuance and (II) the number of additional shares of
Voting Common Stock which the aggregate offering price (determined in
the manner provided in SECTIONS 7.3(d)(i) and (ii)) of the number of
shares of Common Stock so offered (including any shares of Common Stock
deemed to have been issued pursuant to SECTION 7.3(d)(iii)) would
purchase at the greater of the Market Price of a share of Voting Common
Stock and the Conversion Price in effect immediately prior to such
issuance, and (B) the denominator of which is the total number of shares
of Common Stock outstanding (including any shares of Common Stock deemed
to have been issued pursuant to SECTION 7.3(d)(iii) upon the issuance of
a Common Stock Right having a per share exercise price, conversion price
or exchange price equal to or lower than the Market Price of a share of
Voting Common Stock) immediately after the issuance of such Common
Stock.
(c) If the Corporation shall, at any time or from time to time after
the Original Issuance Date, directly or indirectly, redeem, purchase or
otherwise acquire any shares of Common Stock or any Common Stock Right for a
consideration per share greater than the Market Price of a share of Voting
Common Stock (plus, in the case of Common Stock Rights, the additional per
share consideration required to be paid to the Corporation upon exercise,
conversion or exchange), then the Conversion Price in effect immediately prior
to each such issuance shall forthwith be lowered to a price equal to the
product of:
(i) the Conversion Price in effect immediately prior to such
calculation, MULTIPLIED BY
(ii) a fraction, (A) the numerator of which is the quotient of
(I) the difference of (x) the product of the total number of shares of
Common Stock outstanding (including any shares of Common Stock deemed to
have been issued pursuant to SECTION 7.3(d)(iii) upon the issuance of a
Common Stock Right having an exercise price, conversion price or
exchange price equal to or lower than the Market Price of a share of
Voting Common Stock) immediately prior to such issuance, MULTIPLIED BY
the Market Price of a share of Voting Common Stock immediately prior to
such event MINUS (y) the aggregate consideration paid by the Corporation
in such event (plus, in the case of Common Stock Rights, the aggregate
23
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additional consideration to be paid by the Corporation upon exercise,
conversion or exchange) DIVIDED BY (II) the number of shares of Common
Stock outstanding (including any shares of Common Stock deemed to have
been issued pursuant to SECTION 7.3(d)(iii) upon the issuance of a
Common Stock Right having an exercise price, conversion price or
exchange price equal to or lower than the Market Price of a share of
Voting Common Stock) immediately after the issuance of such Common Stock
and (B) the denominator of which is the Market Price of a share of
Voting Common Stock immediately prior to such event.
(d) For the purposes of any adjustment of the Conversion Price
pursuant to SECTION 7.3(b) or (c) above, the following provisions shall be
applicable:
(i) In the case of the issuance of Common Stock for cash in a
public offering or private placement, the consideration shall be deemed
to be the amount of cash paid therefor after deducting therefrom any
discounts, commissions or placement fees payable by the Corporation to
any underwriter or placement agent in connection with the issuance and
sale thereof.
(ii) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the Fair Value thereof.
(iii) In the case of the issuance of Common Stock Rights:
(A) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued
at the time such options or rights were issued and for a
consideration equal to the aggregate consideration (determined in
the manner provided in SECTIONS 7.3(d)(i) and (ii)), if any,
received by the Corporation upon the issuance of such options or
rights plus the minimum aggregate purchase price provided in such
options or rights for the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such
Securities convertible into or exchangeable for Common Stock or
upon the exercise of options to purchase or rights to subscribe
for such convertible or exchangeable Securities and subsequent
conversion or exchange thereof shall be deemed to have been issued
at the time such Securities, options, or rights were issued and
for a consideration equal to the aggregate consideration received
by the Corporation for any such Securities and related options or
rights (excluding any cash received on account of accrued interest
or accrued dividends), plus the additional aggregate
consideration, if any, to be received by the Corporation upon the
conversion or exchange of such Securities or the exercise of any
related options or rights (the consideration in each case to be
determined in the manner provided in SECTIONS 7.3(d)(i) and (ii));
24
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(C) on any change in the number of shares or the
exercise, conversion or exchange price of Common Stock deliverable
upon exercise of any such options or rights or conversions of or
exchange for such Securities, the Conversion Price shall forthwith
be readjusted to such Conversion Price as would have obtained had
the adjustment made upon the issuance of such options, rights or
Securities not exercised or converted prior to such change or
options or rights related to such Securities not exercised or
converted prior to such change been made upon the basis of the
number of shares and price after giving effect to such change; and
(D) on the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or
exchangeable Securities, the Conversion Price shall forthwith be
readjusted to such Conversion Price as would have obtained had the
adjustment made upon the issuance of such options, rights,
Securities or options or rights related to such Securities been
made upon the basis of the issuance of only the number of shares
of Common Stock actually issued upon the exercise of such options
or rights, upon the conversion or exchange of such Securities, or
upon the exercise of the options or rights related to such
Securities and subsequent conversion or exchange thereof; PROVIDED
that no such readjustment shall be made to the extent that such
expiration or termination is in connection with or related to any
settlement, including any cash settlement, of any such options,
rights, conversion rights or exchange rights.
(e) If, at any time after the Original Issuance Date, the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date for the determination of holders of
Common Stock entitled to receive such stock dividend, subdivision or split-up
(or if no record date is set, the date such stock dividend, subdivision of
stock split is consummated), then, following the record date for such event,
the Conversion Price shall be appropriately decreased so that the number of
shares of Non-Voting Common Stock issuable on conversion of each share of
Redeemable Preferred Stock, in each case, shall be increased in proportion to
such increase in outstanding shares.
(f) If, at any time after the Original Issuance Date, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for such
combination, the Conversion Price shall be appropriately increased so that the
number of shares of Non-Voting Common Stock issuable on conversion of each
share of Redeemable Preferred Stock, in each case, shall be decreased in
proportion to such decrease in outstanding shares.
(g) If any capital reorganization of the Corporation, any
reclassification of the stock of the Corporation (other than a change in par
value or from no par value to par value or from par value to no par value or
as a result of a stock dividend or subdivision, split-up or combination of
shares), or any consolidation or merger of the Corporation shall occur, then
each share of Redeemable Preferred Stock after such reorganization,
reclassification, consolidation, or merger shall be convertible into the kind
and number of shares of stock or other Securities or property of the
Corporation or of the corporation resulting from such consolidation or
surviving such merger to which the holder of the number of shares of
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Non-Voting Common Stock deliverable (immediately prior to the time of such
reorganization, reclassification, consolidation or merger) upon conversion of
such share of Redeemable Preferred Stock would have been entitled upon such
reorganization, reclassification, consolidation or merger. The provisions of
this clause shall similarly apply to successive reorganizations,
reclassifications, consolidations or mergers.
(h) If any event occurs of the type contemplated by the provisions of
this SECTION 7.3 but not expressly provided for by such provisions (including,
without limitation, the granting of stock appreciation rights, phantom stock
rights or other rights with equity features, but excluding any issuance of
Common Stock or Common Stock Rights pursuant to an Equity Incentive Plan),
then the Corporation's Board of Directors, in the good faith exercise of its
fiduciary duties to the Holders of Redeemable Preferred Stock, shall make an
appropriate reduction in the Conversion Price so as to protect the rights of
the Holders of the Redeemable Preferred Stock.
(i) All calculations under this paragraph shall be made to the nearest
one hundredth (1/100) of a cent. In no event will the Conversion Price be
reduced below the par value of the Common Stock.
(j) In any case in which the provisions of this SECTION 7.3 shall
require that an adjustment shall become effective immediately after a record
date of an event, the Corporation may defer until the occurrence of such event
issuing to the Holder of any share of Redeemable Preferred Stock converted
after such record date and before the occurrence of such event the number of
shares of capital stock issuable upon such conversion by reason of the
adjustment required by such event in excess of the number of shares of capital
stock issuable upon such conversion before giving effect to such adjustments;
PROVIDED, HOWEVER, that the Corporation shall deliver to such Holder an
appropriate instrument evidencing such Holder's right to receive such excess
shares.
(k) Whenever the Conversion Price shall be adjusted as provided in
this SECTION 7.3, the Corporation shall make available for inspection during
regular business hours, at its principal executive offices or at such other
place as may be designated by the Corporation, a statement, signed by its
chief executive officer and certified by the Corporation's independent public
accountants, showing in detail the facts requiring such adjustment and the
Conversion Price that shall be in effect after such adjustment. The
Corporation shall also cause a copy of such statement to be sent by first
class certified mail, return receipt requested and postage prepaid, to each
Holder of Redeemable Preferred Stock at such Holder's address appearing on the
Corporation's records. Where appropriate, such copy may be given in advance
and may be included as part of any notice required to be mailed under the
provisions of SECTION 7.3(k).
(l) If the Corporation shall propose to take any action of the types
described in SECTIONS 7.3(e), (f) or (g), the Corporation shall give notice to
each Holder of shares of Redeemable Preferred Stock, in the manner set forth
in SECTION 7.3(k), which notice shall specify the record date, if any, with
respect to any such action and the date on which such action is to take place.
Such notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Conversion Price and
the number, kind or class of shares or other Securities or property which
shall be deliverable or purchasable upon the occurrence of such action or
26
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deliverable upon conversion of shares of Redeemable Preferred Stock. In the
case of any action which would require the fixing of a record date, such
notice shall be given at least 10 days prior to the date so fixed, and in case
of all other action, such notice shall be given at least 10 days prior to the
taking of such proposed action. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of any such action.
(m) In the event that the Requisite Senior Holders consent in writing
to limit, or waive in its entirety, any anti-dilution adjustment to which the
Holders of the Redeemable Preferred Stock would otherwise be entitled
hereunder, the Corporation shall not be required to make any adjustment
whatsoever with respect to any Redeemable Preferred Stock in excess of such
limit or at all, as the terms of such consent may dictate.
7.4. MECHANICS.
(a) Any Holder of shares of Redeemable Preferred Stock electing to
convert the shares or any portion thereof in accordance with SECTION 7.1 shall
give written notice to the Corporation. Such notice shall state that such
Holder elects to convert shares of Redeemable Preferred Stock, the number of
such shares that it elects to convert, the applicable Expected Conversion Date
and the name or names in which such holder wishes the certificate or
certificates for shares of Non-Voting Common Stock to be issued. A Holder may
make any notice of conversion, whether such conversion is in connection with a
Sale of the Corporation or otherwise, conditional upon the happening of any
event or the passage of time. A Holder may rescind any notice of conversion
prior to the Conversion Date.
(b) If the Corporation is entitled to have all of the shares of
Redeemable Preferred Stock converted into Non-Voting Common Stock pursuant to
SECTION 7.2, it may give a written notice to all Holders of Redeemable
Preferred Stock. Such notice shall state that the Corporation elects to
convert all of the outstanding shares of Redeemable Preferred Stock into
Non-Voting Common Stock and the Expected Conversion Date, which shall be not
more than 30 days and not less than 10 days after delivery of such notice. If
any Holder desires to have a certificate or certificates representing the
shares of Non-Voting Common Stock issued in a name or names other than the
name in which the shares being converted are issued, then, at least two
business days prior to the Conversion Date, such Holder shall deliver a notice
to such effect to the Corporation.
(c) On or prior to the date indicated in any notice of conversion
delivered pursuant to SECTION 7.4(a) or 7.4(b) (as applicable, the "EXPECTED
CONVERSION DATE"), the applicable Holder or, in the case of a notice pursuant
to SECTION 7.4(b), all Holders of shares of Redeemable Preferred Stock shall
surrender the certificate or certificates representing such shares of
Redeemable Preferred Stock to be converted, duly endorsed, at the office of
the Corporation or any transfer agent for such shares. On the Expected
Conversion Date, the Corporation shall issue and deliver to or upon the order
of such Holder, against delivery of the certificates representing the shares
of Redeemable Preferred Stock that have been converted, a certificate or
certificates for the number of shares of Non-Voting Common Stock to which such
Holder shall be entitled (in the number(s) and denomination(s) designated by
such Holder), and, the case of a partial conversion pursuant to SECTION 7.1,
the Corporation shall deliver to such Holder a certificate or certificates for
27
<PAGE>
the number of shares of Redeemable Preferred Stock that such Holder has not
elected to convert.
(d) The Corporation shall pay any documentary, stamp or similar issue
or transfer tax due on the issuance of Non-Voting Common Stock upon the
conversion of Redeemable Preferred Stock or due on the issuance of a new
certificate or certificates for any shares of Redeemable Preferred Stock not
converted. Subject to the prior satisfaction or waiver of any conditions set
forth in any notice of conversion (as permitted under SECTION 7.4(a)), the
conversion right with respect to any shares of Redeemable Preferred Stock
shall be deemed to have been exercised on the latest of (i) the date upon
which the certificates representing the shares of Non-Voting Common Stock
shall have been so delivered, (ii) the date on which all of the conditions set
forth in any notice of exercise (as permitted by SECTION 7.4(a)) shall have
been satisfied or waived and (iii) the Expected Conversion Date (such date,
the "ACTUAL CONVERSION DATE") and the person or persons entitled to receive
the shares of Non-Voting Common Stock issuable upon conversion shall be
treated for all purposes as the record Holder or Holders of such Non-Voting
Common Stock on and after that date.
(e) No fractional shares of Non-Voting Common Stock or scrip shall be
issued upon conversion of shares of Redeemable Preferred Stock. The number of
full shares of Non-Voting Common Stock issuable upon conversion of Redeemable
Preferred Stock shall be computed on the basis of the aggregate number of
shares of such Redeemable Preferred Stock to be converted. Instead of any
fractional shares of Non-Voting Common Stock which would otherwise be issuable
upon conversion of any such shares, the Corporation shall pay a cash
adjustment in respect of such fractional interest in an amount equal to the
product of (i) the Market Price of a share of Voting Common Stock and (ii)
such fractional interest. The holders of fractional interests shall not be
entitled to any rights as stockholders of the Corporation in respect of such
fractional interests.
(f) Upon issuance of shares in accordance with this Section, each
share of Non-Voting Common Stock issued shall be duly authorized, validly
issued, fully paid and non-assessable, with no personal liability attaching to
the ownership thereof and free from all taxes or Liens with respect thereto
due to any action or failure to act by or on behalf of the Corporation.
(g) The Corporation shall take all such actions as may be necessary to
assure that all shares issued pursuant to this Section may be so issued
without violation of any Applicable Law or any requirements of any securities
exchange upon which such shares may be listed (except for official notice of
issuance which will be immediately transmitted by the Corporation upon
issuance). The Corporation shall not close its books against the transfer of
shares in any manner which would interfere with the timely conversion of any
shares.
7.5. RESERVATION OF SHARES.
From and after the Convertibility Effective Date, the Corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of each class of capital stock or its treasury shares, solely for the
purpose of issuance upon the conversion of shares of Redeemable Preferred
Stock and the exercise of the warrants which may be issued pursuant to SECTION
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6.4, such number of shares of such class as are then issuable upon the
conversion of the shares of Redeemable Preferred Stock or the exercise of such
warrants.
ARTICLE VIII
CERTAIN REGULATORY MATTERS
The Corporation shall not redeem, purchase, acquire or take any other
action affecting outstanding shares of any capital stock entitled to general
voting rights if, after giving effect to such redemption, purchase,
acquisition or other action, a Regulated Stockholder would own (i) more than
4.99% of any class of Voting Securities of the Corporation (other than any
class of Voting Securities that is (or is made prior to any such redemption,
purchase, acquisition or other action) convertible into a class of non-Voting
Securities that are otherwise identical to the Voting Securities and
convertible into such Voting Securities on terms reasonably acceptable to such
Regulated Stockholder) or (ii) more than 24.99% of the total equity of the
Corporation or more than 24.99% of the total value of all capital stock and
subordinated debt of the Corporation (in each case determined by assuming such
Regulated Stockholder (but no other holder) has exercised, converted or
exchanged all of its options, warrants and other convertible or exchangeable
Securities).
* * * *
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
duly executed by an authorized officer of the Corporation as of the 25th day
of June, 1999.
By: /s/IVAN R. SABEL
-------------------
Name: Ivan R. Sabel
Title: President
EXHIBIT 2(C)
CERTIFICATE OF ELIMINATION OF CLASS A, B, C, D, E AND F PREFERRED STOCK
----------
Pursuant To Section 151 of the
General Corporation Law of the State of Delaware
----------
HANGER ORTHOPEDIC GROUP, INC. , a corporation organized and existing
under the General Corporation Law of the State of Delaware (the
"CORPORATION"), hereby certifies that the following resolution was duly
adopted by the Board of Directors of the Corporation as required by Section
151 of the Delaware General Corporation Law at a meeting duly called and held
on June 9, 1999.
RESOLVED, that all series of previously authorized preferred stock, $.01
par value per share, of the Corporation, namely the Class A Preferred Stock as
to which the original Certificate of Designations, Preferences and Rights was
filed on May 12, 1989, the Class B Preferred Stock, as to which the original
Certificate of Designations, Preferences and Rights was filed on May 12, 1989,
the Class C Preferred Stock, as to which the original Certificate of
Designations, Preferences and Rights was filed on February 12, 1990, the Class
D Preferred Stock, as to which the original Certificate of Designations,
Preferences and Rights was filed on February 12, 1990, the Class E Preferred
Stock, as to which the original Certificate of Designations, Preferences and
Rights was filed on February 12, 1990 and the Class F Preferred Stock, as to
which the original Certificate of Designations, Preferences and Rights was
filed on April 13, 1991, no shares of which series of preferred stock are
currently issued or outstanding, are hereby cancelled.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
duly executed by an authorized officer of the Corporation as of the 18th day
of June, 1999.
By: /s/IVAN R. SABEL
-----------------------------
Name: Ivan R. Sabel
Title: Chairman of the Board,
President and Chief
Executive Officer
EXHIBIT 10(a)
=============================================================================
CREDIT AGREEMENT
dated as of
June 16, 1999
among
HANGER ORTHOPEDIC GROUP, INC.
The Lenders Party Hereto
and
THE CHASE MANHATTAN BANK,
as Administrative Agent, Collateral Agent and
Issuing Bank
BANKERS TRUST COMPANY,
as Syndication Agent
PARIBAS,
as Documentation Agent
---------------------------
CHASE SECURITIES INC.,
as Lead Arranger and Book Manager
=============================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS
<S> <C>
SECTION 1.01. Defined Terms.............................................................................1
SECTION 1.02. Classification of Loans and Borrowings...................................................19
SECTION 1.03. Terms Generally..........................................................................19
SECTION 1.04. Accounting Terms; GAAP; Pro Forma Computations...........................................19
ARTICLE II THE CREDITS
SECTION 2.01. Commitments..............................................................................19
SECTION 2.02. Loans and Borrowings.....................................................................20
SECTION 2.03. Requests for Borrowings..................................................................20
SECTION 2.04. Letters of Credit........................................................................21
SECTION 2.05. Funding of Borrowings....................................................................24
SECTION 2.06. Interest Elections.......................................................................25
SECTION 2.07. Termination and Reduction of Commitments.................................................25
SECTION 2.08. Repayment of Loans; Evidence of Debt.....................................................26
SECTION 2.09. Amortization of Term Loans...............................................................27
SECTION 2.10. Prepayment of Loans......................................................................28
SECTION 2.11. Fees .................................................................................29
SECTION 2.12. Interest.................................................................................30
SECTION 2.13. Alternate Rate of Interest...............................................................30
SECTION 2.14. Increased Costs..........................................................................31
SECTION 2.15. Break Funding Payments...................................................................31
SECTION 2.16. Taxes .................................................................................32
SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set-offs..............................33
SECTION 2.18. Mitigation Obligations; Replacement of Lenders...........................................34
ARTICLE III REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Organization; Powers.....................................................................35
SECTION 3.02. Authorization; Enforceability............................................................35
SECTION 3.03. Governmental Approvals; No Conflicts.....................................................35
SECTION 3.04. Financial Condition; No Material Adverse Change..........................................35
SECTION 3.05. Properties...............................................................................36
SECTION 3.06. Litigation and Environmental Matters.....................................................36
SECTION 3.07. Compliance with Laws and Agreements......................................................36
i
<PAGE>
SECTION 3.08. Investment and Holding Company Status....................................................37
SECTION 3.09. Taxes .................................................................................37
SECTION 3.10. ERISA .................................................................................37
SECTION 3.11. Disclosure...............................................................................37
SECTION 3.12. Subsidiaries.............................................................................37
SECTION 3.13. Insurance................................................................................37
SECTION 3.14. Labor Matters............................................................................37
SECTION 3.15. Solvency.................................................................................38
SECTION 3.16. Senior Indebtedness......................................................................38
SECTION 3.17. Year 2000................................................................................38
SECTION 3.18. Intellectual Property....................................................................38
ARTICLE IV CONDITIONS
SECTION 4.01. Effective Date...........................................................................38
SECTION 4.02. Each Credit Event........................................................................41
ARTICLE V AFFIRMATIVE COVENANTS
SECTION 5.01. Financial Statements and Other Information...............................................42
SECTION 5.02. Notices of Material Events...............................................................43
SECTION 5.03. Information Regarding Collateral.........................................................44
SECTION 5.04. Existence; Conduct of Business...........................................................44
SECTION 5.05. Payment of Obligations...................................................................44
SECTION 5.06. Maintenance of Properties................................................................44
SECTION 5.07. Insurance................................................................................44
SECTION 5.08. Casualty and Condemnation................................................................45
SECTION 5.09. Books and Records; Inspection and Audit Rights...........................................45
SECTION 5.10. Compliance with Laws.....................................................................45
SECTION 5.11. Use of Proceeds and Letters of Credit....................................................45
SECTION 5.12. Additional Subsidiaries..................................................................45
SECTION 5.13. Further Assurances.......................................................................45
SECTION 5.14. Interest Rate Protection.................................................................46
ARTICLE VI NEGATIVE COVENANTS
SECTION 6.01. Indebtedness; Certain Equity Securities..................................................46
SECTION 6.02. Liens .................................................................................47
SECTION 6.03. Fundamental Changes......................................................................47
SECTION 6.04. Asset Sales..............................................................................48
SECTION 6.05. Investments, Loans, Advances, Guarantees and Acquisitions................................48
SECTION 6.06. Sale and Leaseback Transactions..........................................................49
SECTION 6.07. Hedging Agreements.......................................................................50
ii
<PAGE>
SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness....................................50
SECTION 6.09. Transactions with Affiliates.............................................................50
SECTION 6.10. Restrictive Agreements...................................................................50
SECTION 6.11. Amendment of Material Documents..........................................................51
SECTION 6.12. Interest Expense Coverage Ratio..........................................................51
SECTION 6.13. Leverage Ratio...........................................................................51
SECTION 6.14. Consolidated Adjusted EBITDA Interest Coverage Ratio.....................................52
SECTION 6.15. Maximum Capital Expenditures.............................................................52
ARTICLE VII
EVENTS OF DEFAULT.......................................................................................52
ARTICLE VIII
THE ADMINISTRATIVE AGENT................................................................................54
ARTICLE IX MISCELLANEOUS
SECTION 9.01. Notices .................................................................................56
SECTION 9.02. Waivers; Amendments......................................................................56
SECTION 9.03. Expenses; Indemnity; Damage Waiver.......................................................57
SECTION 9.04. Successors and Assigns...................................................................58
SECTION 9.05. Survival.................................................................................60
SECTION 9.06. Counterparts; Integration; Effectiveness.................................................60
SECTION 9.07. Severability.............................................................................61
SECTION 9.08. Right of Setoff..........................................................................61
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process...............................61
SECTION 9.10. WAIVER OF JURY TRIAL.....................................................................61
SECTION 9.11. Headings.................................................................................62
SECTION 9.12. Confidentiality..........................................................................62
SECTION 9.13. Interest Rate Limitation.................................................................62
SECTION 9.14. Release of Liens and Guarantees..........................................................62
</TABLE>
iii
<PAGE>
SCHEDULES:
Schedule 1.01 -- Guarantors
Schedule 2.01 -- Commitments
Schedule 3.05 -- Real Property
Schedule 3.06 -- Disclosed Matters
Schedule 3.12 -- Subsidiaries
Schedule 3.13 -- Insurance
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.05 -- Existing Investments
Schedule 6.10 -- Existing Restrictions
Schedule A -- Class I Mortgaged Property
Schedule B -- Mortgaged Property
EXHIBITS:
Exhibit A -- Form of Assignment and Acceptance
Exhibit B-1 -- Form of Opinion of Freedman, Levy, Kroll & Simonds, counsel for
the Borrower
Exhibit B-2 -- Form of Opinion of local counsel for the Administrative Agent
Exhibit C -- Form of Perfection Certificate
Exhibit D -- Form of Guarantee Agreement
Exhibit E -- Form of Indemnity, Subrogation and Contribution Agreement
Exhibit F -- Form of Pledge Agreement
Exhibit G -- Form of Security Agreement
Exhibit H -- Form of Borrowing Request
Exhibit I -- Form of Interest Election Request
Exhibit J -- Form of Administrative Questionnaire
Exhibit K -- Form of Permitted Seller Note
Exhibit L -- Form of Mortgage
iv
<PAGE>
CREDIT AGREEMENT dated as of June 16, 1999,
among HANGER ORTHOPEDIC GROUP, INC., the LENDERS
party hereto, THE CHASE MANHATTAN BANK, as
Administrative Agent and Collateral Agent,
BANKERS TRUST COMPANY, as Syndication Agent and
PARIBAS as Documentation Agent.
Pursuant to or in connection with the Stock Purchase Agreement (such
term and each other capitalized term used and not otherwise defined herein
being used with the meaning assigned to it in Section 1.01), (a) the Borrower
will issue and sell to CCP and PNA, and CCP and PNA will purchase, the
Preferred Stock for an aggregate cash amount of $60,000,000, (b) the Borrower
will borrow the Term Loans and a principal amount not to exceed $20,000,000 of
the Revolving Loans under this Agreement, (c) the Borrower will issue not less
than $150,000,000 aggregate principal amount of the Subordinated Notes in a
public offering or in a Rule 144A or other private placement, (d) the Borrower
will contribute $406,000,000 to the equity of its wholly owned subsidiary
Hanger Prosthetics & Orthotics, Inc., which will lend such amount to
AcquisitionCo, (e) AcquisitionCo will acquire from the Seller for an aggregate
cash amount not to exceed $406,000,000 all the outstanding capital stock of,
and will then be merged with and into, NovaCare Orthotics & Prosthetic, Inc.,
a Delaware corporation and (f) the Borrower will pay fees and expenses
incurred in connection with the Effective Date Transactions in an aggregate
amount not to exceed $20,000,000.
The Borrower has requested the Lenders to extend credit in the form of
(a) Tranche A Term Loans on the Effective Date in an aggregate principal
amount not in excess of $100,000,000, (b) Tranche B Term Loans on the
Effective Date in an aggregate principal amount not in excess of $100,000,000,
(c) Revolving Loans at any time and from time to time on or after the
Effective Date and prior to the Revolving Maturity Date in an aggregate
principal amount at any time outstanding not in excess of $100,000,000 minus
the LC Exposure at such time and (d) Letters of Credit in an aggregate stated
amount at any time outstanding that will not result in the LC Exposure
exceeding $5,000,000. The proceeds of the Term Loans and of Revolving Loans
(the amount of which shall not exceed $20,000,000) made on the Effective Date
are to be used by the Borrower solely (i) to finance the Acquisition, (ii) to
refinance the Scheduled Indebtedness and (iii) to pay fees and expenses
related to the Effective Date Transactions. The proceeds of the remaining
Revolving Loans are to be used by the Borrower and its Subsidiaries to provide
working capital and for other general corporate purposes. The Letters of
Credit are to be used to support obligations incurred by the Borrower and its
Subsidiaries in the ordinary course of their businesses.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following
terms have the meanings specified below:
<PAGE>
2
"ABR", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Alternate Base Rate.
"ACQUISITION" means the purchase by AcquisitionCo from the Seller of all
the outstanding capital stock of NovaCare O&P and the subsequent merger of
AcquisitionCo with and into NovaCare O&P, all as provided in the Stock
Purchase Agreement. "ACQUISITION DOCUMENTS" means (a) the Stock Purchase
Agreement and (b) the Transition Services Agreement, the Subscriber Services
Agreement and the Escrow Agreement, each as defined in the Stock Purchase
Agreement.
"ACQUISITIONCO" means HPO Acquisition Corp., a Delaware corporation and
a wholly owned subsidiary of the Borrower.
"ADJUSTED LIBO RATE" means, with respect to any Eurodollar Borrowing for
any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.
"ADMINISTRATIVE AGENT" means The Chase Manhattan Bank, in its capacity
as administrative agent for the Lenders hereunder.
"ADMINISTRATIVE QUESTIONNAIRE" means an Administrative Questionnaire in
a form supplied by the Administrative Agent.
"AFFILIATE" means, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or
is Controlled by or is under common Control with the Person specified.
"AGENTS" means the Administrative Agent, the Collateral Agent, the
Syndication Agent and the Documentation Agent.
"ALTERNATE BASE RATE" means, for any day, a rate per annum equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect
on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a
change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate, the Base CD Rate or the Federal Funds Effective Rate,
respectively.
"APPLICABLE PERCENTAGE" means, with respect to any Revolving Lender, the
percentage of the total Revolving Commitments represented by such Lender's
Revolving Commitment. If the Revolving Commitments have terminated or expired,
the Applicable Percentages shall be determined based upon the Revolving
Commitments most recently in effect, giving effect to any assignments.
"APPLICABLE RATE" means, for any day (a) with respect to any Tranche B
Term Loan, (i) 2.50% per annum, in the case of an ABR Loan, or (ii) 3.50% per
annum, in the case of a Eurodollar Loan, and (b) with respect to any Revolving
Loan or Tranche A Term Loan or with respect to the commitment fees payable
hereunder, as the case may be, the applicable rate per annum set forth below
under the caption "ABR Spread", "Eurodollar Spread" or "Commitment Fee Rate",
as the case may be, based upon the Leverage Ratio as of the most recent
determination date; PROVIDED that until the date that is 45 days after
December 31, 1999, the "Applicable Rate" for purposes of clause (b) shall be
the applicable rate per annum set forth below for Category 1:
<PAGE>
3
<TABLE>
<CAPTION>
============================================================================================================
ABR EURODOLLAR COMMITMENT FEE
LEVERAGE RATIO: SPREAD SPREAD RATE
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CATEGORY 1
Greater than or equal to 1.50% 2.50% 0.50%
4.00 to 1.00
------------------------------------------------------------------------------------------------------------
CATEGORY 2
Greater than or equal to 3.50 1.25% 2.25% 0.50%
to 1.00 but less than
4.00 to 1.00
------------------------------------------------------------------------------------------------------------
CATEGORY 3
Greater than or equal to 3.00 1.00% 2.00% 0.375%
to 1.00 but less than
3.50 to 1.00
------------------------------------------------------------------------------------------------------------
CATEGORY 4
Less than 3.00 to 1.00 0.75% 1.75% 0.375%
============================================================================================================
</TABLE>
For purposes of the foregoing, (i) the Leverage Ratio shall be
determined as of the end of each fiscal quarter of the Borrower's fiscal year
based upon the Borrower's consolidated financial statements delivered pursuant
to Section 5.01(a) or (b) and (ii) each change in the Applicable Rate
resulting from a change in the Leverage Ratio shall be effective during the
period commencing on and including the date of delivery to the Administrative
Agent of such consolidated financial statements indicating such change and
ending on the date immediately preceding the effective date of the next such
change; PROVIDED that the Leverage Ratio shall be deemed to be in Category 1
(a) at any time that an Event of Default has occurred and is continuing or (b)
at the option of the Administrative Agent or at the request of the Required
Lenders, if the Borrower fails to deliver the consolidated financial
statements required to be delivered by it pursuant to Section 5.01(a) or (b),
during the period from the expiration of the time for delivery thereof until
such consolidated financial statements are delivered.
"ARRANGER" means Chase Securities Inc.
"ASSESSMENT RATE" means, for any day, the annual assessment rate in
effect on such day that is payable by a member of the Bank Insurance Fund
classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in dollars at the
offices of such member in the United States; PROVIDED that if, as a result of
any change in any law, rule or regulation, it is no longer possible to
<PAGE>
4
determine the Assessment Rate as aforesaid, then the Assessment Rate shall be
such annual rate as shall be determined by the Administrative Agent to be
representative of the cost of such insurance to the Lenders.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered
into by a Lender and an assignee (with the consent of any party whose consent
is required by Section 9.04), and accepted by the Administrative Agent, in the
form of Exhibit A or any other form approved by the Administrative Agent.
"BASE CD RATE" means the sum of (a) the Three-Month Secondary CD Rate
multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"BOARD" means the Board of Governors of the Federal Reserve System of
the United States of America.
"BORROWER" means Hanger Orthopedic Group, Inc., a Delaware corporation.
"BORROWING" means Loans of the same Class and Type, made, converted or
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect.
"BORROWING REQUEST" means a request by the Borrower for a Borrowing in
accordance with Section 2.03.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or other day
on which commercial banks in New York City are authorized or required by law
to remain closed; PROVIDED that, when used in connection with a Eurodollar
Loan, the term "BUSINESS DAY" shall also exclude any day on which banks are
not open for dealings in dollar deposits in the London interbank market.
"CAPITAL LEASE OBLIGATIONS" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination
thereof, which obligations are required to be classified and accounted for as
capital leases on a balance sheet of such Person under GAAP, and the amount of
such obligations shall be the capitalized amount thereof determined in
accordance with GAAP.
"CCP" means Chase Capital Partners, together with one of more of its
affiliated investment funds.
"CERTIFICATE OF DESIGNATIONS" means the certificate of designations
dated as of the Effective Date governing the Preferred Stock, substantially in
the form as described in the Offering Memorandum, with no changes therefrom
adverse to the Lenders.
"CHANGE IN CONTROL" means (a) the acquisition by any Person or group
(within the meaning of the Securities Exchange Act of 1934, as amended, and
the rules of the Securities and Exchange Commission thereunder as in effect on
the date hereof) of ownership, directly or indirectly, beneficially or of
record, by any Person of Equity Interests in the Borrower representing at
<PAGE>
5
least 35% of the aggregate ordinary voting power or the aggregate equity
represented by the issued and outstanding Equity Interests in the Borrower;
(b) occupation of a majority of the seats (other than vacant seats) on the
board of directors of the Borrower by Persons who were neither (i) nominated
by the board of directors of the Borrower nor (ii) appointed by directors so
nominated; (c) the acquisition of direct or indirect Control of the Borrower
by any Person or group; or (d) the occurrence of a "Change of Control"or
similar event, however denominated, under the Subordinated Note Documents, any
other instrument or agreement evidencing or governing Indebtedness or any
certificate of designations, instrument or agreement governing the Preferred
Stock or any other Equity Interests.
"CHANGE IN LAW" means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender or
the Issuing Bank (or, for purposes of Section 2.14(b), by any lending office
of such Lender or by such Lender's or the Issuing Bank's holding company, if
any) with any request, guideline or directive (whether or not having the force
of law) of any Governmental Authority made or issued after the date of this
Agreement.
"CLASS", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are Revolving
Loans, Tranche A Term Loans or Tranche B Term Loans and, when used in
reference to any Commitment, refers to whether such Commitment is a Revolving
Commitment, Tranche A Commitment or Tranche B Commitment.
"CLASS I MORTGAGE" means a mortgage, deed of trust, assignment of leases
and rents, leasehold mortgage or other security document granting a Lien on
any Class I Mortgaged Property to secure the Obligations. Each Class I
Mortgage shall be satisfactory in form and substance to the Collateral Agent,
substantially in the form of Exhibit L.
"CLASS I MORTGAGED PROPERTY" means, initially, each Mortgaged Property
identified on Schedule A, and each other Mortgaged Property on which any
manufacturing or distribution facility of a Loan Party is located or which has
a book or fair market value in excess of $750,000.
"CLOSING DATE" means the date this Agreement becomes effective pursuant
to Section 9.06.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL" means any and all "Collateral", as defined in any
applicable Security Document.
"COLLATERAL AGENT" means The Chase Manhattan Bank, in its capacity as
collateral agent for the Lenders hereunder.
"COLLATERAL AND GUARANTEE REQUIREMENT" means the requirement that:
(a) the Administrative Agent shall have received from each Loan
Party either (i) a counterpart of each of the Guarantee Agreement, the
Indemnity, Subrogation and Contribution Agreement and the Security
<PAGE>
6
Documents duly executed and delivered on behalf of such Loan Party or
(ii) in the case of any Person that becomes a Loan Party after the
Effective Date, a supplement to the Guarantee Agreement, the Indemnity,
Subrogation and Contribution Agreement and each applicable Security
Document, as appropriate, in the form specified therein, duly executed
and delivered on behalf of such Loan Party;
(b) all outstanding Equity Interests of the Borrower and each
Subsidiary owned by or on behalf of any Loan Party shall have been
pledged pursuant to the Pledge Agreement (except that the Loan Parties
shall not be required to pledge more than 65% of the outstanding voting
Equity Interests of any Foreign Subsidiary) and the Administrative Agent
shall have received certificates or other instruments representing all
such Equity Interests, together with stock powers or other instruments
of transfer with respect thereto endorsed in blank;
(c) all Indebtedness in an aggregate principal amount exceeding
$250,000 of the Borrower and each Subsidiary that is owing to any Loan
Party shall be evidenced by a promissory note and shall have been
pledged pursuant to the Pledge Agreement and the Administrative Agent
shall have received all such promissory notes, together with instruments
of transfer with respect thereto endorsed in blank;
(d) all documents and instruments, including Uniform Commercial
Code financing statements, required by law or reasonably requested by
the Administrative Agent to be filed, registered or recorded to create
the Liens intended to be created by the Security Documents and perfect
such Liens to the extent required by, and with the priority required by,
the Security Documents, shall have been filed, registered or recorded or
delivered to the Administrative Agent for filing, registration or
recording;
(e) the Administrative Agent shall have received (i) counterparts
of a Mortgage with respect to each Mortgaged Property duly executed and
delivered by the record owner of such Mortgaged Property, (ii) a policy
or policies of title insurance issued by a nationally recognized title
insurance company insuring the Lien of each such Class I Mortgage as a
valid first Lien on the Class I Mortgaged Property described therein,
free of any other Liens except as expressly permitted by Section 6.02,
together with such endorsements, coinsurance and reinsurance as the
Administrative Agent or the Required Lenders may reasonably request, and
(iii) such surveys, abstracts, appraisals, legal opinions and other
documents as the Administrative Agent or the Required Lenders may
reasonably request with respect to any such Class I Mortgage or Class I
Mortgaged Property; and
(f) each Loan Party shall have obtained all consents and approvals
required to be obtained by it in connection with the execution and
delivery of all Loan Documents to which it is a party, the performance
of its obligations thereunder and the granting by it of the Liens
thereunder.
"COMMITMENT" means a Revolving Commitment, Tranche A Commitment or
Tranche B Commitment, or any combination thereof (as the context requires).
<PAGE>
7
"CONSOLIDATED ADJUSTED EBITDA" means Consolidated EBITDA minus
Consolidated Capital Expenditures for the period for which Consolidated EBITDA
is being calculated.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, (a) the
additions to property, plant and equipment and other capital expenditures of
the Borrower and its consolidated Subsidiaries that are (or would be) set
forth in a consolidated statement of cash flows of the Borrower for such
period prepared in accordance with GAAP and (b) Capital Lease Obligations
incurred by the Borrower and its consolidated Subsidiaries during such period.
"CONSOLIDATED CASH INTEREST EXPENSE" means, for any period, the excess
of (a) the sum of (i) the interest expense (including imputed interest expense
in respect of Capital Lease Obligations) of the Borrower and the Subsidiaries
for such period, determined on a consolidated basis in accordance with GAAP,
(ii) any interest accrued during such period in respect of Indebtedness of the
Borrower or any Subsidiary that is required to be capitalized rather than
included in consolidated interest expense for such period in accordance with
GAAP, plus (iii) any cash payments made during such period in respect of
obligations referred to in clause (b)(iii) below that were amortized or
accrued in a previous period, minus (b) the sum of (i) interest income of the
Borrower and the Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP, (ii) to the extent included in such
consolidated interest expense for such period, non-cash amounts attributable
to amortization of financing costs paid in a previous period, plus (iii) to
the extent included in such consolidated interest expense for such period,
non-cash amounts attributable to amortization of debt discounts or accrued
interest payable in kind for such period. Anything contained in this
definition or elsewhere in this Agreement to the contrary notwithstanding, in
calculating Consolidated Cash Interest Expense for each of the periods ending
on December 31, 1999 and March 31, 2000, respectively, Consolidated Cash
Interest Expense shall be deemed to equal Consolidated Cash Interest Expense
for the period commencing on July 1, 1999, and ending on December 31, 1999 and
March 31, 2000, respectively.
"CONSOLIDATED EBITDA" means, for any period, Consolidated Net Income for
such period plus (a) without duplication and to the extent deducted in
determining such Consolidated Net Income, the sum of (i) consolidated interest
expense for such period, (ii) consolidated income tax expense for such period,
(iii) all amounts attributable to depreciation and amortization for such
period, (iv) any extraordinary charges for such period and (v) solely in
determining Consolidated EBITDA for the periods ending December 31, 1999,
March 31, 2000 and June 30, 2000, $2,025,000, and minus (b) without
duplication and to the extent included in determining such Consolidated Net
Income, any extraordinary gains for such period, all determined on a
consolidated basis in accordance with GAAP. Anything contained in this
definition or elsewhere in this Agreement to the contrary notwithstanding, in
calculating Consolidated EBITDA (i) for any four-fiscal-quarter period that
includes the fiscal quarter ending September 30, 1999, Consolidated EBITDA for
such quarter shall be increased by an amount up to $15,000,000 of
restructuring and acquisition and integration expenses incurred in connection
with the Acquisition to the extent such costs have actually been paid by the
Loan Parties and not so included in Consolidated EBITDA in any prior quarter
and (ii) solely for purposes of calculating the Leverage Ratio, for each of
the periods ending on December 31, 1999 and March 31, 2000, respectively,
Consolidated EBITDA shall be deemed to equal Consolidated EBITDA for the
period commencing on July 1, 1999, and ending on (x) December 31, 1999, plus
<PAGE>
8
$2,025,000 multiplied by 2 and (y) March 31, 2000, plus $2,025,000 multiplied
by 4/3, respectively. For purposes of calculating Consolidated EBITDA for any
period (each, a "REFERENCE PERIOD") in connection with determining compliance
with Sections 6.12, 6.13 and 6.14 for such period, if during such Reference
Period (or, in the case of pro forma calculations, during the period from the
last day of such Reference Period to and including the date as of which such
calculation is made) the Borrower or any Subsidiary shall have made a Material
Disposition or Material Acquisition (each as defined below), Consolidated
EBITDA for such Reference Period shall be calculated after giving pro forma
effect thereto as if such Material Disposition or Material Acquisition
occurred on the first day of such Reference Period (with the Reference Period
for the purposes of pro forma calculations being the most recent period of
four consecutive fiscal quarters for which the relevant financial information
is available); PROVIDED that such pro forma calculations shall give effect to
the terms of any employment agreement entered into in connection such Material
Disposition or Material Acquisition. As used in this definition, "Material
Acquisition" means any acquisition or series of related acquisitions permitted
under Section 6.05; and "Material Disposition" means any disposition of
property or series of related dispositions of property that involves assets
comprising all or substantially all of an operating unit of a business or
constitutes all or substantially all of the Equity Interests of a Subsidiary.
"CONSOLIDATED NET INCOME" means, for any period, the net income or loss
of the Borrower and the Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP; PROVIDED that there shall be
excluded (a) the income of any Person (other than the Borrower) in which any
other Person (other than the Borrower or any Subsidiary or any director
holding qualifying shares in compliance with applicable law) owns an Equity
Interest, except to the extent of the amount of dividends or other
distributions actually paid to the Borrower or any of the Subsidiaries during
such period, and (b) the income or loss of any Person accrued prior to the
date it becomes a Subsidiary or is merged into or consolidated with the
Borrower or any Subsidiary or the date that such Person's assets are acquired
by the Borrower or any Subsidiary.
"CONTROL" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or
otherwise. "CONTROLLING" and "CONTROLLED" have meanings correlative thereto.
"DEFAULT" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"DISCLOSED MATTERS" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.
"DOLLARS" or "$" refers to lawful money of the United States of America.
"DOCUMENTATION AGENT" means Paribas.
"EFFECTIVE DATE" means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 9.02).
<PAGE>
9
"EFFECTIVE DATE TRANSACTIONS" means the Transactions that have occurred,
or that are contemplated or required by this Agreement to have occurred, on or
before the Effective Date and prior to the initial Borrowing or issuance of a
Letter of Credit hereunder.
"ENVIRONMENTAL LAWS" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"ENVIRONMENTAL LIABILITY" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation,
fines, penalties or indemnities), of the Borrower or any Subsidiary directly
or indirectly resulting from or based upon (a) violation of any Environmental
Law, (b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"EQUITY INTERESTS" means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single
employer under Section 414(b) or (c) of the Code or, solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
"ERISA EVENT" means (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder with respect to a Plan
(other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section
303(d) of ERISA of an application for a waiver of the minimum funding standard
with respect to any Plan; (d) the incurrence by the Borrower or any of its
ERISA Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Borrower or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to an
intention to terminate any Plan or Plans or to appoint a trustee to administer
any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of
any liability with respect to the withdrawal or partial withdrawal from any
Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA
Affiliate of any notice, or the receipt by any Multiemployer Plan from the
Borrower or any ERISA Affiliate of any notice, concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA.
<PAGE>
10
"EURODOLLAR", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"EVENT OF DEFAULT" has the meaning assigned to such term in Article VII.
"EXCESS CASH FLOW" means, for any fiscal year, the sum (without
duplication) of:
(a) the consolidated net income (or loss) of the Borrower and its
consolidated Subsidiaries for such fiscal year, adjusted to exclude any
gains or losses attributable to Prepayment Events; PLUS
(b) depreciation, amortization and other non-cash charges or
losses deducted in determining such consolidated net income (or loss)
for such fiscal year; PLUS
(c) the sum of (i) the amount, if any, by which Net Working
Capital decreased during such fiscal year plus (ii) the net amount, if
any, by which the consolidated deferred revenues and other consolidated
accrued long-term liability accounts of the Borrower and its
consolidated Subsidiaries increased during such fiscal year plus (iii)
the net amount, if any, by which the consolidated accrued long-term
asset accounts of the Borrower and its consolidated Subsidiaries
decreased during such fiscal year; MINUS
(d) the sum of (i) any non-cash gains included in determining such
consolidated net income (or loss) for such fiscal year plus (ii) the
amount, if any, by which Net Working Capital increased during such
fiscal year plus (iii) the net amount, if any, by which the consolidated
deferred revenues and other consolidated accrued long-term liability
accounts of the Borrower and its consolidated Subsidiaries decreased
during such fiscal year plus (iv) the net amount, if any, by which the
consolidated accrued long-term asset accounts of the Borrower and its
consolidated Subsidiaries increased during such fiscal year; MINUS
(e) the sum of (i) Capital Expenditures for such fiscal year
(except to the extent attributable to the incurrence of Capital Lease
Obligations or otherwise financed by incurring Long-Term Indebtedness)
PLUS (ii) cash consideration paid during such fiscal year to make
acquisitions or other capital investments (except to the extent financed
by incurring Long-Term Indebtedness) PLUS (iii) to the extent paid in
cash during such fiscal year, 50% of payments in respect of Permitted
Earn-Out Obligations; MINUS
(f) the aggregate principal amount of Long-Term Indebtedness
repaid or prepaid by the Borrower and its consolidated Subsidiaries
during such fiscal year, excluding (i) Indebtedness in respect of
Revolving Loans and Letters of Credit, (ii) Term Loans prepaid pursuant
to Section 2.10(c) or (d), and (iii) repayments or prepayments of
Long-Term Indebtedness financed by incurring other Long-Term
Indebtedness.
"EXCLUDED TAXES" means, with respect to the Administrative Agent, any
Lender, the Issuing Bank or any other recipient of any payment to be made by
or on account of any obligation of the Borrower hereunder, (a) income or
franchise taxes imposed on (or measured by) its net income by the United
States of America, or by the jurisdiction under the laws of which such
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11
recipient is organized or in which its principal office is located or, in the
case of any Lender, in which its applicable lending office is located, (b) any
branch profits taxes imposed by the United States of America or any similar
tax imposed by any other jurisdiction described in clause (a) above and (c) in
the case of a Foreign Lender (other than an assignee pursuant to a request by
the Borrower under Section 2.18(b)), any withholding tax that (i) is in effect
and would apply to amounts payable to such Foreign Lender at the time such
Foreign Lender becomes a party to this Agreement (or designates a new lending
office), except to the extent that such Foreign Lender (or its assignor, if
any) was entitled, at the time of designation of a new lending office (or
assignment), to receive additional amounts from the Borrower with respect to
any withholding tax pursuant to Section 2.16(a), or (ii) is attributable to
such Foreign Lender's failure to comply with Section 2.16(e).
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day that is a Business Day, the average (rounded upwards,
if necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"FINANCIAL OFFICER" means the chief financial officer, principal
accounting officer, treasurer or controller of the Borrower.
"FOREIGN LENDER" means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"FOREIGN SUBSIDIARY" means any Subsidiary that is organized under the
laws of a jurisdiction other than the United States of America or any State
thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles in the United
States of America.
"GOVERNMENTAL AUTHORITY" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state
or local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"GUARANTEE" of or by any Person (the "GUARANTOR") means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other
Person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly,
and including any obligation of the guarantor, direct or indirect, (a) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation or to purchase (or to advance or supply
funds for the purchase of) any security for the payment thereof, (b) to
<PAGE>
12
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account
party in respect of any letter of credit or letter of guaranty issued to
support such Indebtedness or obligation; PROVIDED, that the term Guarantee
shall not include endorsements for collection or deposit in the ordinary
course of business.
"GUARANTEE AGREEMENT" means the Guarantee Agreement substantially in the
form of Exhibit D among the Borrower, the Guarantors from time to time party
thereto and the Collateral Agent for the benefit of the Secured Parties, as
the same may be amended, modified or supplemented from time to time in
accordance with the provisions hereof.
"GUARANTORS" means each person listed on Schedule 1.01 and each other
person that becomes party to the Guarantee Agreement as a Guarantor, and the
permitted successors and assigns of each such person.
"HAZARDOUS MATERIALS" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"HEDGING AGREEMENT" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging
arrangement.
"INDEBTEDNESS" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) al obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed, (g) all Guarantees by such
Person of Indebtedness of others, (h) all Capital Lease Obligations of such
Person, (i) all obligations, contingent or otherwise, of such Person as an
account party in respect of letters of credit and letters of guaranty and (j)
all obligations, contingent or otherwise, of such Person in respect of
bankers' acceptances. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor as a
result of such Person's ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such
Person is not liable therefor.
"INDEMNIFIED TAXES" means Taxes other than Excluded Taxes.
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13
"INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT" means the Indemnity,
Subrogation and Contribution Agreement substantially in the form of Exhibit E
among the Borrower, the Subsidiary Loan Parties from time to time party
thereto and the Collateral Agent for the benefit of the Secured Parties, as
the same may be amended, modified or supplemented from time to time in
accordance with the provisions hereof.
"INFORMATION MEMORANDUM" means the Confidential Information Memorandum
dated May 1999 relating to the Borrower and the Transactions.
"INTELLECTUAL PROPERTY" shall have the meaning assigned to such term in
Section 3.18.
"INTEREST ELECTION REQUEST" means a request by the Borrower to convert
or continue a Revolving Borrowing or Term Borrowing in accordance with Section
2.06.
"INTEREST PAYMENT DATE" means (a) with respect to any ABR Loan, the last
day of each March, June, September and December and (b) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part and, in the case of a Eurodollar
Borrowing with an Interest Period of more than three months' duration, each
day prior to the last day of such Interest Period that occurs at intervals of
three months' duration after the first day of such Interest Period.
"INTEREST PERIOD" means, with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; PROVIDED, that (a) if any Interest
Period would end on a day other than a Business Day, such Interest Period
shall be extended to the next succeeding Business Day unless such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day and (b) any
Interest Period that commences on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period. For purposes hereof, the date
of a Borrowing initially shall be the date on which such Borrowing is made and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.
"ISSUING BANK" means The Chase Manhattan Bank, in its capacity as the
issuer of Letters of Credit hereunder, and its successors in such capacity as
provided in Section 2.04(i). The Issuing Bank may, in its discretion, arrange
for one or more Letters of Credit to be issued by Affiliates of the Issuing
Bank, in which case the term "Issuing Bank" shall include any such Affiliate
with respect to Letters of Credit issued by such Affiliate.
"LC DISBURSEMENT" means a payment made by the Issuing Bank pursuant to a
Letter of Credit.
"LC EXPOSURE" means, at any time, the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the
aggregate amount of all LC Disbursements that have not yet been reimbursed by
or on behalf of the Borrower at such time. The LC Exposure of any Revolving
<PAGE>
14
Lender at any time shall be its Applicable Percentage of the total LC Exposure
at such time.
"LENDERS" means the Persons listed on Schedule 2.01 and any other Person
that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that shall have ceased to be a party
hereto pursuant to an Assignment and Acceptance or Section 2.18.
"LETTER OF CREDIT" means any letter of credit issued pursuant to this
Agreement.
"LEVERAGE RATIO" means, on any date, the ratio of (a) Total Indebtedness
as of such date to (b) Consolidated EBITDA for the period of four consecutive
fiscal quarters of the Borrower ended on such date (or, if such date is not
the last day of a fiscal quarter, ended on the last day of the fiscal quarter
of the Borrower most recently ended prior to such date).
"LIBO RATE" means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Dow Jones Market
Service (or on any successor or substitute page of such Service, or any
successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest Period, as the rate
for dollar deposits with a maturity comparable to such Interest Period. In the
event that such rate is not available at such time for any reason, then the
"LIBO RATE" with respect to such Eurodollar Borrowing for such Interest Period
shall be the rate at which dollar deposits of $5,000,000 and for a maturity
comparable to such Interest Period are offered by the principal London office
of the Administrative Agent in immediately available funds in the London
interbank market at approximately 11:00 a.m., London time, two Business Days
prior to the commencement of such Interest Period.
"LIEN" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest
in, on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"LOAN DOCUMENTS" means this Agreement, the Guarantee Agreement, the
Security Documents and the Indemnity, Subrogation and Contribution Agreement.
"LOAN PARTIES" means the Borrower and the Subsidiary Loan Parties.
"LOANS" means the loans made by the Lenders hereunder.
"LONG-TERM INDEBTEDNESS" means any Indebtedness that, in accordance with
GAAP, constitutes (or, when incurred, constituted) a long-term liability.
<PAGE>
15
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, assets, operations, prospects or condition, financial or otherwise,
of the Borrower and the Subsidiaries taken as a whole, or of NovaCare O&P, (b)
the ability of any Loan Party to perform any of its obligations under any Loan
Document or (c) the rights of or benefits available to the Lenders under any
Loan Document.
"MATERIAL INDEBTEDNESS" means Indebtedness (other than the Loans and
Letters of Credit), or obligations in respect of one or more Hedging
Agreements, of any one or more of the Borrower and its Subsidiaries in an
aggregate principal amount exceeding $5,000,000. For purposes of determining
Material Indebtedness, the "principal amount" of the obligations of the
\Borrower or any Subsidiary in respect of any Hedging Agreement at any time
shall be the maximum aggregate amount (giving effect to any netting
agreements) that the Borrower or such Subsidiary would be required to pay if
such Hedging Agreement were terminated at such time.
"MOODY'S" means Moody's Investors Service, Inc.
"MORTGAGE" means a mortgage, deed of trust, assignment of leases and
rents, leasehold mortgage or other security document granting a Lien on any
Mortgaged Property to secure the Obligations. Each Mortgage shall be
satisfactory in form and substance to the Collateral Agent, substantially in
the form of Exhibit L or the form of mortgage pursuant to the Paribas Credit
Agreement.
"MORTGAGED PROPERTY" means, initially, each real property (and the
improvements thereto) owned by a Loan Party, identified by the Collateral
Agent and listed on Schedule B, and each other parcel of real property (and
the improvements thereto) hereafter acquired by a Loan Party.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"NET PROCEEDS" means, with respect to any event, (a) the cash proceeds
received in respect of such event including (i) any cash received in respect
of any non-cash proceeds, but only as and when received, (ii) in the case of a
casualty, insurance proceeds, and (iii) in the case of a condemnation or
similar event, condemnation awards and similar payments, net of (b) the sum of
(i) all reasonable fees and out-of-pocket expenses paid by the Borrower and
the Subsidiaries to third parties (other than Affiliates) in connection with
such event, (ii) in the case of a sale, transfer or other disposition of an
asset (including pursuant to a sale and leaseback transaction or a casualty or
a condemnation or similar proceeding), the amount of all payments required to
be made by the Borrower and the Subsidiaries as a result of such event to
repay Indebtedness (other than Loans) secured by such asset or otherwise
subject to mandatory prepayment as a result of such event, (c) in the case of
any event described in clause (c) of the definition of "Prepayment Event," the
aggregate amount of such proceeds applied pursuant to Section 6.08(a)(iv), (d)
in the case of an issuance of common stock by the Borrower, if the Borrower
shall have delivered to the Administrative Agent calculations demonstrating
that the Leverage Ratio, calculated on a pro forma basis as of the end of and
for the most recent period of four fiscal quarters for which financial
statements shall have been delivered pursuant to Section 5.03(a) or (b),
giving effect to the application of the proceeds thereof (the "COMMON STOCK
PROCEEDS") as if such application had occurred at the beginning of such
period, does not exceed 2.50 to 1.00, the aggregate amount of such Common
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16
Stock Proceeds that have been applied to the prepayment of the Subordinated
Notes, which amount shall not exceed 25% of the total of the aggregate amount
of such Common Stock Proceeds less the sum of (x) any portion of such Common
Stock Proceeds applied pursuant to Sectio 6.08(a)(iv) and (y) the aggregate
amount of such Common Stock Proceeds applied in any other manner permitted by
this Agreement and (e) the amount of all taxes paid (or reasonably estimated
to be payable) by the Borrower and the Subsidiaries, and the amount of any
reserves established by the Borrower and the Subsidiaries to fund contingent
liabilities reasonably estimated to be payable, in each case during the year
that such event occurred or the next succeeding year and that are directly
attributable to such event (as determined reasonably and in good faith by the
chief financial officer of the Borrower).
"NET WORKING CAPITAL" means, at any date, (a) the consolidated current
assets of the Borrower and its consolidated Subsidiaries as of such date
(excluding cash and Permitted Investments) minus (b) the consolidated current
liabilities of the Borrower and its consolidated Subsidiaries as of such date
(excluding current liabilities in respect of Indebtedness). Net Working
Capital at any date may be a positive or negative number. Net Working Capital
increases when it becomes more positive or less negative and decreases when it
becomes less positive or more negative.
"NOVACARE O&P" means NovaCare Orthotics & Prosthetic, Inc., a Delaware
corporation and a wholly owned subsidiary of the Seller, and its subsidiaries,
taken as a whole.
"OBLIGATIONS" means (a) the due and punctual payment by the Borrower or
the applicable Loan Parties of (i) the principal of and premium, if any, and
interest (including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) on the Loans, when and as due,
whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, (ii) each payment required to be made by the Borrower
under this Agreement in respect of any Letter of Credit, when and as due,
including payments in respect of reimbursement of disbursements, interest
thereon and obligations to provide cash collateral and (iii) all other
monetary obligations, including fees, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Loan Parties to the Secured Parties
under this Agreement and the other Loan Documents, (b) the due and punctual
payment and performance of all covenants, agreements, obligations and
liabilities of the Loan Parties, monetary or otherwise, under or pursuant to
this Agreement and the other Loan Documents and (c) the due and punctual
payment and performance of all obligations of the Borrower or any Subsidiary,
monetary or otherwise, under each Hedging Agreement entered into to limit
interest rate risk with a counterparty that was a Lender or an Affiliate of a
Lender at the time such Hedging Agreement was entered into.
"OFFERING MEMORANDUM" means the offering memorandum dated June 9, 1999
relating to the Subordinated Notes.
"OTHER TAXES" means any and all present or future recording, stamp,
documentary, excise, transfer, sales, property or similar taxes, charges or
levies arising from any payment made under any Loan Document or from the
<PAGE>
17
execution, delivery or enforcement of, or otherwise with respect to, any Loan
Document.
"PARIBAS CREDIT AGREEMENT" means the Credit Agreement dated as of
November 1, 1996, among the Borrower, JEH Acquisition Corporation, a Georgia
corporation, the lenders party thereto and Paribas, individually and as
administrative agent, as amended to the date hereof.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
"PERFECTION CERTIFICATE" means a certificate in the form of Exhibit C or
any other form approved by the Collateral Agent.
"PERMITTED EARN-OUT OBLIGATIONS" means obligations of the Borrower
incurred in connection with an acquisition permitted under Section 6.05(i)
which (a) are not secured or Guaranteed, (b) are payable solely by the
Borrower upon the passage of time or in the event certain future performance
goals are achieved by the business acquired in such acquisition and (c) arise
under written agreements specifying in each case an amount as the maximum
potential liability for the Borrower in respect thereof; PROVIDED, that the
Maximum Earn-Out Liability (as defined below) shall not exceed (i) $1,000,000
for any single acquisition (including all amounts payable over the term of the
agreement creating such Permitted Earn-Out Obligation) or (ii) $10,000,000 in
any fiscal year. For purposes hereof, the amount of any Permitted Earn-Out
Obligation shall be the maximum potential liability ("MAXIMUM EARN-OUT
LIABILITY") of the Borrower specified in the agreement creating such Permitted
Earn-Out Obligation.
"PERMITTED ENCUMBRANCES" means:
(a) Liens imposed by law for taxes that are not yet due or are
being contested in compliance with Section 5.04;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the ordinary
course of business and securing obligations that are not overdue by more
than 30 days or are being contested in compliance with Section 5.04;
(c) pledges and deposits made in the ordinary course of business
in compliance with workers' compensation, unemployment insurance and
other social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature, in each case in the
ordinary course of business;
(e) judgment liens in respect of judgments that do not constitute
an Event of Default under clause (k) of Article VII; and
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do
<PAGE>
18
not materially detract from the value of the affected property or
interfere with the ordinary conduct of business of the Borrower or any
Subsidiary;
PROVIDED that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"PERMITTED INVESTMENTS" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States
of America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in
each case maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from
the date of acquisition thereof and having, at such date of acquisition,
the highest credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances
and time deposits maturing within 180 days from the date of acquisition
thereof issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any domestic office of any commercial
bank organized under the laws of the United States of America or any
State thereof which has a combined capital and surplus and undivided
profits of not less than $500,000,000; and
(d) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) above and
entered into with a financial institution satisfying the criteria
described in clause (c) above.
"PERMITTED SELLER NOTES" means notes issued by the Borrower to sellers
of stock or assets in one or more acquisitions permitted under Section 6.05,
which notes (i) shall be unsecured and not guaranteed by subsidiaries of the
Borrower, (ii) shall be subordinated to the Obligations on terms at least as
favorable to the Lenders as those set forth in Exhibit K hereto, (iii) shall
mature no earlier than the date that is six months after the Tranche B
Maturity Date and (iv) shall otherwise be in form and on terms satisfactory to
the Administrative Agent; PROVIDED, that Permitted Seller Notes in an
aggregate principal amount outstanding at any time not to exceed $15,000,000
shall be permitted (x) to be PARI PASSU with the Obligations or (y) to mature
earlier than the date that is six months after the Tranche B Maturity Date.
"PERSON" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"PLAN" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower
or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section
3(5) of ERISA.
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19
"PLEDGE AGREEMENT" means the Pledge Agreement substantially in the form
of Exhibit F among the Borrower, the Subsidiary Loan Parties from time to time
party thereto and the Collateral Agent for the benefit of the Secured Parties,
as the same may be amended, modified or supplemented from time to time in
accordance with the provisions hereof.
"PNA" means Paribas North America, Inc., an affiliate of Paribas.
"PREFERRED STOCK" means the 7% Redeemable Preferred Stock, par value
$0.01 per share, original issue price $1,000 a share, of the Borrower, issued
under the Certificate of Designations, substantially in the form as described
in the Offering Memorandum, with no changes therefrom adverse to the Lenders.
"PREPAYMENT EVENT" means:
(a) any sale, transfer or other disposition (including pursuant to
a sale and leaseback transaction) of any property or asset of the
Borrower or any Subsidiary, other than (i) dispositions described in
clauses (a) and (b) of Section 6.04 and (ii) other dispositions
resulting in aggregate Net Proceeds not exceeding $5,000,000 during any
fiscal year of the Borrower; or
(b) any casualty or other insured damage to, or any taking under
power of eminent domain or by condemnation or similar proceeding of, any
property or asset of the Borrower or any Subsidiary, but only to the
extent that the Net Proceeds therefrom (i) exceed $1,000,000 and (ii)
have not been applied to repair, restore or replace such property or
asset within 120 days after such event; or
(c) the issuance by the Borrower or any Subsidiary of any Equity
Interests, or the receipt by the Borrower or any Subsidiary of any
capital contribution, other than any such issuance of Equity Interests
to, or receipt of any such capital contribution from, the Borrower or a
Subsidiary, but only to the extent that the Net Proceeds therefrom
exceed $500,000; PROVIDED that any equity issuances shall not constitute
Prepayment Events to the extent the proceeds thereof are applied to
finance acquisitions permitted under Section 6.05 or make payments
pursuant to Section 6.08(a)(iv); or
(d) the incurrence by the Borrower or any Subsidiary of any
Indebtedness, other than the Subordinated Notes or other Indebtedness
described in clauses (iv), (vi), (vii), (viii) and (ix) of paragraph (a)
of Section 6.01.
"PRIME RATE" means the rate of interest per annum publicly announced
from time to time by The Chase Manhattan Bank as its prime rate in effect at
its principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as
being effective.
"PROJECTIONS" shall have the meaning set forth in Section 4.01(n).
"REGISTER" has the meaning set forth in Section 9.04.
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20
"RELATED PARTIES" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"REQUIRED LENDERS" means, at any time, Lenders having Revolving
Exposures, Term Loans and unused Commitments representing more than 50% of the
sum of the total Revolving Exposures, outstanding Term Loans and unused
Commitments at such time.
"RESTRICTED PAYMENT" means any dividend or other distribution (whether
in cash, securities or other property) with respect to any Equity Interests in
the Borrower or any Subsidiary, or any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancelation or termination
of any Equity Interests in the Borrower or any Subsidiary or any option,
warrant or other right to acquire any such Equity Interests in the Borrower or
any Subsidiary.
"REVOLVING AVAILABILITY PERIOD" means the period from and including the
Effective Date to but excluding the earlier of the date that is five Business
Days prior to the Revolving Maturity Date and the date of termination of the
Revolving Commitments.
"REVOLVING COMMITMENT" means, with respect to each Lender, the
commitment, if any, of such Lender to make Revolving Loans and to acquire
participations in Letters of Credit hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender's Revolving Exposure
hereunder, as such commitment may be (a) reduced from time to time pursuant to
Section 2.07 and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04. The initial amount
of each Lender's Revolving Commitment is set forth on Schedule 2.01 or in the
Assignment and Acceptance pursuant to which such Lender shall have assumed its
Revolving Commitment, as applicable. The initial aggregate amount of the
Lenders' Revolving Commitments is $100,000,000.
"REVOLVING EXPOSURE" means, with respect to any Lender at any time, the
sum of the outstanding principal amount of such Lender's Revolving Loans and
its LC Exposure at such time.
"REVOLVING LENDER" means a Lender with a Revolving Commitment or, if the
Revolving Commitments have terminated or expired, a Lender with Revolving
Exposure.
"REVOLVING LOAN" means a Loan made pursuant to clause (c) of Section
2.01.
"REVOLVING MATURITY DATE" means the sixth anniversary of the Closing
Date.
"S&P" means Standard & Poor's.
"SCHEDULED INDEBTEDNESS" means (a) all Indebtedness incurred under the
Paribas Credit Agreement and (b) all Guarantees issued by NovaCare Orthotics
and Prosthetics, Inc. and its subsidiaries under the Credit Agreement dated as
of May 27, 1994, among NovaCare, Inc., a Delaware corporation, certain of its
subsidiaries, the lenders party thereto and PNC Bank, National Association, as
agent, as amended to the date hereof.
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21
"SECURED PARTIES" means the Administrative Agent, the Collateral Agent,
each Lender, the Issuing Bank and each other person to which any of the
Obligations is owed.
"SECURITY AGREEMENT" means the Security Agreement substantially in the
form of Exhibit G among the Borrower, the Subsidiary Loan Parties from time to
time party thereto and the Collateral Agent for the benefit of the Secured
Parties, as the same may be amended, modified or supplemented from time to
time in accordance with the provisions hereof.
"SECURITY DOCUMENTS" means the Security Agreement, the Pledge Agreement,
the Mortgages and each other security agreement or other instrument or
document executed and delivered pursuant to Section 5.12 or 5.13 to secure any
of the Obligations.
"SELLER" means NovaCare, Inc., a Delaware corporation.
"STATUTORY RESERVE RATE" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including
any marginal, special, emergency or supplemental reserves) expressed as a
decimal established by the Board to which the Administrative Agent is subject
(a) with respect to the Base CD Rate, for new negotiable nonpersonal time
deposits in dollars of over $100,000 with maturities approximately equal to
three months and (b) with respect to the Adjusted LIBO Rate, for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D
of the Board). Such reserve percentages shall include those imposed pursuant
to such Regulation D. Eurodollar Loans shall be deemed to constitute
eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D or any
comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"STOCK PURCHASE AGREEMENT" means the Stock Purchase Agreement dated
April 2, 1999, as amended as of May 19, 1999 by and among the Seller, NC
Resources, Inc., a Delaware corporation, the Borrower and AcquisitionCo.
"SUBORDINATED NOTES" means $150,000,000 aggregate principal amount of
the Borrower's Senior Subordinated Notes due 2009 to be issued by the Borrower
pursuant to the Subordinated Note Documents.
"SUBORDINATED NOTE DOCUMENTS" means the indenture providing for the
issuance of the Subordinated Notes substantially in the form as described in
the Offering Memorandum, with no changes therefrom adverse to the Lenders and
all other instruments, agreements and other documents evidencing or governing
the Subordinated Notes or providing for any Guarantee or other right in
respect thereof.
"SUBSIDIARY" means, with respect to any Person (the "PARENT") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as
any other corporation, limited liability company, partnership, association or
other entity (a) of which securities or other ownership interests representing
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22
more than 50% of the equity or more than 50% of the ordinary voting power or,
in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held, or (b) that is, as
of such date, otherwise Controlled, by the parent or one or more subsidiaries
of the parent or by the parent and one or more subsidiaries of the parent.
"SUBSIDIARY" means any subsidiary of the Borrower.
"SUBSIDIARY LOAN PARTY" means any Subsidiary that is not a Foreign
Subsidiary.
"SYNDICATION AGENT" means Bankers Trust Company.
"TAXES" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"TERM LOANS" means Tranche A Term Loans and Tranche B Term Loans.
"THREE-MONTH SECONDARY CD RATE" means, for any day, the secondary market
rate for three-month certificates of deposit reported as being in effect on
such day (or, if such day is not a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during
the week following such day) or, if such rate is not so reported on such day
or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center banks
in New York City received at approximately 10:00 a.m., New York City time, on
such day (or, if such day is not a Business Day, on the next preceding
Business Day) by the Administrative Agent from three negotiable certificate of
deposit dealers of recognized standing selected by it.
"TOTAL INDEBTEDNESS" means, as of any date, the sum of (a) the aggregate
principal amount of Indebtedness of the Borrower and the Subsidiaries
outstanding as of such date, in the amount that would be reflected on a
balance sheet prepared as of such date on a consolidated basis in accordance
with GAAP, plus (b) the aggregate principal amount of Indebtedness of the
Borrower and the Subsidiaries outstanding as of such date that is not required
to be reflected on a balance sheet in accordance with GAAP, determined on a
consolidated basis.
"TRANCHE A COMMITMENT" means, with respect to each Lender, the
commitment, if any, of such Lender to make a Tranche A Term Loan hereunder on
the Effective Date, expressed as an amount representing the maximum principal
amount of the Tranche A Term Loan to be made by such Lender hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.07 and
(b) reduced or increased from time to time pursuant to assignments by or to
such Lender pursuant to Section 9.04. The initial amount of each Lender's
Tranche A Commitment is set forth on Schedule 2.01, or in the Assignment and
Acceptance pursuant to which such Lender shall have assumed its Tranche A
Commitment, as applicable. The initial aggregate amount of the Lenders'
Tranche A Commitments is $100,000,000.
"TRANCHE A LENDER" means a Lender with a Tranche A Commitment or an
outstanding Tranche A Term Loan.
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23
"TRANCHE A MATURITY DATE" means the sixth anniversary of the Closing
Date.
"TRANCHE A TERM LOAN" means a Loan made pursuant to clause (a) of
Section 2.01.
"TRANCHE B COMMITMENT" means, with respect to each Lender, the
commitment, if any, of such Lender to make a Tranche B Term Loan hereunder on
the Effective Date, expressed as an amount representing the maximum principal
amount of the Tranche B Term Loan to be made by such Lender hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.07 and
(b) reduced or increased from time to time pursuant to assignments by or to
such Lender pursuant to Section 9.04. The initial amount of each Lender's
Tranche B Commitment is set forth on Schedule 2.01 or in the Assignment and
Acceptance pursuant to which such Lender shall have assumed its Tranche A
Commitment, as applicable. The initial aggregate amount of the Lenders'
Tranche B Commitments is $100,000,000.
"TRANCHE B LENDER" means a Lender with a Tranche B Commitment or an
outstanding Tranche B Term Loan.
"TRANCHE B MATURITY DATE" means the date that is six months after the
seventh anniversary of the Closing Date.
"TRANCHE B TERM LOAN" means a Loan made pursuant to clause (b) of
Section 2.01.
"TRANSACTIONS" means the execution, delivery and performance by the Loan
Parties of the Loan Documents (including the creation of the Liens provided
for in the Security Documents), the Borrowings and issuances of Letters of
Credit hereunder, the use of the proceeds of such Borrowings and Letters of
Credit, the issuance and sale of the Preferred Stock, the issuance and sale of
the Subordinated Notes, the Acquisition and the other transactions
contemplated hereby and by the other Loan Documents.
"TYPE", when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the
Alternate Base Rate.
"WHOLLY OWNED SUBSIDIARY" means a Subsidiary of which securities (except
for directors' qualifying shares) or other ownership interests representing
100% of the equity and 100% of the ordinary voting power are, at the time any
determination is being made, owned, controlled or held, directly or
indirectly, by the Borrower or one or more wholly owned subsidiaries of the
Borrower.
"WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. CLASSIFICATION OF LOANS AND BORROWINGS. For purposes of
this Agreement, Loans may be classified and referred to by Class (E.G., a
"Revolving Loan") or by Type (E.G., a "Eurodollar Loan") or by Class and Type
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24
(E.G., a "Eurodollar Revolving Loan"). Borrowings also may be classified and
referred to by Class (E.G., a "Revolving Borrowing") or by Type (E.G., a
"Eurodollar Borrowing") or by Class and Type (E.G., a "Eurodollar Revolving
Borrowing").
SECTION 1.03. TERMS GENERALLY. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The word "will" shall be construed to have the same meaning and effect as the
word "shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth
herein), (b) any reference herein to any Person shall be construed to include
such Person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.04. ACCOUNTING TERMS; GAAP; PRO FORMA COMPUTATIONS. (a) Except
as otherwise expressly provided herein, all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from
time to time; PROVIDED that, if the Borrower notifies the Administrative Agent
that the Borrower requests an amendment to any provision hereof to eliminate
the effect of any change occurring after the date hereof in GAAP or in the
application thereof on the operation of such provision (or if the
Administrative Agent notifies the Borrower that the Required Lenders request
an amendment to any provision hereof for such purpose), regardless of whether
any such notice is given before or after such change in GAAP or in the
application thereof, then such provision shall be interpreted on the basis of
GAAP as in effect and applied immediately before such change shall have become
effective until such notice shall have been withdrawn or such provision
amended in accordance herewith.
(b) All pro forma computations required to be made hereunder giving
effect to any acquisition, investment, sale, disposition or similar event
shall reflect on a pro forma basis such event and, to the extent applicable,
the historical earnings and cash flows associated with the assets acquired or
disposed of and any related incurrence or reduction of Indebtedness, but shall
not take into account any projected synergies or similar benefits expected to
be realized as a result of such event.
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25
ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS. Subject to the terms and conditions set forth
herein, each Lender agrees (a) to make a Tranche A Term Loan to the Borrower
on the Effective Date in a principal amount not exceeding its Tranche A
Commitment, (b) to make a Tranche B Term Loan to the Borrower on the Effective
Date in a principal amount not exceeding its Tranche B Commitment and (c) to
make Revolving Loans to the Borrower from time to time during the Revolving
Availability Period in an aggregate principal amount that will not result in
such Lender's Revolving Exposure exceeding such Lender's Revolving Commitment.
Within the foregoing limits and subject to the terms and conditions set forth
herein, the Borrower may borrow, prepay and reborrow Revolving Loans. Amounts
repaid in respect of Term Loans may not be reborrowed.
SECTION 2.02. LOANS AND BORROWINGS. (a) Each Loan shall be made as part
of a Borrowing consisting of Loans of the same Class and Type made by the
Lenders ratably in accordance with their respective Commitments of the
applicable Class. The failure of any Lender to make any Loan required to be
made by it shall not relieve any other Lender of its obligations hereunder;
PROVIDED that the Commitments of the Lenders are several and no Lender shall
be responsible for any other Lender's failure to make Loans as required.
(b) Each Revolving Borrowing and Term Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request in
accordance herewith. Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make
such Loan; PROVIDED that any exercise of such option shall not affect the
obligation of the Borrower to repay such Loan in accordance with the terms of
this Agreement.
(c) At the commencement of each Interest Period for any Eurodollar
Borrowing, such Borrowing shall be in an aggregate amount that is an integral
multiple of $1,000,000. At the time that each ABR Revolving Borrowing is made,
such Borrowing shall be in an aggregate amount that is not less than $500,000
and if greater, is an integral multiple of $1,000,000; PROVIDED that an ABR
Revolving Borrowing may be in an aggregate amount that is equal to the entire
unused balance of the total Revolving Commitments or that is required to
finance the reimbursement of an LC Disbursement as contemplated by Section
2.04(e). Borrowings of more than one Type and Class may be outstanding at the
same time; PROVIDED that there shall not at any time be more than a total of
10 Eurodollar Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request, or to elect to convert or continue, any
Borrowing if the Interest Period requested with respect thereto would end
after the Revolving Maturity Date, Tranche A Maturity Date or Tranche B
Maturity Date, as applicable.
SECTION 2.03. REQUESTS FOR BORROWINGS. To request a Revolving Borrowing
or Term Borrowing, the Borrower shall notify the Administrative Agent of such
request by telephone (a) in the case of a Eurodollar Borrowing, not later than
11:00 a.m., New York City time, three Business Days before the date of the
proposed Borrowing or (b) in the case of an ABR Borrowing, not later than
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26
11:00 a.m., New York City time, one Business Day before the date of the
proposed Borrowing; PROVIDED that any such notice of an ABR Revolving
Borrowing to finance the reimbursement of an LC Disbursement as contemplated
by Section 2.05(e) may be given not later than 10:00 a.m., New York City time,
on the date of the proposed Borrowing. Each such telephonic Borrowing Request
shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Borrowing Request in a form
approved by the Administrative Agent and signed by the Borrower. Each such
telephonic and written Borrowing Request shall specify the following
information in compliance with Section 2.02:
(i) whether the requested Borrowing is to be a Revolving
Borrowing, Tranche A Term Borrowing or Tranche B Term Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) the date of such Borrowing, which shall be a Business Day;
(iv) whether such Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing;
(v) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(vi) the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the requirements of
Section 2.05.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Revolving Borrowing, then the Borrower
shall be deemed to have selected an Interest Period of one month's duration.
Promptly following receipt of a Borrowing Request in accordance with this
Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender's Loan to be made as part of the
requested Borrowing.
SECTION 2.04. LETTERS OF CREDIT. (a) GENERAL. Subject to the terms and
conditions set forth herein, the Borrower may request the issuance of Letters
of Credit for its own account, in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, at any time and from time to time
during the Revolving Availability Period. In the event of any inconsistency
between the terms and conditions of this Agreement and the terms and
conditions of any form of letter of credit application or other agreement
submitted by the Borrower to, or entered into by the Borrower with, the
Issuing Bank relating to any Letter of Credit, the terms and conditions of
this Agreement shall control.
(b) NOTICE OF ISSUANCE, AMENDMENT, RENEWAL, EXTENSION; CERTAIN
CONDITIONS. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the
Issuing Bank and the Administrative Agent (reasonably in advance of the
requested date of issuance, amendment, renewal or extension) a notice
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27
requesting the issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, and specifying the date of
issuance, amendment, renewal or extension (which shall be a Business Day), the
date on which such Letter of Credit is to expire (which shall comply with
paragraph (c) of this Section), the amount of such Letter of Credit, the name
and address of the beneficiary thereof and such other information as shall be
necessary to prepare, amend, renew or extend such Letter of Credit. If
requested by the Issuing Bank, the Borrower also shall submit a letter of
credit application on the Issuing Bank's standard form in connection with any
request for a Letter of Credit. A Letter of Credit shall be issued, amended,
renewed or extended only if (and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrower shall be deemed to represent
and warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the LC Exposure shall not exceed $5,000,000 and (ii) the total
Revolving Exposures shall not exceed the total Revolving Commitments.
(c) EXPIRATION DATE. Each Letter of Credit shall expire at or prior to
the close of business on the earlier of (i) the date one year after the date
of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Revolving Maturity Date.
(d) PARTICIPATIONS. By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing
Bank hereby grants to each Revolving Lender, and each Revolving Lender hereby
acquires from the Issuing Bank, a participation in such Letter of Credit equal
to such Lender's Applicable Percentage of the aggregate amount available to be
drawn under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Revolving Lender hereby absolutely and unconditionally agrees
to pay to the Administrative Agent, for the account of the Issuing Bank, such
Lender's Applicable Percentage of each LC Disbursement made by the Issuing
Bank and not reimbursed by the Borrower on the date due as provided in
paragraph (e) of this Section, or of any reimbursement payment required to be
refunded to the Borrower for any reason. Each Lender acknowledges and agrees
that its obligation to acquire participations pursuant to this paragraph in
respect of Letters of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including any amendment, renewal or
extension of any Letter of Credit or the occurrence and continuance of a
Default or reduction or termination of the Commitments, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever.
(e) REIMBURSEMENT. If the Issuing Bank shall make any LC Disbursement in
respect of a Letter of Credit, the Borrower shall reimburse such LC
Disbursement by paying to the Administrative Agent an amount equal to such LC
Disbursement not later than 12:00 noon, New York City time, on the date that
such LC Disbursement is made, if the Borrower shall have received notice of
such LC Disbursement prior to 10:00 a.m., New York City time, on such date,
or, if such notice has not been received by the Borrower prior to such time on
such date, then not later than 12:00 noon, New York City time, on (i) the
Business Day that the Borrower receives such notice, if such notice is
received prior to 10:00 a.m., New York City time, on the day of receipt, or
(ii) the Business Day immediately following the day that the Borrower receives
such notice, if such notice is not received prior to such time on the day of
receipt; PROVIDED that, if such LC Disbursement is not less than $5,000,000,
the Borrower may, subject to the conditions to borrowing set forth herein,
request in accordance with Section 2.03 that such payment be financed with an
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28
ABR Revolving Borrowing in an equivalent amount and, to the extent so
financed, the Borrower's obligation to make such payment shall be discharged
and replaced by the resulting ABR Revolving Borrowing. If the Borrower fails
to make such payment when due, the Administrative Agent shall notify each
Revolving Lender of the applicable LC Disbursement, the payment then due from
the Borrower in respect thereof and such Lender's Applicable Percentage
thereof. Promptly following receipt of such notice, each Revolving Lender
shall pay to the Administrative Agent its Applicable Percentage of the payment
then due from the Borrower, in the same manner as provided in Section 2.05
with respect to Loans made by such Lender (and Section 2.05 shall apply,
MUTATIS MUTANDIS, to the payment obligations of the Revolving Lenders), and
the Administrative Agent shall promptly pay to the Issuing Bank the amounts so
received by it from the Revolving Lenders. Promptly following receipt by the
Administrative Agent of any payment from the Borrower pursuant to this
paragraph, the Administrative Agent shall distribute such payment to the
Issuing Bank or, to the extent that Revolving Lenders have made payments
pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders
and the Issuing Bank as their interests may appear. Any payment made by a
Revolving Lender pursuant to this paragraph to reimburse the Issuing Bank for
any LC Disbursement (other than the funding of ABR Revolving Loans as
contemplated above) shall not constitute a Loan and shall not relieve the
Borrower of its obligation to reimburse such LC Disbursement.
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(f) OBLIGATIONS ABSOLUTE. The Borrower's obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever
and irrespective of (i) any lack of validity or enforceability of any Letter
of Credit or this Agreement, or any term or provision therein, (ii) any draft
or other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or
circumstance whatsoever, whether or not similar to any of the foregoing, that
might, but for the provisions of this Section, constitute a legal or equitable
discharge of, or provide a right of setoff against, the Borrower's obligations
hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Bank,
nor any of their Related Parties, shall have any liability or responsibility
by reason of or in connection with the issuance or transfer of any Letter of
Credit or any payment or failure to make any payment thereunder (irrespective
of any of the circumstances referred to in the preceding sentence), or any
error, omission, interruption, loss or delay in transmission or delivery of
any draft, notice or other communication under or relating to any Letter of
Credit (including any document required to make a drawing thereunder), any
error in interpretation of technical terms or any consequence arising from
causes beyond the control of the Issuing Bank; PROVIDED that the foregoing
shall not be construed to excuse the Issuing Bank from liability to the
Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrower to the
extent permitted by applicable law) suffered by the Borrower that are caused
by the Issuing Bank's failure to exercise care when determining whether drafts
and other documents presented under a Letter of Credit comply with the terms
thereof. The parties hereto expressly agree that, in the absence of gross
negligence or wilful misconduct on the part of the Issuing Bank (as finally
determined by a court of competent jurisdiction), the Issuing Bank shall be
deemed to have exercised care in each such determination. In furtherance of
the foregoing and without limiting the generality thereof, the parties agree
that, with respect to documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of Credit, the Issuing Bank
may, in its sole discretion, either accept and make payment upon such
documents without responsibility for further investigation, regardless of any
notice or information to the contrary, or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such Letter of Credit.
(g) DISBURSEMENT PROCEDURES. The Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand
for payment under a Letter of Credit. The Issuing Bank shall promptly notify
the Administrative Agent and the Borrower by telephone (confirmed by telecopy)
of such demand for payment and whether the Issuing Bank has made or will make
an LC Disbursement thereunder; PROVIDED that any failure to give or delay in
giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Revolving Lenders with respect to any such
LC Disbursement.
(h) INTERIM INTEREST. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement
in full on the date such LC Disbursement is made, the unpaid amount thereof
shall bear interest, for each day from and including the date such LC
Disbursement is made to but excluding the date that the Borrower reimburses
such LC Disbursement, at the rate per annum then applicable to ABR Revolving
Loans; PROVIDED that, if the Borrower fails to reimburse such LC Disbursement
when due pursuant to paragraph (e) of this Section, then Sections 2.12(c) and
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30
(d) shall apply. Interest accrued pursuant to this paragraph shall be for the
account of the Issuing Bank, except that interest accrued on and after the
date of payment by any Revolving Lender pursuant to paragraph (e) of this
Section to reimburse the Issuing Bank shall be for the account of such Lender
to the extent of such payment.
(i) REPLACEMENT OF THE ISSUING BANK. The Issuing Bank may be replaced at
any time by written agreement among the Borrower, the Administrative Agent,
the replaced Issuing Bank and the successor Issuing Bank. The Administrative
Agent shall notify the Lenders of any such replacement of the Issuing Bank. At
the time any such replacement shall become effective, the Borrower shall pay
all unpaid fees accrued for the account of the replaced Issuing Bank pursuant
to Section 2.11(b). From and after the effective date of any such replacement,
(i) the successor Issuing Bank shall have all the rights and obligations of
the Issuing Bank under this Agreement with respect to Letters of Credit to be
issued thereafter and (ii) references herein to the term "Issuing Bank" shall
be deemed to refer to such successor or to any previous Issuing Bank, or to
such successor and all previous Issuing Banks, as the context shall require.
After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank
shall remain a party hereto and shall continue to have all the rights and
obligations of an Issuing Bank under this Agreement with respect to Letters of
Credit issued by it prior to such replacement, but shall not be required to
issue additional Letters of Credit.
(j) CASH COLLATERALIZATION. If any Event of Default shall occur and be
continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Revolving Lenders with LC Exposure representing greater
than 50% of the total LC Exposure) demanding the deposit of cash collateral
pursuant to this paragraph, the Borrower shall deposit in an account with the
Administrative Agent, in the name of the Administrative Agent and for the
benefit of the Lenders, an amount in cash equal to the LC Exposure as of such
date plus any accrued and unpaid interest thereon; PROVIDED that the
obligation to deposit such cash collateral shall become effective immediately,
and such deposit shall become immediately due and payable, without demand or
other notice of any kind, upon the occurrence of any Event of Default with
respect to the Borrower described in clause (h) or (i) of Article VII. The
Borrower also shall deposit cash collateral pursuant to this paragraph as and
to the extent required by Section 2.10(b), and any such cash collateral so
deposited and held by the Administrative Agent hereunder shall constitute part
of the Borrowing Base for purposes of determining compliance with Section
2.10(b). Each such deposit shall be held by the Administrative Agent as
collateral for the payment and performance of the obligations of the Borrower
under this Agreement. The Administrative Agent shall have exclusive dominion
and control, including the exclusive right of withdrawal, over such account.
Other than any interest earned on the investment of such deposits, which
investments shall be made at the option and sole discretion of the
Administrative Agent and at the Borrower's risk and expense, such deposits
shall not bear interest. Interest or profits, if any, on such investments
shall accumulate in such account. Moneys in such account shall be applied by
the Administrative Agent to reimburse the Issuing Bank for LC Disbursements
for which it has not been reimbursed and, to the extent not so applied, shall
be held for the satisfaction of the reimbursement obligations of the Borrower
for the LC Exposure at such time or, if the maturity of the Loans has been
accelerated (but subject to the consent of Revolving Lenders with LC Exposure
representing greater than 50% of the total LC Exposure), be applied to satisfy
other obligations of the Borrower under this Agreement. If the Borrower is
required to provide an amount of cash collateral hereunder as a result of the
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31
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three Business Days after
all Events of Default have been cured or waived. If the Borrower is required
to provide an amount of cash collateral hereunder pursuant to Section 2.10(b),
such amount (to the extent not applied as aforesaid) shall be returned to the
Borrower as and to the extent that, after giving effect to such return, the
Borrower would remain in compliance with Section 2.10(b) and no Default shall
have occurred and be continuing.
SECTION 2.05. FUNDING OF BORROWINGS. (a) Each Lender shall make each
Loan to be made by it hereunder on the proposed date thereof by wire transfer
of immediately available funds by 12:00 noon, New York City time, to the
account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders. The Administrative Agent will make such
Loans available to the Borrower by promptly crediting the amounts so received,
in like funds, to an account of the Borrower maintained with the
Administrative Agent in New York City and designated by the Borrower in the
applicable Borrowing Request; PROVIDED that ABR Revolving Loans made to
finance the reimbursement of an LC Disbursement as provided in Section 2.04(e)
shall be remitted by the Administrative Agent to the Issuing Bank.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any 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 on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its
share of the applicable Borrowing available to the Administrative Agent, then
the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with
interest thereon, for each day from and including the date such amount is made
available to the Borrower to but excluding the date of payment to the
Administrative Agent, at (i) in the case of such Lender, the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation or (ii) in
the case of the Borrower, the interest rate applicable to ABR Loans. If such
Lender pays such amount to the Administrative Agent, then such amount shall
constitute such Lender's Loan included in such Borrowing.
SECTION 2.06. INTEREST ELECTIONS. (a) Each Revolving Borrowing and Term
Borrowing initially shall be of the Type specified in the applicable Borrowing
Request and, in the case of a Eurodollar Borrowing, shall have an initial
Interest Period as specified in such Borrowing Request. Thereafter, the
Borrower may elect to convert such Borrowing to a different Type or to
continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect
Interest Periods therefor, all as provided in this Section. The Borrower may
elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among
the Lenders holding the Loans comprising such Borrowing, and the Loans
comprising each such portion shall be considered a separate Borrowing.
(b) To make an election pursuant to this Section, the Borrower shall
notify the Administrative Agent of such election by telephone by the time that
a Borrowing Request would be required under Section 2.03 if the Borrower were
requesting a Revolving Borrowing of the Type resulting from such election to
be made on the effective date of such election. Each such telephonic Interest
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32
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest
Election Request in a form approved by the Administrative Agent and signed by
the Borrower.
(c) Each telephonic and written Interest Election Request shall specify
the following information in compliance with Section 2.02 and paragraph (f) of
this Section:
(i) the Borrowing to which such Interest Election Request applies
and, if different options are being elected with respect to different
portions thereof, the portions thereof to be allocated to each resulting
Borrowing (in which case the information to be specified pursuant to
clauses (iii) and (iv) below shall be specified for each resulting
Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or
a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of
such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election Request
with respect to a Eurodollar Borrowing prior to the end of the Interest Period
applicable thereto, then, unless such Borrowing is repaid as provided herein,
at the end of such Interest Period such Borrowing shall be converted to an ABR
Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing and the Administrative Agent, at the
request of the Required Lenders, so notifies the Borrower, then, so long as an
Event of Default is continuing (i) no outstanding Borrowing may be converted
to or continued as a Eurodollar Borrowing and (ii) unless repaid, each
Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the
Interest Period applicable thereto.
SECTION 2.07. TERMINATION AND REDUCTION OF COMMITMENTS. (a) Unless
previously terminated, (i) the Tranche A Commitments and Tranche B Commitments
shall terminate at 5:00 p.m., New York City time, on the Effective Date and
(ii) the Revolving Commitments shall terminate on the Revolving Maturity Date.
(b) The Borrower may at any time terminate, or from time to time reduce,
the Commitments of any Class; PROVIDED that (i) each reduction of the
Commitments of any Class shall be in an amount that is an integral multiple of
$1,000,000 and not less than $5,000,000 and (ii) the Borrower shall not
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33
terminate or reduce the Revolving Commitments if, after giving effect to any
concurrent prepayment of the Revolving Loans in accordance with Section 2.10,
the sum of the Revolving Exposures would exceed the total Revolving
Commitments.
(c) If any prepayment of Term Borrowings would be required pursuant to
Section 2.10 but cannot be made because there are no Term Borrowings
outstanding, or because the amount of the required prepayment exceeds the
outstanding amount of Term Borrowings, then, on the date that such prepayment
would be required, the Revolving Commitments shall be reduced by an aggregate
amount equal to the amount of the required prepayment, or the excess of such
amount over the outstanding amount of Term Borrowings, as the case may be.
(d) The Borrower shall notify the Administrative Agent of any election
to terminate or reduce the Commitments under paragraph (b) of this Section, or
any required reduction of the Revolving Commitments under paragraph (c) of
this Section, at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section shall be irrevocable; PROVIDED that a notice
of termination of the Revolving Commitments delivered by the Borrower may
state that such notice is conditioned upon the effectiveness of other credit
facilities, in which case such notice may be revoked by the Borrower (by
notice to the Administrative Agent on or prior to the specified effective
date) if such condition is not satisfied. Any termination or reduction of the
Commitments of any Class shall be permanent. Each reduction of the Commitments
of any Class shall be made ratably among the Lenders in accordance with their
respective Commitments of such Class.
SECTION 2.08. REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Borrower
hereby unconditionally promises to pay (i) to the Administrative Agent for the
account of each Lender the then unpaid principal amount of each Revolving Loan
of such Lender on the Revolving Maturity Date and (ii) to the Administrative
Agent for the account of each Lender the then unpaid principal amount of each
Term Loan of such Lender as provided in Section 2.09.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Class and Type thereof
and the Interest Period applicable thereto, (ii) the amount of any principal
or interest due and payable or to become due and payable from the Borrower to
each Lender hereunder and (iii) the amount of any sum received by the
Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be PRIMA FACIE evidence of the existence and
amounts of the obligations recorded therein; PROVIDED that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
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34
(e) Any Lender may request that Loans of any Class made by it be
evidenced by a promissory note. In such event, the Borrower shall prepare,
execute and deliver to such Lender a promissory note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its
registered assigns) and in a form approved by the Administrative Agent.
Thereafter, the Loans evidenced by such promissory note and interest thereon
shall at all times (including after assignment pursuant to Section 9.04) be
represented by one or more promissory notes in such form payable to the order
of the payee named therein (or, if such promissory note is a registered note,
to such payee and its registered assigns).
SECTION 2.09. AMORTIZATION OF TERM LOANS. (a) Subject to adjustment
pursuant to paragraph (d) of this Section, the Borrower shall repay Tranche A
Term Borrowings in 22 consecutive quarterly installments, payable beginning
March 31, 2000 and on each successive date thereafter which is three months
after the preceding installment date, in the aggregate amount set forth below
for each installment:
INSTALLMENT AMOUNT
1-4 $2,500,000
5-22 $5,000,000
(b) Subject to adjustment pursuant to paragraph (d) of this Section, the
Borrower shall repay Tranche B Term Borrowings in 28 consecutive quarterly
installments, payable beginning March 31, 2000 and on each successive date
thereafter which is three months after the preceding installment date, in the
aggregate amount set forth below for each installment:
INSTALLMENT AMOUNT
1-22 $ 250,000
23-28 $15,750,000
(c) To the extent not previously paid, (i) all Tranche A Term Loans
shall be due and payable on the Tranche A Maturity Date and (ii) all Tranche B
Term Loans shall be due and payable on the Tranche B Maturity Date.
(d) Any prepayment of a Term Borrowing of either Class shall be applied
to reduce the subsequent scheduled repayments of the Term Borrowings of such
Class to be made pursuant to this Section ratably; PROVIDED that any
prepayment made pursuant to Section 2.10(a) shall be applied, first, to reduce
the next scheduled repayment of the Term Borrowings of such Class to be made
pursuant to this Section unless and until such next scheduled repayment has
been eliminated as a result of reductions hereunder and, second, ratably.
(e) Prior to any repayment of any Term Borrowings of either Class
hereunder, the Borrower shall select the Borrowing or Borrowings of the
applicable Class to be repaid and shall notify the Administrative Agent by
telephone (confirmed by telecopy) of such selection not later than 11:00 a.m.,
New York City time, three Business Days before the scheduled date of such
repayment. Each repayment of a Borrowing shall be applied ratably to the Loans
included in the repaid Borrowing. Repayments of Term Borrowings shall be
accompanied by accrued interest on the amount repaid.
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35
SECTION 2.10. PREPAYMENT OF LOANS. (a) The Borrower shall have the right
at any time and from time to time to prepay any Borrowing in whole or in part,
subject to the requirements of this Section.
(b) In the event and on such occasion that the sum of the Revolving
Exposures exceeds the total Revolving Commitments, the Borrower shall prepay
Revolving Borrowings (or, if no such Borrowings are outstanding, deposit cash
collateral in an account with the Administrative Agent pursuant to Section
2.04(j)) in an aggregate amount equal to such excess.
(c) In the event and on each occasion that any Net Proceeds are received
by or on behalf of the Borrower or any Subsidiary in respect of any Prepayment
Event, the Borrower shall, immediately after such Net Proceeds are received,
prepay Term Borrowings in an aggregate amount equal to such Net Proceeds;
PROVIDED that, in the case of any event described in clause (a) of the
definition of the term Prepayment Event, if the Borrower shall deliver to the
Administrative Agent a certificate of a Financial Officer to the effect that
the Borrower and the Subsidiaries intend to apply the Net Proceeds from such
event (or a portion thereof specified in such certificate), within 120 days
after receipt of such Net Proceeds, to acquire real property, equipment or
other tangible assets to be used in the business of the Borrower and the
Subsidiaries, and certifying that no Default has occurred and is continuing,
then no prepayment shall be required pursuant to this paragraph in respect of
the Net Proceeds in respect of such event (or the portion of such Net Proceeds
specified in such certificate, if applicable) except to the extent of any such
Net Proceeds therefrom that have not been so applied by the end of such
120-day period, at which time a prepayment shall be required in an amount
equal to such Net Proceeds that have not been so applied; PROVIDED FURTHER
that the Borrower shall not be permitted to make elections pursuant to the
immediately preceding proviso with respect to Net Proceeds in any fiscal year
aggregating in excess of $1,000,000.
(d) Following the end of each fiscal year of the Borrower, commencing
with the fiscal year ending December 31, 2000 , the Borrower shall prepay Term
Borrowings in an aggregate amount equal to 50% of Excess Cash Flow for such
fiscal year. Each prepayment pursuant to this paragraph shall be made on or
before the date on which financial statements are delivered pursuant to
Section 5.01 with respect to the fiscal year for which Excess Cash Flow is
being calculated (and in any event within 90 days after the end of such fiscal
year).
(e) Prior to any optional or mandatory prepayment of Borrowings
hereunder, the Borrower shall select the Borrowing or Borrowings to be prepaid
and shall specify such selection in the notice of such prepayment pursuant to
paragraph (f) of this Section. In the event of any optional or mandatory
prepayment of Term Borrowings made at a time when Term Borrowings of both
Classes remain outstanding, the Borrower shall select Term Borrowings to be
prepaid so that the aggregate amount of such prepayment is allocated between
the Tranche A Term Borrowings and Tranche B Term Borrowings pro rata based on
the aggregate principal amount of outstanding Borrowings of each such Class;
PROVIDED that any Tranche B Lender may elect, by notice to the Administrative
Agent by telephone (confirmed by telecopy) at least one Business Day prior to
the prepayment date, to decline all or any portion of any prepayment of its
Tranche B Term Loans pursuant to this Section (other than an optional
prepayment pursuant to paragraph (a) of this Section, which may not be
declined), in which case the aggregate amount of the prepayment that would
have been applied to prepay Tranche B Term Loans but was so declined shall be
applied to prepay Tranche A Term Borrowings and Tranche B Term Loans of
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36
Lenders who accept prepayment of their Tranche B Term Loans pursuant to this
Section, on a pro rata basis based on their then respective outstanding
principal amounts.
(f) The Borrower shall notify the Administrative Agent by telephone
(confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City
time, three Business Days before the date of prepayment or (ii) in the case of
prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time,
one Business Day before the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date, the principal amount of
each Borrowing or portion thereof to be prepaid and, in the case of a
mandatory prepayment, a reasonably detailed calculation of the amount of such
prepayment; PROVIDED that, if a notice of optional prepayment is given in
connection with a conditional notice of termination of the Revolving
Commitments as contemplated by Section 2.07, then such notice of prepayment
may be revoked if such notice of termination is revoked in accordance with
Section 2.07. Promptly following receipt of any such notice, the
Administrative Agent shall advise the Lenders of the contents thereof. Each
partial prepayment of any Borrowing shall be in an amount that would be
permitted in the case of an advance of a Borrowing of the same Type as
provided in Section 2.02, except as necessary to apply fully the required
amount of a mandatory prepayment. Each prepayment of a Borrowing shall be
applied ratably to the Loans included in the prepaid Borrowing. Prepayments
shall be accompanied by accrued interest to the extent required by Section
2.12.
SECTION 2.11. FEES. (a) The Borrower agrees to pay to the Administrative
Agent for the account of each Lender a commitment fee, which shall accrue at
the Applicable Rate on the average daily unused amount of each Commitment of
such Lender during the period from and including the Closing Date to but
excluding the date on which such Commitment terminates. Accrued commitment
fees shall be payable in arrears (i) in the case of commitment fees in respect
of the Revolving Commitments, on the last day of March, June, September and
December of each year and on the date on which the Revolving Commitments
terminate, commencing on the first such date to occur after the Closing Date,
and (ii) in the case of commitment fees in respect of the Tranche A Term
Commitments and Tranche B Term Commitments, on the Effective Date or any
earlier date on which such Commitments terminate. All commitment fees shall be
computed on the basis of a year of 360 days and shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day). For purposes of computing commitment fees with respect to Revolving
Commitments, a Revolving Commitment of a Lender shall be deemed to be used to
the extent of the outstanding Revolving Loans and LC Exposure of such Lender.
(b) The Borrower agrees to pay (i) to the Administrative Agent for the
account of each Revolving Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at the Applicable Rate
used to determine the interest rates applicable to Eurodollar Revolving Loans,
on the average daily amount of such Lender's LC Exposure (excluding any
portion thereof attributable to unreimbursed LC Disbursements) during the
period from and including the Effective Date to but excluding the later of the
date on which such Lender's Revolving Commitment terminates and the date on
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37
which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank
a fronting fee, which shall accrue at the rate of 1/4 of 1% per annum on the
average daily amount of the LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the Effective Date to but excluding the later of the date of
termination of the Revolving Commitments and the date on which there ceases to
be any LC Exposure, as well as the Issuing Bank's standard fees with respect
to the issuance, amendment, renewal or extension of any Letter of Credit or
processing of drawings thereunder. Participation fees and fronting fees
accrued through and including the last day of March, June, September and
December of each year shall be payable on the third Business Day following
such last day, commencing on the first such date to occur after the Effective
Date; PROVIDED that all such fees shall be payable on the date on which the
Revolving Commitments terminate and any such fees accruing after the date on
which the Revolving Commitments terminate shall be payable on demand. Any
other fees payable to the Issuing Bank pursuant to this paragraph shall be
payable within 10 days after demand. All participation fees and fronting fees
shall be computed on the basis of a year of 360 days and shall be payable for
the actual number of days elapsed (including the first day but excluding the
last day).
(c) The Borrower agrees to pay to the Administrative Agent, for its own
account, fees payable in the amounts and at the times separately agreed upon
between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
commitment fees and participation fees, to the Lenders entitled thereto. Fees
paid shall not be refundable under any circumstances.
SECTION 2.12. INTEREST. (a) The Loans comprising each ABR Borrowing
shall bear interest at the Alternate Base Rate plus the Applicable Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear interest
at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing
plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise,
such overdue amount shall bear interest, after as well as before judgment, at
a rate per annum equal to (i) in the case of overdue principal of any Loan, 2%
plus the rate otherwise applicable to such Loan as provided in the preceding
paragraphs of this Section or (ii) in the case of any other amount, 2% plus
the rate applicable to ABR Revolving Loans as provided in paragraph (a) of
this Section.
(d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan and, in the case of Revolving Loans, upon
termination of the Revolving Commitments; PROVIDED that (i) interest accrued
pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in
the event of any repayment or prepayment of any Loan (other than a prepayment
of an ABR Revolving Loan prior to the end of the Revolving Availability
Period), accrued interest on the principal amount repaid or prepaid shall be
payable on the date of such repayment or prepayment and (iii) in the event of
any conversion of any Eurodollar Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion.
(e) All interest hereunder shall be computed on the basis of a year of
360 days, except that interest computed by reference to the Alternate Base
Rate at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and
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38
in each case shall be payable for the actual number of days elapsed (including
the first day but excluding the last day). The applicable Alternate Base Rate
or Adjusted LIBO Rate shall be determined by the Administrative Agent, and
such determination shall be conclusive absent manifest error.
SECTION 2.13. ALTERNATE RATE OF INTEREST. If prior to the commencement
of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall
be conclusive absent manifest error) that adequate and reasonable means
do not exist for ascertaining the Adjusted LIBO Rate for such Interest
Period; or
(b) the Administrative Agent is advised by the Required Lenders
that the Adjusted LIBO Rate for such Interest Period will not adequately
and fairly reflect the cost to such Lenders of making or maintaining
their Loans included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and
the Lenders by telephone or telecopy as promptly as practicable thereafter
and, until the Administrative Agent notifies the Borrower and the Lenders that
the circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.
SECTION 2.14. INCREASED COSTS. (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit
or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender (except any such reserve
requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London
interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit or
participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or
the Issuing Bank of participating in, issuing or maintaining any Letter of
Credit or to reduce the amount of any sum received or receivable by such
Lender or the Issuing Bank hereunder (whether of principal, interest or
otherwise), then the Borrower will pay to such Lender or the Issuing Bank, as
the case may be, such additional amount or amounts as will compensate such
Lender or the Issuing Bank, as the case may be, for such additional costs
incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender's or the Issuing Bank's capital or on the
capital of such Lender's or the Issuing Bank's holding company, if any, as a
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39
consequence of this Agreement or the Loans made by, or participations in
Letters of Credit held by, such Lender, or the Letters of Credit issued by the
Issuing Bank, to a level below that which such Lender or the Issuing Bank or
such Lender's or the Issuing Bank's holding company could have achieved but
for such Change in Law (taking into consideration such Lender's or the Issuing
Bank's policies and the policies of such Lender's or the Issuing Bank's
holding company with respect to capital adequacy), then from time to time the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing
Bank or such Lender's or the Issuing Bank's holding company for any such
reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Bank or
its holding company, as the case may be, as specified in paragraph (a) or (b)
of this Section shall be delivered to the Borrower and shall be conclusive
absent manifest error. The Borrower shall pay such Lender or the Issuing Bank,
as the case may be, the amount shown as due on any such certificate within 10
days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation;
PROVIDED that the Borrower shall not be required to compensate a Lender or the
Issuing Bank pursuant to this Section for any increased costs or reductions
incurred more than 270 days prior to the date that such Lender or the Issuing
Bank, as the case may be, notifies the Borrower of the Change in Law giving
rise to such increased costs or reductions and of such Lender's or the Issuing
Bank's intention to claim compensation therefor; PROVIDED FURTHER that, if the
Change in Law giving rise to such increased costs or reductions is
retroactive, then the 270-day period referred to above shall be extended to
include the period of retroactive effect thereof.
SECTION 2.15. BREAK FUNDING PAYMENTS. In the event of (a) the payment of
any principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan other than on the last day of the
Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Revolving Loan or Term Loan on the date specified in
any notice delivered pursuant hereto (regardless of whether such notice may be
revoked under Section 2.10(f) and is revoked in accordance therewith), or (d)
the assignment of any Eurodollar Loan other than on the last day of the
Interest Period applicable thereto as a result of a request by the Borrower
pursuant to Section 2.18, then, in any such event, the Borrower shall
compensate each Lender for the loss, cost and expense attributable to such
event. In the case of a Eurodollar Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be
the excess, if any, of (i) the amount of interest which would have accrued on
the principal amount of such Loan had such event not occurred, at the Adjusted
LIBO Rate that would have been applicable to such Loan, for the period from
the date of such event to the last day of the then current Interest Period
therefor (or, in the case of a failure to borrow, convert or continue, for the
period that would have been the Interest Period for such Loan), over (ii) the
amount of interest which would accrue on such principal amount for such period
at the interest rate which such Lender would bid were it to bid, at the
commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the eurodollar market. A certificate of any Lender
setting forth any amount or amounts that such Lender is entitled to receive
<PAGE>
40
pursuant to this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender the
amount shown as due on any such certificate within 10 days after receipt
thereof.
SECTION 2.16. TAXES. (a) Any and all payments by or on account of any
obligation of the Borrower hereunder or under any other Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or
Other Taxes; PROVIDED that if the Borrower shall be required to deduct any
Indemnified Taxes or Other Taxes from such payments, then (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) the Administrative Agent, Lender or Issuing Bank (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii)
the Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent, each Lender
and the Issuing Bank, within 10 days after written demand therefor, for the
full amount of any Indemnified Taxes or Other Taxes paid by the Administrative
Agent, such Lender or the Issuing Bank, as the case may be, on or with respect
to any payment by or on account of any obligation of the Borrower hereunder or
under any other Loan Document (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section)
and any penalties, interest and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental
Authority. A certificate as to the amount of such payment or liability
delivered to the Borrower by a Lender or the Issuing Bank, or by the
Administrative Agent on its own behalf or on behalf of a Lender or the Issuing
Bank, shall be conclusive absent manifest error. (d) As soon as practicable
after any payment of Indemnified Taxes or Other Taxes by the Borrower to a
Governmental Authority, the Borrower shall deliver to the Administrative Agent
the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the
Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by
applicable law, such properly completed and executed documentation prescribed
by applicable law or reasonably requested by the Borrower as will permit such
payments to be made without withholding or at a reduced rate, provided that
such Foreign Lender has received written notice from the Borrower advising it
of the availability of such exemption or reduction and supplying all
applicable documentation.
SECTION 2.17. PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF
SET-OFFS. (a) The Borrower shall make each payment required to be made by it
hereunder or under any other Loan Document (whether of principal, interest,
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41
fees or reimbursement of LC Disbursements, or of amounts payable under Section
2.14, 2.15 or 2.16, or otherwise) prior to the time expressly required
hereunder or under such other Loan Document for such payment (or, if no such
time is expressly required, prior to 12:00 noon, New York City time), on the
date when due, in immediately available funds, without set-off or
counterclaim. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the
next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent at its offices at 270
Park Avenue, New York, New York, except payments to be made directly to the
Issuing Bank as expressly provided herein and except that payments pursuant to
Sections 2.14, 2.15, 2.16 and 9.03 shall be made directly to the Persons
entitled thereto and payments pursuant to other Loan Documents shall be made
to the Persons specified therein. The Administrative Agent shall distribute
any such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof. If any payment under
any Loan Document shall be due on a day that is not a Business Day, the date
for payment shall be extended to the next succeeding Business Day, and, in the
case of any payment accruing interest, interest thereon shall be payable for
the period of such extension. All payments under each Loan Document shall be
made in dollars.
(b) If at any time insufficient funds are received by and available to
the Administrative Agent to pay fully all amounts of principal, unreimbursed
LC Disbursements, interest and fees then due hereunder, such funds shall be
applied (i) first, towards payment of interest and fees then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
interest and fees then due to such parties, and (ii) second, towards payment
of principal and unreimbursed LC Disbursements then due hereunder, ratably
among the parties entitled thereto in accordance with the amounts of principal
and unreimbursed LC Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans, Term Loans or participations in LC
Disbursements resulting in such Lender receiving payment of a greater
proportion of the aggregate amount of its Revolving Loans, Term Loans and
participations in LC Disbursements and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such
greater proportion shall purchase (for cash at face value) participations in
the Revolving Loans, Term Loans and participations in LC Disbursements of
other Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Revolving Loans, Term
Loans and participations in LC Disbursements; PROVIDED that (i) if any such
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment
made by the Borrower pursuant to and in accordance with the express terms of
this Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations
in LC Disbursements to any assignee or participant, other than to the Borrower
or any Subsidiary or Affiliate thereof (as to which the provisions of this
paragraph shall apply). The Borrower consents to the foregoing and agrees, to
the extent it may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against the Borrower rights of set-off and counterclaim with respect to such
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42
participation as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Bank hereunder that the
Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in accordance herewith and
may, in reliance upon such assumption, distribute to the Lenders or the
Issuing Bank, as the case may be, the amount due. In such event, if the
Borrower has not in fact made such payment, then each of the Lenders or the
Issuing Bank, as the case may be, severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with interest thereon, for each day from and including
the date such amount is distributed to it to but excluding the date of payment
to the Administrative Agent, at the greater of the Federal Funds Effective
Rate and a rate determined by the Administrative Agent in accordance with
banking industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to be made by
it pursuant to Section 2.04(d) or (e), 2.05(b), 2.17(d) or 9.03(c), then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender's obligations
under such Sections until all such unsatisfied obligations are fully paid.
SECTION 2.18. MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS. (a) If any
Lender requests compensation under Section 2.14, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.16, then such
Lender shall use reasonable efforts to designate a different lending office
for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if,
in the judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 2.14 or 2.16, as the
case may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to
such Lender. The Borrower hereby agrees to pay all reasonable costs and
expenses incurred by any Lender in connection with any such designation or
assignment.
(b) If any Lender requests compensation under Section 2.14, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and
the Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement
to an assignee that shall assume such obligations (which assignee may be
another Lender, if a Lender accepts such assignment); PROVIDED that (i) the
Borrower shall have received the prior written consent of the Administrative
Agent (and, if a Revolving Commitment is being assigned, the Issuing Bank),
which consent shall not unreasonably be withheld, (ii) such Lender shall have
received payment of an amount equal to the outstanding principal of its Loans
and participations in LC Disbursements, accrued interest thereon, accrued fees
and all other amounts payable to it hereunder, from the assignee (to the
extent of such outstanding principal and accrued interest and fees) or the
Borrower (in the case of all other amounts) and (iii) in the case of any such
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43
assignment resulting from a claim for compensation under Section 2.14 or
payments required to be made pursuant to Section 2.16, such assignment will
result in a material reduction in such compensation or payments. A Lender
shall not be required to make any such assignment and delegation if, prior
thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrower to require such assignment and delegation
cease to apply.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
SECTION 3.01. ORGANIZATION; POWERS. Each of the Borrower and its
Subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, has all requisite power and
authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business
in, and is in good standing in, every juris diction where such qualification
is required.
SECTION 3.02. AUTHORIZATION; ENFORCEABILITY. The Transactions to be
entered into by each Loan Party are within such Loan Party's corporate powers
and have been duly authorized by all necessary corporate and, if required,
stockholder action. This Agreement has been duly executed and delivered by the
Borrower and constitutes, and each other Loan Document to which any Loan Party
is to be a party, when executed and delivered by such Loan Party, will
constitute, a legal, valid and binding obligation of the Borrower or such Loan
Party (as the case may be), enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law.
SECTION 3.03. GOVERNMENTAL APPROVALS; NO CONFLICTS. The Transactions (a)
do not require any consent or approval of, registration or filing with, or any
other action by, any Governmental Authority, except such as have been obtained
or made and are in full force and effect and except filings necessary to
perfect Liens created under the Loan Documents, (b) will not violate any
applicable law or regulation or the charter, by-laws or other organizational
documents of the Borrower or any of its Subsidiaries or any order of any
Governmental Authority, (c) will not violate or result in a default under any
indenture, agreement or other instrument binding upon the Borrower or any of
its Subsidiaries or its assets, or give rise to a right thereunder to require
any payment to be made by the Borrower or any of its Subsidiaries, and (d)
will not result in the creation or imposition of any Lien on any asset of the
Borrower or any of its Subsidiaries, except Liens created under the Loan
Documents.
SECTION 3.04. FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE. (a) The
Borrower has heretofore furnished to the Lenders its consolidated balance
sheet and statements of income, stockholders equity and cash flows (i) as of
and for the fiscal year ended December 31, 1998, reported on by
PricewaterhouseCoopers LLP, independent public accountants, and (ii) as of and
for the fiscal quarter and the portion of the fiscal year ended March 31,
1999, certified by its chief financial officer. Such financial statements
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44
present fairly, in all material respects, the financial position and results
of operations and cash flows of the Borrower and its consolidated Subsidiaries
as of such dates and for such periods in accordance with GAAP, subject to
year-end audit adjustments and the absence of footnotes in the case of the
statements referred to in clause (ii) above. (b) The Borrower has heretofore
furnished to the Lenders its pro forma consolidated balance sheet as of March
31, 1999, prepared giving effect to the Effective Date Transactions as if the
Effective Date Transactions had occurred on such date. Such pro forma
consolidated balance sheet (i) has been prepared in good faith based on the
same assumptions used to prepare the pro forma financial statements included
in the Information Memorandum (which assumptions are believed by the Borrower
to be reasonable), (ii) is based on the best information available to the
Borrower after due inquiry, (iii) accurately reflects all adjustments
necessary to give effect to the Effective Date Transactions and (iv) presents
fairly, in all material respects, the pro forma financial position of the
Borrower and its consolidated Subsidiaries as of March 31, 1999 as if the
Effective Date Transactions had occurred on such date.
(c) Except as disclosed in the financial statements referred to above or
the notes thereto or in the Information Memorandum and except for the
Disclosed Matters, after giving effect to the Transactions, none of the
Borrower, its Subsidiaries or NovaCare O&P has, as of the Effective Date, any
material contingent liabilities, unusual long-term commitments or unrealized
losses.
(d) Since December 31, 1998, there has been no material adverse change
in the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and its Subsidiaries, taken as a whole.
SECTION 3.05. PROPERTIES. (a) Each of the Borrower and its Subsidiaries
has good title to, or valid leasehold interests in, all its real and personal
property material to its business (including its Mortgaged Properties), except
for minor defects in title that do not interfere with its ability to conduct
its business as currently conducted or to utilize such properties for their
intended purposes.
(b) Each of the Borrower and its Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
property material to its business, and the use thereof by the Borrower and its
Subsidiaries does not infringe upon the rights of any other Person, except for
any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
(c) Schedule 3.05 sets forth the address of each real property that is
owned or leased by the Borrower or any of its Subsidiaries as of the Effective
Date after giving effect to the Transactions.
(d) As of the Effective Date, neither the Borrower nor any of its
Subsidiaries has received notice of, or has knowledge of, any pending or
contemplated condemnation proceeding affecting any Mortgaged Property or any
sale or disposition thereof in lieu of condemnation. Neither any Mortgaged
Property nor any interest therein is subject to any right of first refusal,
option or other contractual right to purchase such Mortgaged Property or
interest therein.
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45
SECTION 3.06. LITIGATION AND ENVIRONMENTAL MATTERS. (a) There are no
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any of its Subsidiaries (i) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve any of the Loan Documents or the Transactions.
(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, neither the Borrower nor any
of its Subsidiaries (i) has failed to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval required
under any Environmental Law, (ii) has become subject to any Environmental
Liability, (iii) has received notice of any claim with respect to any
Environmental Liability or (iv) knows of any basis for any Environmental
Liability.
(c) Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
SECTION 3.07. COMPLIANCE WITH LAWS AND AGREEMENTS. Each of the Borrower
and its Subsidiaries is in compliance with all laws, regulations and orders of
any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. No Default has
occurred and is continuing.
SECTION 3.08. INVESTMENT AND HOLDING COMPANY STATUS. Neither the
Borrower nor any of its Subsidiaries is (a) an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940 or (b)
a "holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
SECTION 3.09. TAXES. Each of the Borrower and its Subsidiaries has
timely filed or caused to be filed all Tax returns and reports required to
have been filed and has paid or caused to be paid all Taxes required to have
been paid by it, except (a) any Taxes that are being contested in good faith
by appropriate proceedings and for which the Borrower or such Subsidiary, as
applicable, has set aside on its books adequate reserves in accordance with
GAAP or (b) to the extent that the failure to do so could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events
for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.11. DISCLOSURE. The Borrower has disclosed to the Lenders all
agreements, instruments and corporate or other restrictions to which the
Borrower or any of its Subsidiaries is subject, and all other matters known to
any of them, that, individually or in the aggregate, could reasonably be
<PAGE>
46
expected to result in a Material Adverse Effect. Neither the Information
Memorandum nor any of the other reports, financial statements, certificates or
other information furnished by or on behalf of any Loan Party to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement, any other Loan Document or any other document delivered in
connection with the Transactions or delivered hereunder or thereunder (as
modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; PROVIDED that, with respect to projected
financial information, the Borrower represents only that such information was
prepared in good faith based upon assumptions believed to be reasonable at the
time.
SECTION 3.12. SUBSIDIARIES. Schedule 3.12 sets forth the name of, and
the ownership interest of the Borrower in, each Subsidiary of the Borrower and
identifies each Subsidiary that is a Subsidiary Loan Party, in each case as of
the Effective Date.
SECTION 3.13. INSURANCE. Schedule 3.13 sets forth a description of all
insurance maintained by or on behalf of the Borrower and its Subsidiaries as
of the Effective Date. As of the Effective Date, all premiums in respect of
such insurance have been paid. The Borrower believes that the insurance
maintained by or on behalf of the Borrower and its Subsidiaries is adequate.
SECTION 3.14. LABOR MATTERS. As of the Effective Date, there are no
strikes, lockouts or slowdowns against the Borrower or any Subsidiary pending
or, to the knowledge of the Borrower, threatened. The hours worked by and
payments made to employees of the Borrower and the Subsidiaries have not been
in violation of the Fair Labor Standards Act or any other applicable Federal,
state, local or foreign law dealing with such matters. All payments due from
the Borrower or any Subsidiary, or for which any claim may be made against the
Borrower or any Subsidiary, on account of wages and employee health and
welfare insurance and other benefits, have been paid or accrued as a liability
on the books of the Borrower or such Subsidiary. The consummation of the
Transactions will not give rise to any right of termination or right of
renegotiation on the part of any union under any collective bargaining
agreement to which the Borrower or any Subsidiary is bound.
SECTION 3.15. SOLVENCY. Immediately after the consummation of the
Transactions to occur on the Effective Date and immediately following the
making of each Loan made on the Effective Date and after giving effect to the
application of the proceeds of such Loans, (a) the fair value of the assets of
each Loan Party, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (b) the present fair saleable value of
the property of each Loan Party will be greater than the amount that will be
required to pay the probable liability of its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (c) each Loan Party will be able to pay its debts
and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) each Loan Party will not have
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted
following the Effective Date.
SECTION 3.16. SENIOR INDEBTEDNESS. The Obligations constitute "Senior
Debt" under and as defined in the Subordinated Note Documents.
<PAGE>
47
SECTION 3.17. YEAR 2000. Any reprogramming required to permit the proper
functioning, in and following the year 2000, of (a) the computer systems of
the Borrower and its Subsidiaries and (b) equipment containing embedded
microchips (including systems and equipment supplied by others or with which
the Borrower's systems interface) and the testing of all such systems and
equipment, as so reprogrammed, will be completed by October 31, 1999. The cost
to the Borrower and its Subsidiaries of such reprogramming and testing and of
the reasonably foreseeable consequences of year 2000 to the Borrower and its
Subsidiaries (including reprogramming errors and the failure of others'
systems or equipment) will not result in a Default or a Material Adverse
Effect. Except for such of the reprogramming referred to in the preceding
sentence as may be necessary, the computer and management information systems
of the Borrower and its Subsidiaries are and, with ordinary course upgrading
and maintenance, will continue for the term of this Agreement to be,
sufficient to permit the Borrower to conduct its businesses without Material
Adverse Effect.
SECTION 3.18. INTELLECTUAL PROPERTY. The Borrower and each of its
Subsidiary owns, or is licensed to use, all patents, trademarks, tradenames,
service marks, copyrights, technology, know-how and processes (together with
all applications therefor and licenses granting rights therein, "INTELLECTUAL
PROPERTY") reasonably necessary for the conduct of its business as currently
conducted, except for those the failure to own or be licensed to use which
could not reasonably be expected to result in a Material Adverse Effect. To
the knowledge of the Borrower, (a) the use of Intellectual Property by the
Borrower and its Subsidiaries does not infringe on the rights of any person,
(b) no Intellectual Property of the Borrower or any of its Subsidiaries is
being infringed upon by any Person, and (c) no claim is pending or threatened
in writing challenging the use or the validity of any Intellectual Property of
the Borrower or any Subsidiary, except for infringements and claims referred
to in the foregoing clauses (a), (b) and (c) that, in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
ARTICLE IV
CONDITIONS
SECTION 4.01. EFFECTIVE DATE. The obligations of the Lenders to make
Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not
become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 9.02):
(a) The Administrative Agent (or its counsel) shall have received
from each party hereto either (i) a counterpart of this Agreement signed
on behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a
signed signature page of this Agreement) that such party has signed a
counterpart of this Agreement.
(b) The Administrative Agent shall have received a favorable
written opinion (addressed to the Administrative Agent and the Lenders
and dated the Effective Date) of each of (i) Freedman, Levy, Kroll &
Simonds, counsel for the Borrower, substantially in the form of Exhibit
<PAGE>
48
B-1 and (ii) local counsel for the Administrative Agent in each
jurisdiction where a Class I Mortgaged Property is located,
substantially in the form of Exhibit B-2, and, in the case of each such
opinion, covering such other matters relating to the Loan Parties, the
Loan Documents or the Transactions as the Administrative Agent or the
Required Lenders shall reasonably request. The Borrower hereby requests
such counsel to deliver such opinions.
(c) The Administrative Agent shall have received such documents
and certificates as the Administrative Agent or its counsel may
reasonably request relating to the organization, existence and good
standing of each Loan Party, the authorization of the Transactions and
any other legal matters relating to the Loan Parties, the Loan Documents
or the Transactions, all in form and substance satisfactory to the
Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a certificate,
dated the Effective Date and signed by the President, a Vice President
or a Financial Officer of the Borrower, confirming compliance with the
conditions set forth in paragraphs (a) and (b) of Section 4.02.
(e) The Agents shall have received all fees and other amounts due
and payable on or prior to the Effective Date, including, to the extent
invoiced, reimbursement or payment of all out-of-pocket expenses
(including fees, charges and disbursements of counsel) required to be
reimbursed or paid by any Loan Party hereunder or under any other Loan
Document.
(f) The Collateral and Guarantee Requirement shall have been
satisfied and the Administrative Agent shall have received a completed
Perfection Certificate dated the Effective Date and signed by an
executive officer or Financial Officer of the Borrower, together with
all attachments contemplated thereby, including the results of a search
of the Uniform Commercial Code (or equivalent) filings made with respect
to the Loan Parties in the jurisdictions contemplated by the Perfection
Certificate and copies of the financing statements (or similar
documents) disclosed by such search and evidence reasonably satisfactory
to the Administrative Agent that the Liens indicated by such financing
statements (or similar documents) are permitted by Section 6.02 or have
been released.
(g) The Administrative Agent shall have received evidence that the
insurance required by Section 5.07 and the Security Documents is in
effect.
(h) The Lenders shall be reasonably satisfied as to the amount and
nature of any environmental and employee health and safety exposures to
which the Borrower and its Subsidiaries may be subject after giving
effect to the Transactions, and with the plans of the Borrower and its
subsidiaries with respect thereto.
(i) The Borrower shall have received gross cash proceeds of not
less than $60,000,000 from the issuance and sale of the Preferred Stock.
The Administrative Agent shall have received copies of the Certificate
of Designations and related documents in connection with the Preferred
Stock substantially in the form as described in the Offering Memorandum,
certified by a Financial Officer as complete and correct.
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49
(j) The Borrower shall have received gross cash proceeds of not
less than $150,000,000 from the issuance of the Subordinated Notes. The
Administrative Agent shall have received copies of the Subordinated Note
Documents substantially in the form as described in the Offering
Memorandum, certified by a Financial Officer as complete and correct.
(k) All consents and approvals required to be obtained from any
Governmental Authority or other Person in connection with the
Transactions shall have been obtained, and all applicable waiting
periods and appeal periods shall have expired, in each case without the
imposition of any burdensome conditions, and there shall be no
governmental or judicial action, actual or threatened, that could
reasonably be expected to restrain, prevent or impose burdensome
conditions on the Transactions or the operations or business of the
Borrower and the Subsidiaries after giving effect to the Transactions.
The Acquisition and the other Effective Date Transactions shall have
been, or substantially simultaneously with the initial funding of Loans
on the Effective Date shall be, consummated in accordance with the
Acquisition Documents and applicable law, without any amendment to or
waiver of any material terms or conditions of the Acquisition Documents
not approved by the Required Lenders. The Administrative Agent shall
have received copies of the Acquisition Documents and all certificates,
opinions and other documents delivered thereunder, certified by a
Financial Officer as complete and correct.
(l) The Administrative Agent shall have received (i) audited
consolidated and consolidating balance sheets and related statements of
income, stockholders' equity and cash flows of the Borrower and its
Subsidiaries for the three fiscal years ended prior to the Effective
Date, (ii) unaudited consolidated and consolidating balance sheets and
related statements of income, stockholders' equity and cash flows of the
Borrower and its Subsidiaries for each fiscal quarter, if any, ending
after the end of the most recent fiscal year and at least 30 days prior
to the Effective Date (and, to the extent available and excluding
related statements of cash flows, for each month ending after the end of
the most recent such fiscal quarter and before the Effective Date),
(iii) audited consolidated and consolidating balance sheets and related
statements of income, stockholders' equity and cash flows of NovaCare
O&P for the three fiscal years ended prior to the Effective Date and
(iv) unaudited consolidated and consolidating balance sheets and related
statements of income, stockholders' equity and cash flows of NovaCare
O&P for each fiscal quarter, if any, ending after the end of the most
recent fiscal year and at least 30 days prior to the Effective Date
(and, to the extent available and excluding related statements of cash
flows, for each month ending after the end of the most recent such
fiscal quarter and before the Effective Date), each of which audited and
unaudited financial statements (x) shall be in form and scope
satisfactory to the Agents and (y) shall not be materially inconsistent
with the financial statements or the projections previously provided to
the Agents.
(m) The Administrative Agent shall have received a pro forma
consolidated balance sheet of the Borrower as of March 31, 1999,
reflecting all pro forma adjustments as if the Effective Date
Transactions had been consummated on such date, and such pro forma
consolidated balance sheet shall be consistent in all material respects
with the projections and other information previously provided to the
Lenders. After giving effect to the Effective Date Transactions, neither
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50
the Borrower nor any of its Subsidiaries shall have outstanding any
shares of preferred stock or any Indebtedness, other than (i)
Indebtedness incurred under the Loan Documents, (ii) the Subordinated
Notes, (iii) existing subordinated notes of subsidiaries of NovaCare O&P
in an aggregate principal amount not to exceed $40,000,000, (iv)
existing subordinated indebtedness of the Borrower or its subsidiaries
in an aggregate principal amount not to exceed $15,600,000 and (v) the
Preferred Stock. The aggregate amount of fees and expenses (including
underwriting discounts and commissions) payable or otherwise borne by
the Borrower and its Subsidiaries in connection with the Effective Date
Transactions shall not exceed $20,000,000.
(n) The Administrative Agent shall have received management's
consolidated and consolidating financial projections for the Borrower
and its Subsidiaries for each of fiscal years 1999 through and including
2007, detailed on a quarter-by-quarter basis for fiscal years 1999 and
2000 (the "PROJECTIONS"), which projections shall reflect the
Transactions and include the written assumptions upon which such
projections are based. Such projections shall be reasonably satisfactory
in all respects to the Agents and shall be substantially similar in form
to the projections set forth in the Information Memorandum. The Lenders
shall be satisfied with the projected amounts and the achievability of
the synergies to be realized as a result of the Acquisition.
(o) The Administrative Agent shall have received a solvency
letter, in form and substance satisfactory to the Lenders, from
Valuation Research with respect to the solvency of the Borrower and its
subsidiaries on a consolidated basis after giving effect to the
Effective Date Transactions.
(p) There shall be no litigation or administrative proceeding that
has had or is reasonably likely to have a Material Adverse Effect, after
giving effect to the Transactions.
(q) The consummation of the Transactions shall not (a) violate any
applicable law, statute, rule or regulation or (b) conflict with, or
result in a default or event of default under, any material agreement of
the Borrower, any of the Subsidiaries or NovaCare O&P.
(r) The Lenders shall have received a certificate of a financial
officer of the Borrower with respect to the pro forma Consolidated
EBITDA of the Borrower and NovaCare O&P for the twelve month period
ending March 31, 1999, and such Consolidated EBITDA (calculated on a pro
forma basis to reflect acquisitions during such period) shall not be
less than $84,000,000.
(s) No event shall have occurred, and no condition or circumstance
shall exist, that in the judgment of the Required Lenders has had or is
reasonably likely to have a material adverse effect on the business,
operations, properties, assets, liabilities or condition (financial or
otherwise) of the Borrower and its subsidiaries, taken as a whole, or of
NovaCare O&P.
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51
(t) The Scheduled Indebtedness shall have been or shall
simultaneously be repaid in full or released, all agreements and
instruments evidencing or governing such Indebtedness and all lending or
other commitments thereunder shall have been terminated and all Liens
securing such Indebtedness shall have been released, and the
Administrative Agent shall have received such evidence as it shall
reasonably have requested as to the satisfaction of such conditions.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans
and of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 5:00 p.m., New York City time, on
July 31, 1999 (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).
SECTION 4.02. EACH CREDIT EVENT. The obligation of each Lender to make a
Loan on the occasion of any Borrowing, and of the Issuing Bank to issue,
amend, renew or extend any Letter of Credit, is subject to receipt of the
request therefor in accordance herewith and to the satisfaction of the
following conditions:
(a) The representations and warranties of each Loan Party set
forth in the Loan Documents shall be true and correct on and as of the
date of such Borrowing or the date of issuance, amendment, renewal or
extension of such Letter of Credit, as applicable.
(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such
Letter of Credit, as applicable, no Default shall have occurred and be
continuing.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter
of Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.
ARTICLE V
AFFIRMATIVE COVENANTS
Until the Commitments have expired or been terminated and the principal
of and interest on each Loan and all fees payable hereunder shall have been
paid in full and all Letters of Credit shall have expired or terminated and
all LC Disbursements shall have been reimbursed, the Borrower covenants and
agrees with the Lenders that:
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52
SECTION 5.01. FINANCIAL STATEMENTS AND OTHER INFORMATION. The Borrower
will furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year of the
Borrower, its audited consolidated and unaudited consolidating balance
sheet and related statements of income, stockholders' equity and cash
flows as of the end of and for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all reported
on by PricewaterhouseCoopers LLP or other independent public accountants
of recognized national standing (without a "going concern" or like
qualification or exception and without any qualification or exception as
to the scope of such audit) to the effect that such consolidated
financial statements present fairly in all material respects the
financial condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with
GAAP consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrower, its consolidated and
consolidating balance sheet and related statements of income,
stockholders' equity and cash flows as of the end of and for such fiscal
quarter and the then elapsed portion of the fiscal year, setting forth
in each case in comparative form the figures for the corresponding
period or periods of (or, in the case of the balance sheet, as of the
end of) the previous fiscal year, all certified by one of its Financial
Officers as presenting fairly in all material respects the financial
condition and results of operations of the Borrower and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and
the absence of footnotes;
(c) within 45 days after the end of each of the first two fiscal
months of each fiscal quarter of the Borrower, its consolidated balance
sheet and related statements of income and stockholders' equity as of
the end of and for such fiscal month and the then elapsed portion of the
fiscal year, all certified by one of its Financial Officers as
presenting in all material respects the financial condition and results
of operations of the Borrower and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject
to normal year-end audit adjustments and the absence of footnotes;
(d) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer of the
Borrower (i) certifying as to whether a Default has occurred and, if a
Default has occurred, specifying the details thereof and any action
taken or proposed to be taken with respect thereto, (ii) setting forth
reasonably detailed calculations demonstrating compliance with Sections
6.12, 6.13, 6.14 and 6.15 and (iii) stating whether any change in GAAP
or in the application thereof has occurred since the date of the
Borrower's audited financial statements referred to in Section 3.04 and,
if any such change has occurred, specifying the effect of such change on
the financial statements accompanying such certificate;
(e) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether they obtained knowledge during
the course of their examination of such financial statements of any
<PAGE>
53
Default (which certificate may be limited to the extent required by
accounting rules or guidelines);
(f) prior to the commencement of each fiscal year of the Borrower,
a detailed consolidated budget for such fiscal year (including a
projected consolidated balance sheet and related statements of projected
operations and cash flows as of the end of and for such fiscal year and
setting forth the assumptions used for purposes of preparing such
budget) and, promptly when available, any significant revisions of such
budget;
(g) promptly after the same become publicly available, copies of
all periodic and other reports, proxy statements and other materials
filed by the Borrower or any Subsidiary with the Securities and Exchange
Commission, or any Governmental Authority succeeding to any or all of
the functions of said Commission, or with any national securities
exchange, or distributed by the Borrower to its shareholders generally,
as the case may be; and
(h) promptly following any request therefor, such other
information regarding the operations, business affairs and financial
condition of the Borrower or any Subsidiary, or compliance with the
terms of any Loan Document, as the Administrative Agent or any Lender
may reasonably request.
SECTION 5.02. NOTICES OF MATERIAL EVENTS. The Borrower will furnish to
the Administrative Agent and each Lender prompt written notice of the
following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit, investigation
or proceeding by or before any arbitrator or Governmental Authority
against or affecting the Borrower or any Affiliate thereof that, if
adversely determined, could reasonably be expected to result in a
Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with
any other ERISA Events that have occurred, could reasonably be expected
to result in liability of the Borrower and its Subsidiaries in an
aggregate amount exceeding $1,000,000; and
(d) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement
of a Financial Officer or other executive officer of the Borrower setting
forth the details of the event or development requiring such notice and any
action taken or proposed to be taken with respect thereto.
SECTION 5.03. INFORMATION REGARDING COLLATERAL. (a) The Borrower will
furnish to the Administrative Agent prompt written notice of any change (i) in
any Loan Party's corporate name or in any trade name used to identify it in
the conduct of its business or in the ownership of its properties, (ii) in the
location of any Loan Party's chief executive office, its principal place of
business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by
<PAGE>
54
it is located (including the establishment of any such new office or
facility), (iii) in any Loan Party's identity or corporate structure or (iv)
in any Loan Party's Federal Taxpayer Identification Number. The Borrower
agrees not to effect or permit any change referred to in the preceding
sentence unless all filings have been made under the Uniform Commercial Code
or otherwise that are required in order for the Administrative Agent to
continue at all times following such change to have a valid, legal and
perfected security interest in all the Collateral. The Borrower also agrees
promptly to notify the Administrative Agent if any material portion of the
Collateral is damaged or destroyed.
(b) Each year, at the time of delivery of annual financial statements
with respect to the preceding fiscal year pursuant to clause (a) of Section
5.01, the Borrower shall deliver to the Administrative Agent a certificate of
a Financial Officer and the General Counsel of the Borrower (i) setting forth
the information required pursuant to Section 1 of the Perfection Certificate
or confirming that there has been no change in such information since the date
of the Perfection Certificate delivered on the Effective Date or the date of
the most recent certificate delivered pursuant to this Section and (ii)
certifying that all Uniform Commercial Code financing statements (including
fixture filings, as applicable) or other appropriate filings, recordings or
registrations, including all refilings, rerecordings and reregistrations,
containing a description of the Collateral have been filed of record in each
governmental, municipal or other appropriate office in each jurisdiction
identified pursuant to clause (i) above to the extent necessary to protect and
perfect the security interests under the Security Documents for a period of
not less than 18 months after the date of such certificate (except as noted
therein with respect to any continuation statements to be filed within such
period).
SECTION 5.04. EXISTENCE; CONDUCT OF BUSINESS. The Borrower will, and
will cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges, franchises, patents,
copyrights, trademarks and trade names material to the conduct of its
business; PROVIDED that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 6.03.
SECTION 5.05. PAYMENT OF OBLIGATIONS. The Borrower will, and will cause
each of its Subsidiaries to, pay its Indebtedness and other obligations,
including Tax liabilities, before the same shall become delinquent or in
default, except where (a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has
set aside on its books adequate reserves with respect thereto in accordance
with GAAP, (c) such contest effectively suspends collection of the contested
obligation and the enforcement of any Lien securing such obligation and (d)
the failure to make payment pending such contest could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 5.06. MAINTENANCE OF PROPERTIES. The Borrower will, and will
cause each of its Subsidiaries to, keep and maintain all property material to
the conduct of its business in good working order and condition, ordinary wear
and tear excepted.
SECTION 5.07. INSURANCE. The Borrower will, and will cause each of its
Subsidiaries to, maintain, with financially sound and reputable insurance
companies (a) insurance in such amounts (with no greater risk retention) and
against such risks as are customarily maintained by companies of established
repute engaged in the same or similar businesses operating in the same or
<PAGE>
55
similar locations and (b) all insurance required to be maintained pursuant to
the Security Documents. The Borrower will furnish to the Lenders, upon request
of the Administrative Agent, information in reasonable detail as to the
insurance so maintained.
SECTION 5.08. CASUALTY AND CONDEMNATION. (a) The Borrower (a) will
furnish to the Administrative Agent and the Lenders prompt written notice of
any casualty or other insured damage to any material portion of any Collateral
or the commencement of any action or proceeding for the taking of any
Collateral or any part thereof or interest therein under power of eminent
domain or by condemnation or similar proceeding and (b) will ensure that the
Net Proceeds of any such event (whether in the form of insurance proceeds,
condemnation awards or otherwise) are collected and applied in accordance with
the applicable provisions of this Agreement and the Security Documents.
SECTION 5.09. BOOKS AND RECORDS; INSPECTION AND AUDIT RIGHTS. The
Borrower will, and will cause each of its Subsidiaries to, keep proper books
of record and account in which full, true and correct entries are made of all
dealings and transactions in relation to its business and activities. The
Borrower will, and will cause each of its Subsidiaries to, permit any
representatives designated by the Administrative Agent or any Lender, upon
reasonable prior notice, to visit and inspect its properties, to examine and
make extracts from its books and records, and to discuss its affairs, finances
and condition with its officers and independent accountants, all at such
reasonable times and as often as reasonably requested.
SECTION 5.10. COMPLIANCE WITH LAWS. The Borrower will, and will cause
each of its Subsidiaries to, comply with all laws, rules, regulations and
orders of any Governmental Authority applicable to it or its property, except
where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 5.11. USE OF PROCEEDS AND LETTERS OF CREDIT. The proceeds of the
Borrowings hereunder and the Letters of Credit will be used only for the
purposes set forth in the preamble to this Agreement. No part of the proceeds
of any Loan or any Letter of Credit will be used, whether directly or
indirectly, and whether immediately, incidentally or ultimately, to purchase
or carry any Margin Stock or to refinance any Indebtedness originally incurred
for such purpose, or for any other purpose that entails a violation of, or
that is inconsistent with, the provisions of the Regulations of the Board,
including Regulation U or X.
SECTION 5.12. ADDITIONAL SUBSIDIARIES. If any additional Subsidiary is
formed or acquired after the Effective Date, the Borrower will, within three
Business Days after such Subsidiary is formed or acquired, notify the
Administrative Agent and the Lenders thereof and cause the Collateral and
Guarantee Requirement to be satisfied with respect to such Subsidiary (if it
is a Subsidiary Loan Party) and with respect to any Equity Interest in or
Indebtedness of such Subsidiary owned by or on behalf of any Loan Party.
SECTION 5.13. FURTHER ASSURANCES. (a) The Borrower will, and will cause
each Subsidiary Loan Party to, execute any and all further documents,
financing statements, agreements and instruments, and take all such further
actions (including the filing and recording of financing statements, fixture
filings, mortgages, deeds of trust and other documents), which may be required
under any applicable law, or which the Administrative Agent or the Required
Lenders may reasonably request, to cause the Collateral and Guarantee
Requirement to be and remain satisfied, all at the expense of the Loan
<PAGE>
56
Parties. The Borrower also agrees to provide to the Administrative Agent, from
time to time upon request, evidence reasonably satisfactory to the
Administrative Agent as to the perfection and priority of the Liens created or
intended to be created by the Security Documents.
(b) If any material assets (including any real property or improvements
thereto or any interest therein) are acquired by the Borrower or any
Subsidiary Loan Party after the Effective Date (other than assets constituting
Collateral under the Security Documents that become subject to the Liens under
the Security Documents upon acquisition thereof), the Borrower will notify the
Administrative Agent and the Lenders thereof, and, if requested by the
Administrative Agent or the Required Lenders, the Borrower will cause such
assets to be subjected to a Lien securing the Obligations and will take, and
cause the Subsidiary Loan Parties to take, such actions as shall be necessary
or reasonably requested by the Administrative Agent to grant and perfect such
Liens, including actions described in paragraph (a) of this Section, all at
the expense of the Loan Parties.
SECTION 5.14. INTEREST RATE PROTECTION. As promptly as practicable, and
in any event within 90 days after the Effective Date, the Borrower will enter
into, and thereafter for a period of not less than five years will maintain in
effect, one or more interest rate protection agreements on such terms and with
such parties as shall be reasonably satisfactory to the Administrative Agent,
the effect of which shall be to fix or limit the interest cost to the Borrower
with respect to at least 50% of the outstanding Long-Term Indebtedness of the
Borrower.
ARTICLE VI
NEGATIVE COVENANTS
Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in
full and all Letters of Credit have expired or terminated and all LC
Disbursements have been reimbursed, the Borrower covenants and agrees with the
Lenders that:
SECTION 6.01. INDEBTEDNESS; CERTAIN EQUITY SECURITIES. (a) The Borrower
will not, and will not permit any Subsidiary to, create, incur, assume or
permit to exist any Indebtedness, except:
(i) Indebtedness created under the Loan Documents;
(ii) the Subordinated Notes; PROVIDED that the aggregate principal
amount for all Indebtedness permitted by this clause (ii) and
outstanding at any time shall not exceed $150,000,000;
(iii) Indebtedness existing on the date hereof and set forth in
Schedule 6.01, but not any extensions, renewals or replacements of any
such Indebtedness;
(iv) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary; PROVIDED that
Indebtedness of any Subsidiary that is not a Loan Party to the Borrower
<PAGE>
57
or any Subsidiary Loan Party shall be subject to Sections 6.05(d)(ii),
(e) and (f);
(v) Guarantees by the Borrower of Indebtedness of any Subsidiary
and by any Subsidiary of Indebtedness of the Borrower or any other
Subsidiary; PROVIDED that Guarantees by the Borrower or any Subsidiary
Loan Party of Indebtedness of any Subsidiary that is not a Loan Party
shall be subject to Section 6.05;
(vi) Indebtedness of the Borrower or any Subsidiary incurred to
finance the acquisition, construction or improvement of any fixed or
capital assets, including Capital Lease Obligations and any Indebtedness
assumed in connection with the acquisition of any such assets or secured
by a Lien on any such assets prior to the acquisition thereof, and
extensions, renewals and replacements of any such Indebtedness that do
not increase the outstanding principal amount thereof or result in an
earlier maturity date or decreased weighted average life thereof;
PROVIDED that (a) such Indebtedness is incurred prior to or within 90
days after such acquisition or the completion of such construction or
improvement and (b) the aggregate principal amount of Indebtedness
permitted by this clause (vi) shall not exceed $10,000,000 at any time
outstanding;
(vii) Indebtedness of any Person that becomes a Subsidiary after
the date hereof; PROVIDED that (a) such Indebtedness exists at the time
such Person becomes a Subsidiary and is not created in contemplation of
or in connection with such Person becoming a Subsidiary and (b) the
aggregate principal amount of Indebtedness permitted by this clause
(vii) shall not exceed $5,000,000 at any time outstanding;
(viii) Permitted Seller Notes in an aggregate principal amount
outstanding at any time not to exceed $65,000,000; and
(ix) other unsecured Indebtedness in an aggregate principal amount
not exceeding $15,000,000 at any time outstanding; PROVIDED that the
aggregate principal amount of Indebtedness of the Borrower's
Subsidiaries permitted by this clause (ix) shall not exceed $5,000,000
at any time outstanding.
Notwithstanding the foregoing, the Borrower will not, and will not permit any
Subsidiary to, create, incur or assume any Indebtedness at any time, unless
such creation, incurrence or assumption is expressly permitted under the
Subordinated Note Documents at such time.
(b) The Borrower will not, and will not permit any Subsidiary to, issue
any preferred stock or other preferred Equity Interests other than (i) the
Preferred Stock and (ii) junior preferred stock; provided that the terms of
such junior preferred stock shall have been approved by the Required Lenders
or shall be no more adverse to the Borrower or the Lenders than the Preferred
Stock and shall be substantially similar to the non-voting common stock of the
Borrower, except with respect to liquidation rights.
<PAGE>
58
SECTION 6.02. LIENS. (a) The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any
property or asset now owned or hereafter acquired by it, or assign or sell any
income or revenues (including accounts receivable) or rights in respect of any
thereof, except:
(i) Liens created under the Loan Documents;
(ii) Permitted Encumbrances;
(iii) any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof and set forth in Schedule 6.02;
PROVIDED that (i) such Lien shall not apply to any other property or
asset of the Borrower or any Subsidiary and (ii) such Lien shall secure
only those obligations which it secures on the date hereof;
(iv) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary or existing on any
property or asset of any Person that becomes a Subsidiary after the date
hereof prior to the time such Person becomes a Subsidiary; PROVIDED that
(A) such Lien is not created in contemplation of or in connection with
such acquisition or such Person becoming a Subsidiary, as the case may
be, (B) such Lien shall not apply to any other property or assets of the
Borrower or any Subsidiary and (c) such Lien shall secure only those
obligations which it secures on the date of such acquisition or the date
such Person becomes a Subsidiary, as the case may be; and
(v) Liens on fixed or capital assets acquired, constructed or
improved by the Borrower or any Subsidiary; PROVIDED that (A) such
security interests secure Indebtedness permitted by clause (vi) of
Section 6.01(a), (B) such security interests and the Indebtedness
secured thereby are incurred prior to or within 90 days after such
acquisition or the completion of such construction or improvement, (C)
the Indebtedness secured thereby does not exceed 80% of the cost of
acquiring, constructing or improving such fixed or capital assets and
(D) such security interests shall not apply to any other property or
assets of the Borrower or any Subsidiary.
SECTION 6.03. FUNDAMENTAL CHANGES. (a) The Borrower will not, and will
not permit any Subsidiary to, merge into or consolidate with any other Person,
or permit any other Person to merge into or consolidate with it, or liquidate
or dissolve, except that if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing, (i) any
Subsidiary may merge into the Borrower in a transaction in which the Borrower
is the surviving corporation, (ii any Subsidiary may merge into another
Subsidiary in a transaction in which the surviving entity is a Subsidiary and
(if either party to such merger is a Subsidiary Loan Party) is a Subsidiary
Loan Party and (iii) any Subsidiary may liquidate or dissolve if the Borrower
determines in good faith that such liquidation or dissolution is in the best
interests of the Borrower and is not materially disadvantageous to the
Lenders; PROVIDED that any such merger involving a Person that is not a wholly
owned Subsidiary immediately prior to such merger, and any such merger
involving a Subsidiary that is not a Subsidiary Loan Party, shall not be
permitted unless also permitted by Section 6.05.
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(b) The Borrower will not, and will not permit any of its Subsidiaries
to, engage to any material extent in any business other than orthotic and
prosthetic patient-care clinic management and the manufacture and distribution
of orthotic and prosthetic devices and patient-care products and business
activities incidental or reasonably related thereto.
SECTION 6.04. ASSET SALES. The Borrower will not, and will not permit
any of its Subsidiaries to, sell, transfer, lease or otherwise dispose of any
asset, including any Equity Interest owned by it, nor will the Borrower permit
any of its Subsidiaries to issue any additional Equity Interest in such
Subsidiary, except:
(a) sales of inventory, used or surplus equipment and Permitted
Investments in the ordinary course of business and dispositions of
obsolete inventory of NovaCare O&P having an aggregate book value not to
exceed $10,000,000 following the Borrower's initial inventory review of
NovaCare O&P in connection with the Acquisition;
(b) sales, transfers and dispositions to the Borrower or a
Subsidiary; PROVIDED that any such sales, transfers or dispositions
involving a Subsidiary that is not a Loan Party shall be made in
compliance with Sections 6.05 and 6.09; and
(c) sales, transfers and other dispositions of assets (other than
Equity Interests in a Subsidiary) that are not permitted by any other
clause of this Section; PROVIDED that the aggregate fair market value of
all assets sold, transferred or otherwise disposed of in reliance upon
this clause (c) shall not exceed $5,000,000 during any fiscal year of
the Borrower and the Net Proceeds of each sale, transfer or disposition
are applied in a manner consistent with the other provisions of this
Agreement (including Section 2.10);
PROVIDED that all sales, transfers, leases and other dispositions permitted
hereby (other than those permitted by clause (b) above) shall be made for fair
value and solely for consideration consisting of (i) cash and (ii) non-cash
consideration in an aggregate amount for all such transactions after the
Effective Date not to exceed $500,000.
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SECTION 6.05. INVESTMENTS, LOANS, ADVANCES, GUARANTEES AND ACQUISITIONS.
The Borrower will not, and will not permit any of its Subsidiaries to,
purchase, hold or acquire (including pursuant to any merger with any Person
that was not a wholly owned Subsidiary prior to such merger) any Equity
Interests in or evidences of indebtedness or other securities (including any
option, warrant or other right to acquire any of the foregoing) of, make or
permit to exist any loans or advances to, Guarantee any obligations of, or
make or permit to exist any investment or any other interest in, any other
Person, or purchase or otherwise acquire (in one transaction or a series of
transactions) any assets of any other Person constituting a business unit,
except:
(a) the Acquisition;
(b) Permitted Investments;
(c) investments existing on the date hereof and set forth on
Schedule 6.05;
(d) investments by the Borrower and its Subsidiaries in Equity
Interests in their respective Subsidiaries; PROVIDED that (i) any such
Equity Interests held by a Loan Party shall be pledged pursuant to the
Pledge Agreement (subject to the limitations applicable to common stock
of a Foreign Subsidiary referred to in the definition of "Collateral and
Guarantee Requirement" in Section 1.01) and (ii) the aggregate amount of
investments by Loan Parties in, loans and advances by Loan Parties to
and Guarantees by Loan Parties of Indebtedness of Subsidiaries that are
not Loan Parties (including all such investments, loans, advances and
Guarantees existing on the Effective Date) shall not exceed $500,000 at
any time outstanding;
(e) loans or advances made by the Borrower to any Subsidiary or
made by any Subsidiary to the Borrower or any other Subsidiary; PROVIDED
that (i) any such loans and advances made by a Loan Party shall be
evidenced by a promissory note pledged pursuant to the Pledge Agreement
and (ii) the amount of such loans and advances made by Loan Parties to
Subsidiaries that are not Loan Parties shall be subject to the
limitation set forth in clause (d) above;
(f) Guarantees constituting Indebtedness permitted by Section
6.01; PROVIDED that (i) a Subsidiary shall not Guarantee the
Subordinated Notes unless (A) such Subsidiary also has Guaranteed the
Obligations pursuant to the Guarantee Agreement, (B) such Guarantee of
the Subordinated Notes is subordinated to such Guarantee of the
Obligations on terms no less favorable to the Lenders than the
subordination provisions of the Subordinated Notes and (C) such
Guarantee of the Subordinated Notes provides for the release and
termination thereof, without action by any party, upon any release and
termination of such Guarantee of the Obligations, and (ii) the aggregate
principal amount of Indebtedness of Subsidiaries that are not Loan
Parties that is Guaranteed by any Loan Party shall be subject to the
limitation set forth in clause (d) above;
(g) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes
with, customers and suppliers, in each case in the ordinary course of
business;
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(h) loans and advances made by the Borrower and the Subsidiaries
in the ordinary course of business consistent with past practices to
their respective employees for education-related expenses (including
tuition and room and board), moving, travel and emergency expenses and
other similar expenses, so long as the aggregate principal amount
thereof at any one time outstanding (determined without regard to any
write-downs or write-offs of such loans and advances) shall not exceed
$2,500,000; and
(i) acquisitions by the Borrower or any Subsidiary of all or
substantially all of the assets of, or all the Equity Interests in, a
Person or division or line of business of a Person if (i) each
Subsidiary, if any, formed for the purpose of or resulting from such
acquisition shall be a Wholly Owned Subsidiary and a Loan Party, (ii)
the ownership by the Borrower or any Subsidiary of such Person or
business is consistent with the limitations of Section 6.03, (iii) no
Default or Event of Default results from the making of any such
acquisition, (iv) prior to the making of any such acquisition the
Borrower shall have delivered to the Administrative Agent calculations
demonstrating pro forma compliance with the covenants contained in
Sections 6.12, 6.13, 6.14 and 6.15 as of the end of and for the most
recent period of four fiscal quarters for which financial statements
shall have been delivered pursuant to Section 5.03(a) or (b), giving
effect to such acquisition, any related incurrence or repayment of
Indebtedness and the terms of any employment agreement entered into in
connection therewith as if they had occurred at the beginning of such
period and (v) the aggregate consideration (including the aggregate
principal amount of Permitted Seller Notes issued and Permitted Earn-Out
Obligations incurred) paid for acquisitions permitted under this clause
(i) after the Effective Date shall not exceed $150,000,000; PROVIDED,
that so long as the conditions in clause (iv) of this paragraph are
satisfied and the Leverage Ratio (calculated as set forth in clause (iv)
of this paragraph) does not exceed 2.50 to 1.00, the restriction set
forth in this clause (v) shall not apply.
Notwithstanding the foregoing, the Borrower will not, and will not permit any
Subsidiary to, enter into any transaction contemplated by this Section 6.05,
unless such transaction is expressly permitted under the Subordinated Note
Documents at such time.
SECTION 6.06. SALE AND LEASEBACK TRANSACTIONS. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into any arrangement,
directly or indirectly, whereby it shall sell or transfer any property, real
or personal, used or useful in its business, whether now owned or hereinafter
acquired, and thereafter rent or lease such property or other property that it
intends to use for substantially the same purpose or purposes as the property
sold or transferred, except for any such sale of any fixed or capital assets
that is made for cash consideration in an amount not less than the cost of
such fixed or capital asset and is consummated within 90 days after the
Borrower or such Subsidiary acquires or completes the construction of such
fixed or capital asset.
SECTION 6.07. HEDGING AGREEMENTS. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any Hedging Agreement, other
than (a) Hedging Agreements required by Section 5.14 and (b) Hedging
Agreements entered into in the ordinary course of business to hedge or
mitigate risks to which the Borrower or any Subsidiary is exposed in the
conduct of its business or the management of its liabilities.
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62
SECTION 6.08. RESTRICTED PAYMENTS; CERTAIN PAYMENTS OF INDEBTEDNESS. (a)
The Borrower will not, and will not permit any Subsidiary to, declare or make,
or agree to pay or make, directly or indirectly, any Restricted Payment, or
incur any obligation (contingent or otherwise) to do so, except (i) the
Borrower may declare and pay dividends with respect to its capital stock
payable solely in additional shares of its common stock, (ii) Subsidiaries may
declare and pay dividends ratably with respect to their capital stock, (iii)
the Borrower may make Restricted Payments, not exceeding $1,000,000 during any
fiscal year, pursuant to and in accordance with stock option plans or other
benefit plans for management or employees of the Borrower and its Subsidiaries
and (iv) if no Default or Event of Default has occurred and is continuing, the
Borrower may repurchase shares of the Preferred Stock for, and may make
additional payments with, cash or Equity Interests in the Borrower pursuant to
the exercise by a holder of its put rights, or the exercise by the Borrower of
its call rights or any mandatory redemption, as applicable, in each case as
contemplated by the Certificate of Designations; PROVIDED that (x) to the
extent such Restricted Payments are made for Equity Interests other than
common stock, the terms of such Equity Interests shall have been approved by
the Required Lenders and (y) to the extent that such Restricted Payments are
made for cash, (A) such Restricted Payments may only be made with the cash
proceeds of an issuance of common stock of the Borrower and (B) prior to the
making of any such Restricted Payment, the Borrower shall have delivered to
the Administrative Agent calculations demonstrating pro forma compliance with
the covenants contained in Sections 6.12, 6.13, 6.14 and 6.15 as of the end of
and for the most recent period of four fiscal quarters for which financial
statements shall have been delivered pursuant to Section 5.01(a), (b) or (c),
giving effect to such Restricted Payment as if it had occurred at the
beginning of such period. Notwithstanding the foregoing, the Borrower shall be
permitted to exchange shares of common stock for the Preferred Stock, as
contemplated by the Certificate of Designations, or exchange shares of common
stock for shares of another class of common stock.
(b) The Borrower will not, and will not permit any Subsidiary to, make
or agree to make, directly or indirectly, any payment or other distribution
(whether in cash, securities or other property) of or in respect of principal
of or interest on any Indebtedness, or any payment or other distribution
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancelation or termination of any Indebtedness, except:
(i) the payment of Indebtedness created under the Loan Documents;
and
(ii) regularly scheduled interest and principal payments as and
when due in respect of any Indebtedness and so long as no Default or
Event of Default has occurred and is continuing, any prepayment of the
Subordinated Notes pursuant to clause (c) of the definition of
"Prepayment Event" up to amount not to exceed the amount permitted to be
deducted from the calculation of Net Proceeds pursuant to clause (d) of
the definition of "Net Proceeds", in each case other than payments in
respect of the Subordinated Notes that are prohibited by the
subordination provisions thereof.
SECTION 6.09. TRANSACTIONS WITH AFFILIATES. The Borrower will not, and
will not permit any Subsidiary to, sell, lease or otherwise transfer any
property or assets to, or purchase, lease or otherwise acquire any property or
assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) transactions in the ordinary course of business that
are at prices and on terms and conditions not less favorable to the Borrower
or such Subsidiary than could be obtained on an arm's-length basis from
unrelated third parties, (b) transactions between or among the Borrower and
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63
the Subsidiary Loan Parties not involving any other Affiliate, (c) any
Restricted Payment permitted by Section 6.08 and (d) with respect to the
Preferred Stock, the transactions contemplated by the Certificate of
Designations, the documents executed in connection with the sale of the
Preferred Stock and the Offering Memorandum.
SECTION 6.10. RESTRICTIVE AGREEMENTS. The Borrower will not, and will
not permit any Subsidiary to, directly or indirectly, enter into, incur or
permit to exist any agreement or other arrangement that prohibits, restricts
or imposes any condition upon (a) the ability of the Borrower or any
Subsidiary to create, incur or permit to exist any Lien upon any of its
property or assets, or (b) the ability of any Subsidiary to pay dividends or
other distributions with respect to any shares of its capital stock or to make
or repay loans or advances to the Borrower or any other Subsidiary or to
Guarantee Indebtedness of the Borrower or any other Subsidiary; PROVIDED that
(i) the foregoing shall not apply to restrictions and conditions imposed by
law or by any Loan Document or Subordinated Note Document, (ii) the foregoing
shall not apply to restrictions and conditions existing on the date hereof
identified on Schedule 6.10 (but shall apply to any amendment or modification
expanding the scope of any such restriction or condition), (iii) the foregoing
shall not apply to customary restrictions and conditions contained in
agreements relating to the sale of a Subsidiary pending such sale, provided
such restrictions and conditions apply only to the Subsidiary that is to be
sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing
shall not apply to restrictions or conditions imposed by any agreement
relating to secured Indebtedness permitted by this Agreement if such
restrictions or conditions apply only to the property or assets securing such
Indebtedness and (v) clause (a) of the foregoing shall not apply to customary
provisions in leases and other contracts restricting the assignment thereof.
SECTION 6.11. AMENDMENT OF MATERIAL DOCUMENTS. The Borrower will not,
and will not permit any Subsidiary to, amend, modify or waive any of its
rights under any Subordinated Note Document or any document or instrument
evidencing or governing the Preferred Stock or other instrument or agreement
evidencing or governing Indebtedness or preferred stock, if any such
amendment, modification or waiver, taken together with any related amendments,
modifications or waivers, could reasonably be expected to be adverse to the
rights or interests of the Lenders (including by reducing the amount of any
prepayment required to be made hereunder).
SECTION 6.12. INTEREST EXPENSE COVERAGE RATIO. The Borrower will not
permit the ratio of (a) Consolidated EBITDA to (b) Consolidated Cash Interest
Expense, in each case for any period of four consecutive fiscal quarters (or
such lesser number of fiscal quarters as shall have elapsed since June 30,
1999) ending during any period set forth below, commencing with the period of
four consecutive fiscal quarters (or such lesser number of fiscal quarters as
shall have elapsed since June 30, 1999) ending on December 31, 1999, to be
less than the ratio set forth below opposite such period:
PERIOD RATIO
Fiscal year ending December 31, 1999 2.25 to 1.00
Fiscal year ending December 31, 2000 2.50 to 1.00
Fiscal year ending December 31, 2001 2.75 to 1.00
Fiscal year ending December 31, 2002 3.00 to 1.00
Thereafter 3.00 to 1.00
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SECTION 6.13. LEVERAGE RATIO. The Borrower will not permit the Leverage
Ratio as of any date during any period set forth below, commencing with the
period of four consecutive fiscal quarters (or such lesser number of fiscal
quarters as shall have elapsed since June 30, 1999) ending on December 31,
1999, to exceed the ratio set forth opposite such period:
PERIOD RATIO
Fiscal year ending December 31, 1999 4.75 to 1.00
Fiscal year ending December 31, 2000 4.00 to 1.00
Fiscal year ending December 31, 2001 3.50 to 1.00
Fiscal year ending December 31, 2002 3.25 to 1.00
Thereafter 3.25 to 1.00
SECTION 6.14. CONSOLIDATED ADJUSTED EBITDA/ INTEREST COVERAGE RATIO. The
Borrower will not permit the ratio of (a) Consolidated Adjusted EBITDA to (b)
Consolidated Cash Interest Expense, in each case for any period of four
consecutive fiscal quarters (or such lesser number of fiscal quarters as shall
have elapsed since June 30, 1999) ending on any date during any period set
forth below, commencing with the period of four consecutive fiscal quarters
(or such lesser number of fiscal quarters as shall have elapsed since June 30,
1999) ending on December 31, 1999, to be less than the ratio set forth below
opposite such period:
PERIOD RATIO
Fiscal year ending December 31, 1999 2.00 to 1.00
Fiscal year ending December 31, 2000 2.25 to 1.00
Fiscal year ending December 31, 2001 2.50 to 1.00
Fiscal year ending December 31, 2002 2.50 to 1.00
Thereafter 2.50 to 1.00
SECTION 6.15. CAPITAL EXPENDITURES. The Borrower will not permit the
aggregate amount of Capital Expenditures made by the Borrower and the
Subsidiaries in any fiscal year to exceed the amount set forth below as the
"BASE AMOUNT" for such fiscal year, PROVIDED that the amount of permitted
Capital Expenditures in any fiscal year shall be increased by an amount equal
to 50% of the total amount of unused permitted Capital Expenditures for the
immediately preceding year (but not including the amount of any unused Capital
Expenditures carried forward to such preceding year pursuant to this proviso):
FISCAL YEAR BASE AMOUNT
1999 $10,500,000
2000 $8,000,000
2001 $7,800,000
2002 $7,500,000
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2003 $7,900,000
2004 $8,400,000
2005 $8,900,000
2006 $9,400,000
2007 $9,900,000
ARTICLE VII
EVENTS OF DEFAULT
If any of the following events ("EVENTS OF DEFAULT") shall occur:
(a) the Borrower shall fail to pay any principal of any Loan or
any reimbursement obligation in respect of any LC Disbursement when and
as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or any
fee or any other amount (other than an amount referred to in clause (a)
of this Article) payable under this Agreement or any other Loan Document
when and as the same shall become due and payable, and such failure
shall continue unremedied for a period of three Business Days;
(c) any representation or warranty made or deemed made by or on
behalf of the Borrower or any Subsidiary in or in connection with any
Loan Document or any amendment or modification thereof or waiver
thereunder, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with any Loan Document
or any amendment or modification thereof or waiver thereunder, shall
prove to have been incorrect when made or deemed made;
(d) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Section 5.02, 5.04 (with respect to
the existence of the Borrower) or 5.11 or in Article VI;
(e) any Loan Party shall fail to observe or perform any covenant,
condition or agreement contained in any Loan Document (other than those
specified in clause (a), (b) or (d) of this Article), and such failure
shall continue unremedied for a period of 30 days after notice thereof
from the Administrative Agent to the Borrower (which notice will be
given at the request of any Lender);
(f) the Borrower or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect
of any Material Indebtedness, when and as the same shall become due and
payable;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that
enables or permits (with or without the giving of notice, the lapse of
time or both) the holder or holders of any Material Indebtedness or any
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66
trustee or agent on its or their behalf to cause any Material
Indebtedness to become due, or to require the prepayment, repurchase,
redemption or defeasance thereof, prior to its scheduled maturity;
PROVIDED that this clause (g) shall not apply to secured Indebtedness
that becomes due as a result of the voluntary sale or transfer of the
property or assets securing such Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of the Borrower or any Subsidiary or its debts, or of
a substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any
Subsidiary or for a substantial part of its assets, and, in any such
case, such proceeding or petition shall continue undismissed for 60 days
or an order or decree approving or ordering any of the foregoing shall
be entered;
(i) the Borrower or any Subsidiary shall (i) voluntarily commence
any proceeding or file any petition seeking liquidation, reorganization
or other relief under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect, (ii)
consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (h)
of this Article, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar
official for the Borrower or any Subsidiary or for a substantial part of
its assets, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
(j) the Borrower or any Subsidiary shall become unable, admit in
writing its inability or fail generally to pay its debts as they become
due;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 shall be rendered against the Borrower,
any Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by
a judgment creditor to attach or levy upon any assets of the Borrower or
any Subsidiary to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that
have occurred, could reasonably be expected to result in liability of
the Borrower and its Subsidiaries in an aggregate amount exceeding (i)
$1,000,000 in any year or (ii) $5,000,000 for all periods;
(m) any Lien purported to be created under any Security Document
shall cease to be, or shall be asserted by any Loan Party not to be, a
valid and perfected Lien on any Collateral, with the priority required
by the applicable Security Document, except (i) as a result of the sale
or other disposition of the applicable Collateral in a transaction
permitted under the Loan Documents or (ii) as a result of the
Administrative Agent's failure to maintain possession of any stock
certificates, promissory notes or other instruments delivered to it
under the Pledge Agreement;
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(n) any of the Security Documents shall cease to be or shall be
asserted by any Loan Party not to be in full force and effect;
(o) the Guarantee Agreement or the Indemnity, Subrogation and
Contribution Agreement shall cease to be or shall be asserted by any
Loan Party not to be in full force and effect; or
(p) a Change in Control shall occur;
then, and in every such event (other than an event with respect to the
Borrower described in clause (h) or (i) of this Article), and at any time
thereafter during the continuance of such event, the Administrative Agent may,
and at the request of the Required Lenders shall, by notice to the Borrower,
take either or both of the following actions, at the same or different times:
(i) terminate the Commitments, and thereupon the Commitments shall terminate
immediately, and (ii) declare the Loans then out standing to be due and
payable in whole (or in part, in which case any principal not so declared to
be due and payable may thereafter be declared to be due and payable), and
thereupon the principal of the Loans so declared to be due and payable,
together with accrued interest thereon and all fees and other obligations of
the Borrower accrued hereunder, shall become due and payable immediately,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower; and in case of any event with respect to
the Borrower described in clause (h) or (i) of this Article, the Commitments
shall automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all fees and other obligations of
the Borrower accrued hereunder, shall automatically become due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower.
ARTICLE VIII
THE ADMINISTRATIVE AGENT
Each of the Lenders and the Issuing Bank hereby irrevocably appoints the
Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated
to the Administrative Agent by the terms of the Loan Documents, together with
such actions and powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have the
same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such
bank and its Affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Borrower or any Subsidiary or other
Affiliate thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations except
those expressly set forth in the Loan Documents. Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any
duty to take any discretionary action or exercise any discretionary powers,
except discretionary rights and powers expressly contemplated by the Loan
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Documents that the Administrative Agent is required to exercise in writing by
the Required Lenders (or such other number or percentage of the Lenders as
shall be necessary under the circumstances as provided in Section 9.02), and
(c) except as expressly set forth in the Loan Documents, the Administrative
Agent shall not have any duty to disclose, and shall not be liable for the
failure to disclose, any information relating to the Borrower or any of its
Subsidiaries that is communicated to or obtained by the bank serving as
Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by
it with the consent or at the request of the Required Lenders (or such other
number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 9.02) or in the absence of its own gross
negligence or wilful misconduct. The Administrative Agent shall not be deemed
not to have knowledge of any Default unless and until written notice thereof
is given to the Administrative Agent by the Borrower or a Lender, and the
Administrative Agent shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made
in or in connection with any Loan Document, (ii) the contents of any
certificate, report or other document delivered thereunder or in connection
therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth in any Loan Document, (iv)
the validity, enforceability, effectiveness or genuineness of any Loan
Document or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article IV or elsewhere in any Loan
Document, other than to confirm receipt of items expressly required to be
delivered to the Administrative Agent. Any co-agents hereunder shall have no
obligations or liabilities pursuant to their capacity as co- agents.
The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate,
consent, statement, instrument, document or other writing believed by it to be
genuine and to have been signed or sent by the proper Person. The
Administrative Agent also may rely upon any statement made to it orally or by
telephone and believed by it to be made by the proper Person, and shall not
incur any liability for relying thereon. The Administrative Agent may consult
with legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and exercise
its rights and powers by or through any one or more sub-agents appointed by
the Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all its duties and exercise its rights and powers through
their respective Related Parties. The exculpatory provisions of the preceding
paragraphs shall apply to any such sub-agent and to the Related Parties of
each Administrative Agent and any such sub-agent, and shall apply to their
respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor to the
Administrative Agent as provided in this paragraph, the Administrative Agent
may resign at any time by notifying the Lenders, the Issuing Bank and the
Borrower. Upon any such resignation, the Required Lenders shall have the
right, in consultation with the Borrower, to appoint a successor. If no
successor 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 its resignation, then the retiring Administrative Agent
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may, on behalf of the Lenders and the Issuing Bank, appoint a successor
Administrative Agent which shall be a bank with an office in New York, New
York, or an Affiliate of any such bank. Upon the acceptance of its appointment
as Administrative Agent hereunder by a successor, such successor shall succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the
Borrower to a successor Administrative Agent shall be the same as those
payable to its predecessor unless otherwise agreed between the Borrower and
such successor. After the Administrative Agent's resignation hereunder, the
provisions of this Article and Section 9.03 shall continue in effect for the
benefit of such retiring Administrative Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without reliance
upon the Administrative 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 the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any other Loan Document or
related agreement or any document furnished hereunder or thereunder.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NOTICES. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it at Hanger Orthopedic Group, Inc.,
7700 Old Georgetown Road, Bethesda, MD 20814, Attention of Chief
Executive Officer (Telecopy No. (301) 986-0702);
(b) if to the Administrative Agent, to The Chase Manhattan Bank,
Loan and Agency Services Group, One Chase Manhattan Plaza, 8th Floor,
New York, New York 10081, Attention of Anne Bowles (Telecopy No. (212)
552-7500);
(c) if to the Issuing Bank, to it at The Chase Manhattan Bank,
Loan and Agency Services Group, One Chase Manhattan Plaza, 8th Floor,
New York, New York 10081, Attention of Anne Bowles (Telecopy No. (212)
552-7500);
(d) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
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Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the
date of receipt.
SECTION 9.02. WAIVERS; AMENDMENTS. (a) No failure or delay by the
Administrative Agent, the Issuing Bank or any Lender in exercising any right
or power hereunder or under any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power,
or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Administrative Agent, the
Issuing Bank and the Lenders hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of any Loan Document or consent to
any departure by any Loan Party therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) of this Section, and then
such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether the Administrative
Agent, any Lender or the Issuing Bank may have had notice or knowledge of such
Default at the time.
(b) Neither this Agreement nor any other Loan Document nor any provision
hereof or thereof may be waived, amended or modified except, in the case of
this Agreement, pursuant to an agreement or agreements in writing entered into
by the Borrower and the Required Lenders or, in the case of any other Loan
Document, pursuant to an agreement or agreements in writing entered into by
the Administrative Agent and the Loan Party or Loan Parties that are parties
thereto, in each case with the consent of the Required Lenders; PROVIDED that
no such agreement shall (i) increase the Commitment of any Lender without the
written consent of such Lender, (ii) reduce the principal amount of any Loan
or LC Disbursement or reduce the rate of interest thereon, or reduce any fees
payable hereunder, without the written consent of each Lender affected
thereby, (iii) postpone the maturity of any Loan, or any scheduled date of
payment of the principal amount of any Term Loan under Section 2.09, or the
required date of reimbursement of any LC Disbursement, or any date for the
payment of any interest or fees payable hereunder, or reduce the amount of,
waive or excuse any such payment, or postpone the scheduled date of expiration
of any Commitment, without the written consent of each Lender affected
thereby, (iv) change Section 2.17(b) or (c) in a manner that would alter the
pro rata sharing of payments required thereby, without the written consent of
each Lender, (v) change any of the provisions of this Section o the percentage
set forth in the definition of "Required Lenders" or any other provision of
any Loan Document specifying the number or percentage of Lenders (or Lenders
of any Class) required to waive, amend or modify any rights thereunder or make
any determination or grant any consent thereunder, without the written consent
of each Lender (or each Lender of such Class, as the case may be), (vi)
release any Subsidiary Loan Party from its Guarantee under the Guarantee
Agreement (except as expressly provided in the Guarantee Agreement), or limit
its liability in respect of such Guarantee, without the written consent of
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each Lender, (vii) release all or substantially all of the Collateral from the
Liens of the Security Documents, without the written consent of each Lender,
(viii) change any provisions of any Loan Document in a manner that by its
terms adversely affects the rights in respect of payments due to Lenders
holding Loans of any Class differently than those holding Loans of any other
Class, without the written consent of Lenders holding a majority in interest
of the outstanding Loans and unused Commitments of each affected Class or (ix)
change the rights of the Tranche B Lenders to decline mandatory prepayments as
provided in Section 2.10 without the written consent of Tranche B Lenders
holding a majority of the outstanding Tranche B Loans; PROVIDED FURTHER that
(a) no such agreement shall amend, modify or otherwise affect the rights or
duties of the Administrative Agent or the Issuing Bank without the prior
written consent of the Administrative Agent or the Issuing Bank, as the case
may be, and (b) any waiver, amendment or modification of this Agreement that
by its terms affects the rights or duties under this Agreement of the
Revolving Lenders (but not the Tranche A Lenders and Tranche B Lenders), the
Tranche A Lenders (but not the Revolving Lenders and Tranche B Lenders) or the
Tranche B Lenders (but not the Revolving Lenders and Tranche A Lenders) may be
effected by an agreement or agreements in writing entered into by the Borrower
and requisite percentage in interest of the affected Class of Lenders that
would be required to consent thereto under this Section if such Class of
Lenders were the only Class of Lenders hereunder at the time. Notwithstanding
the foregoing, any provision of this Agreement may be amended by an agreement
in writing entered into by the Borrower, the Required Lenders and the
Administrative Agent (and, if their rights or obligations are affected
thereby, the Issuing Bank) if (i) by the terms of such agreement the
Commitment of each Lender not consenting to the amendment provided for therein
shall terminate upon the effectiveness of such amendment and (ii) at the time
such amendment becomes effective, each Lender not consenting thereto receives
payment in full of the principal of and interest accrued on each Loan made by
it and all other amounts owing to it or accrued for its account under this
Agreement.
SECTION 9.03. EXPENSES; INDEMNITY; DAMAGE WAIVER. (a) The Borrower shall
pay (i) all reasonable out-of-pocket expenses incurred by the Arranger, the
Agents and their respective Affiliates, including the reasonable fees, charges
and disbursements of counsel for the Agents, in connection with the
syndication of the credit facilities provided for herein, the preparation and
administration of the Loan Documents or any amendments, modifications or
waivers of the provisions thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), (ii) all reasonable
out-of-pocket expenses incurred by the Issuing Bank in connection with the
issuance, amendment, renewal or extension of any Letter of Credit or any
demand for payment thereunder and (iii) all out-of-pocket expenses incurred by
the Agents, the Issuing Bank or any Lender, including the fees, charges and
disbursements of any counsel for the Agents, the Issuing Bank or any Lender,
in connection with the enforcement or protection of its rights in connection
with the Loan Documents, including its rights under this Section, or in
connection with the Loans made or Letters of Credit issued hereunder,
including all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans or Letters of Credit.
(b) The Borrower shall indemnify the Arranger, the Agents, the Issuing
Bank and each Lender, and each Related Party of any of the foregoing Persons
(each such Person being called an "INDEMNITEE") against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the fees, charges and disbursements of any counsel
for any Indemnitee, incurred by or asserted against any Indemnitee arising out
of, in connection with, or as a result of (i) the execution or delivery of any
Loan Document or any other agreement or instrument contemplated hereby, the
performance by the parties to the Loan Documents of their respective
obligations thereunder or the consummation of the Transactions or any other
transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use
of the proceeds therefrom (including any refusal by the Issuing Bank to honor
a demand for payment under a Letter of Credit if the documents presented in
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connection with such demand do not strictly comply with the terms of such
Letter of Credit), (iii) any actual or alleged presence or release of
Hazardous Materials on or from any Mortgaged Property or any other property
currently or formerly owned or operated by the Borrower or any of its
Subsidiaries, or any Environmental Liability related in any way to the
Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto; PROVIDED that such indemnity shall not, as
to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or wilful misconduct of such Indemnitee.
(c) To the extent that the Borrower fails to pay any amount required to
be paid by it to the Arranger, the Agents or the Issuing Bank under paragraph
(a) or (b) of this Section, each Lender severally agrees to pay to the
Arranger, the Agents or the Issuing Bank, as the case may be, such Lender's
pro rata share (determined as of the time that the applicable unreimbursed
expense or indemnity payment is sought) of such unpaid amount; PROVIDED that
the unreimbursed expense or indemnified loss, claim, damage, liability or
related expense, as the case may be, was incurred by or asserted against the
Arranger, the Agents or the Issuing Bank in its capacity as such. For purposes
hereof, a Lender's "pro rata share" shall be determined based upon its share
of the sum of the total Revolving Exposures, outstanding Term Loans and unused
Commitments at the time.
(d) To the extent permitted by applicable law, the Borrower shall not
assert, and each hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with,
or as a result of, this Agreement or any agreement or instrument contemplated
hereby, the Transactions, any Loan or Letter of Credit or the use of the
proceeds thereof.
(e) All amounts due under this Section shall be payable promptly after
written demand therefor.
SECTION 9.04. 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 assigns permitted hereby (including any
Affiliate of the Issuing Bank that issues any Letter of Credit), except that
the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and
any attempted assignment or transfer by the Borrower without such consent
shall be null and void). Nothing in this Agreement, expressed or implied,
shall be construed to confer upon any Person (other than the parties hereto,
their respective successors and assigns permitted hereby (including any
Affiliate of the Issuing Bank that issues any Letter of Credit) and, to the
extent expressly contemplated hereby, the Related Parties of each of the
Arranger, the Agents, the Issuing Bank and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion of
its rights and obligations under this Agreement (including all or a portion of
its Commitment and the Loans at the time owing to it); PROVIDED that (i)
except in the case of an assignment to a Lender or an Affiliate of a Lender,
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each of the Borrower and the Administrative Agent (and, in the case of an
assignment of all or a portion of a Revolving Commitment or any Lender's
obligations in respect of its LC Exposure, the Issuing Bank) must give their
prior written consent to such assignment (which consent shall not be
unreasonably withheld), (ii) except in the case of an assignment to a Lender
or an Affiliate of a Lender or an assignment of the entire remaining amount of
the assigning Lender's Commitment or Loans, the amount of the Commitment or
Loans of the assigning Lender subject to each such assignment (determined as
of the date the Assignment and Acceptance with respect to such assignment is
delivered to the Administrative Agent) shall not be less than $5,000,000
unless each of the Borrower and the Administrative Agent otherwise consent,
(iii) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender's rights and obligations under
this Agreement, except that this clause (iii) shall not be construed to
prohibit the assignment of a proportionate part of all the assigning Lender's
rights and obligations in respect of one Class of Commitments or Loans, (iv)
the parties to each assignment shall execute and deliver to the Administrative
Agent an Assignment and Acceptance, together with a processing and recordation
fee of $3,500, and (v) the assignee, if it shall not be a Lender, shall
deliver to the Administrative Agent an Administrative Questionnaire; and
PROVIDED FURTHER that any consent of the Borrower otherwise required under
this paragraph shall not be required if an Event of Default under clause (h)
or (i) of Article VII has occurred and is continuing. Subject to acceptance
and recording thereof pursuant to paragraph (d) of this Section, from and
after the effective date specified in each Assignment and Acceptance the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of
a Lender under this Agreement, and the assigning Lender thereunder shall, to
the extent of the interest assigned by such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of the assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be a party hereto
but shall continue to be entitled to the benefits of Sections 2.13, 2.14, 2.15
and 9.03). Any assignment or transfer by a Lender of rights or obligations
under this Agreement that does not comply with this paragraph shall be treated
for purposes of this Agreement as a sale by such Lender of a participation in
such rights and obligations in accordance with paragraph (e) of this Section.
For the purposes of this Section 9.04(b), the term "Affiliate" shall be deemed
to include, with respect to an investment fund that invests in commercial
loans, any other investment fund that invests in commercial loans and is
managed or advised by the same investment advisor as such investment fund or
by an Affiliate of such investment advisor.
(c) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices in The City of New York a copy
of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "REGISTER"). The entries
in the Register shall be conclusive, and the Borrower, the Administrative
Agent, the Issuing Bank and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder
for all purposes of this Agreement, notwithstanding notice to the contrary.
The Register shall be available for inspection by the Borrower, the Issuing
Bank and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
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hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has
been recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent or the Issuing Bank, sell participations to one or more
banks or other entities (a "PARTICIPANT") in all or a portion of such Lender's
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); PROVIDED that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) the Borrower, the Administrative
Agent, the Issuing Bank and the other Lenders shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant to
which a Lender sells such a participation shall provide that such Lender shall
retain the sole right to enforce the Loan Documents and to approve any
amendment, modification or waiver of any provision of the Loan Documents;
PROVIDED that such agreement or instrument may provide that such Lender will
not, without the consent of the Participant, agree to any amendment,
modification or waiver described in the first proviso to Section 9.02(b) that
affects such Participant. Subject to paragraph (f) of this Section, the
Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.13, 2.14 and 2.15 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this Section.
To the extent permitted by law, each Participant also shall be entitled to the
benefits of Section 9.08 as though it were a Lender, provided such Participant
agrees to be subject to Section 2.16(c) as though it were a Lender.
(f) A Participant shall not be entitled to receive any greater payment
under Section 2.13 or 2.15 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower's
prior written consent. A Participant that would be a Foreign Lender if it were
a Lender shall not be entitled to the benefits of Section 2.15 unless the
Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with Section
2.15(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; PROVIDED that no such pledge or assignment
of a security interest shall release a Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender as a
party hereto.
SECTION 9.05. SURVIVAL. All covenants, agreements, representations and
warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any such other
party or on its behalf and notwithstanding that the Administrative Agent, the
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Issuing Bank or any Lender may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or any fee or any other
amount payable under this Agreement is outstanding and unpaid or any Letter of
Credit is outstanding and so long as the Commitments have not expired or
terminated. The provisions of Sections 2.13, 2.14, 2.15 and 9.03 and Article
VIII shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.
SECTION 9.06. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement
may be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which
when taken together shall constitute a single contract. This Agreement, the
other Loan Documents and any separate letter agreements with respect to fees
payable to the Administrative Agent constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all
previous agreements and understandings, oral or written, relating to the
subject matter hereof. Except as provided in Section 4.01, this Agreement
shall become effective when it shall have been executed by the Administrative
Agent and when the Administrative Agent shall have received counterparts
hereof which, when taken together, bear the signatures of each of the other
parties hereto, and thereafter shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. Delivery of
an executed counterpart of a signature page of this Agreement by telecopy
shall be effective as delivery of a manually executed counterpart of this
Agreement.
SECTION 9.07. SEVERABILITY. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof; and the invalidity of a particular
provision in a particular jurisdiction shall not invalidate such provision in
any other jurisdiction.
SECTION 9.08. RIGHT OF SETOFF. If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted
by law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any
time owing by such Lender or Affiliate to or for the credit or the account of
the Borrower against any of and all the obligations of the Borrower now or
hereafter existing under this Agreement held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured. The rights of each Lender under
this Section are in addition to other rights and remedies (including other
rights of setoff) which such Lender may have.
SECTION 9.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
PROCESS. (a) This Agreement shall be construed in accordance with and governed
by the law of the State of New York.
(b) The Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the United States
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District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to
any Loan Document, or for recognition or enforcement of any judgment, and each
of the parties hereto hereby irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and determined
in such New York State or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Loan Document shall affect any right
that the Administrative Agent, the Issuing Bank or any Lender may otherwise
have to bring any action or proceeding relating to this Agreement or any other
Loan Document against the Borrower or its properties in the courts of any
jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any other Loan
Document in any court referred to in paragraph (b) of this Section. Each of
the parties hereto hereby irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such action
or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement or any other Loan Document will affect the right of any party to
this Agreement to serve process in any other manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER
AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 9.11. HEADINGS. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of
this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 9.12. CONFIDENTIALITY. Each of the Arranger, the Agents, the
Issuing Bank and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a)
to its and its Affiliates' directors, officers, employees and agents,
including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
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authority, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this
Agreement, (e) in connection with the exercise of any remedies hereunder or
any suit, action or proceeding relating to this Agreement or any other Loan
Document or the enforcement of rights hereunder or thereunder, (f) subject to
an agreement containing provisions substantially the same as those of this
Section, to any assignee of or Participant in, or any prospective assignee of
or Participant in, any of its rights or obligations under this Agreement, (g)
with the consent of the Borrower, (h) to the National Association of Insurance
Commissioners or any similar organization or any nationally recognized rating
agency that requires access to information about a Lender's investment
portfolio in connection with ratings issued with respect to such Lender, (i)
to any direct or indirect contractual counterparty in swap agreements or such
contractual counterparty's professional advisor (so long as such contractual
counterparty or professional advisor to such contractual counterparty agrees
to be bound by the provisions of this Section 9.12.) or (j) to the extent such
Information (i) becomes publicly available other than as a result of a breach
of this Section or (ii) becomes available to the Arranger, the Agents, the
Issuing Bank or any Lender on a nonconfidential basis from a source other than
the Borrower. For the purposes of this Section, "INFORMATION" means all
information received from the Borrower relating to the Borrower or its
business, other than any such information that is available to the Arranger,
the Agents, the Issuing Bank or any Lender on a nonconfidential basis prior to
disclosure by the Borrower; PROVIDED that, in the case of information received
from the Borrower after the date hereof, such information is clearly
identified at the time of delivery as confidential. Any Person required to
maintain the confidentiality of Information as provided in this Section shall
be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
SECTION 9.13. INTEREST RATE LIMITATION. Notwithstanding anything herein
to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which are treated as
interest on such Loan under applicable law (collectively the "CHARGES"), shall
exceed the maximum lawful rate (the "MAXIMUM RATE") which may be contracted
for, charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of
such Loan hereunder, together with all Charges payable in respect thereof,
shall be limited to the Maximum Rate and, to the extent lawful, the interest
and Charges that would have been payable in respect of such Loan but were not
payable as a result of the operation of this Section shall be cumulated and
the interest and Charges payable to such Lender in respect of other Loans or
periods shall be increased (but not above the Maximum Rate therefor) until
such cumulated amount, together with interest thereon at the Federal Funds
Effective Rate to the date of repayment, shall have been received by such
Lender.
SECTION 9.14. RELEASE OF LIENS AND GUARANTEES. In the event that the
Borrower or any Subsidiary conveys, sells, leases, assigns, transfers or
otherwise disposes of all or any portion of any of the Equity Interests,
assets or property of the Borrower or any of the Subsidiaries in a transaction
not prohibited by Section 6.04, the Administrative Agent and the Collateral
Agent shall promptly (and the Lenders hereby authorize the Administrative
Agent and the Collateral Agent to) take such action and execute any such
documents as may be reasonably requested by the Borrower and at the Borrower's
expense to release any Liens created by any Loan Document in respect of such
Equity Interests, assets, property, including the release and satisfaction of
record of any mortgage or deed of trust granted in connection herewith, and,
in the case of a disposition of all or substantially all the Equity Interests
<PAGE>
78
or assets of any Subsidiary Loan Party, terminate such Subsidiary Loan Party's
obligations under the Subsidiary Guarantee Agreement. In addition, the
Administrative Agent and the Collateral Agent agree to take such actions as
are reasonably requested by the Borrower and at the Borrower's expense to
terminate the Liens and security interests created by the Loan Documents when
all the Obligations are paid in full and all Letters of Credit and Commitments
are terminated. Any representation, warranty or covenant contained in any Loan
Document relating to any such Equity Interests, assets, property or Subsidiary
shall no longer be deemed to be made once such Equity Interests, assets or
property is conveyed, sold, leased, assigned, transferred or disposed of.
<PAGE>
79
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.
HANGER ORTHOPEDIC GROUP, INC.,
individually and as Administrative Agent,
By: /s/IVAN R. SABEL
-----------------------------------
Name: Ivan R. Sabel
Title: Chairman and Chief Executive
Officer
<PAGE>
THE CHASE MANHATTAN BANK,
individually and as Administrative Agent,
By: /s/STEPHEN P. ROCHFORD
-----------------------------------
Name: Stephen P. Rochford
Title: Vice President
BANKERS TRUST COMPANY,
individually and as Syndication Agent,
By: /s/DAVID BELL
-----------------------------------
Name: David Bell
Title: Principal
PARIBAS,
individually and as Documentation Agent,
By: /s/DARRYL M. MONASEBIAN
-----------------------------------
Name: Daryl M. Monasebian
Title: Director, Merchant Banking Group
By: /s/DONALD ERCOLE
-----------------------------------
Name: Donald Ercole
Title: Managing Director
ABN AMRO BANK N.V.
By: /s/DONALD SUTTON
-----------------------------------
Name: Donald Sutton
Title: Vice President
By: /s/MICHAEL A. KOWALCZUK
-----------------------------------
Name: Michael A. Kowalczuk
Title: Assistant Vice President
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY,
By: /s/JERRY D. ZINKULA
-----------------------------------
Name: Jerry D. Zinkula
Title: Authorized Signatory
By: /s/PATRICIA W. WILSON
-----------------------------------
Name: Patricia W. Wilson
Title: Authorized Signatory
BANKBOSTON, N.A.
By: /s/CHRISTOPHER J. WICKLES
-----------------------------------
Name: Christopher J. Wickles
Title: Vice President
COMERICA BANK,
By: /s/MARK J. HERMAN
-----------------------------------
Name: Mark J. Herman
Title: First Vice President
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A. "RABOBANK
INTERNATIONAL", NEW YORK BRANCH,
individually and as a co-agent,
By: /s/ELLEN A. POLANSKY
-----------------------------------
Name: Ellen A. Polansky
Title: Vice President
By: /s/ELLEN M. TACKLING
-----------------------------------
Name: Ellen M. Tackling
Title: Vice President-Credit Control
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH,
By: /s/JOHN C. OBERLE
-----------------------------------
Name: John C. Oberle
Title: Vice President
CYPRESSTREE INSTITUTIONAL FUND, LLC,
By: CypressTree Investment Management
Company, Inc. its Managing Member,
By: /s/JEFFREY HEMER
-----------------------------------
Name: Jeffrey Hemer
Title: Principal
DEBT STRATEGIES FUND III, INC.,
By: /s/COLLEEN M. CUNNIFFE
-----------------------------------
Name: Colleen M. Cunniffe
Title: Authorized Signatory
DRESDNER BANK AG, NEW YORK
BRANCH AND GRAND CAYMAN BRANCH
By: /s/CHARLES M. O'SHEA
-----------------------------------
Name: Charles M. O'Shea
Title: Vice President
By: /s/ANDREW P. NESI
-----------------------------------
Name: Andrew P. Nesi
Title: First Vice President
FIRST UNION NATIONAL BANK,
individually and as a co-agent,
By: /s/J. MATT MACLVER, JR.
-----------------------------------
Name: J. Matt Maclver, Jr.
Title: Vice President
<PAGE>
FLEET NATIONAL BANK,
By: /s/CATHERINE H. LILLY
-----------------------------------
Name: Catherine H. Lilly
Title: Vice President
FRANKLIN FLOATING RATE TRUST,
By: /s/CHAUNCEY LUFKIN
-----------------------------------
Name: Chauncey Lufkin
Title: Vice President
HELLER FINANCIAL, INC.,
By: /s/SHELIA C. WEIME
-----------------------------------
Name: Shelia C. Weime
Title: Vice President
KZH IV LLC,
By: /s/VIRGINIA CONWAY
-----------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH CYPRESSTREE-1 LLC,
By: /s/VIRGINIA CONWAY
-----------------------------------
Name: Virginia Conway
Title: Authorized Agent
<PAGE>
KZH STERLING LLC,
By: /s/VIRGINIA CONWAY
-----------------------------------
Name: Virginia Conway
Title: Authorized Agent
MERRILL LYNCH SENIOR FLOATING
RATE FUND II, INC.,
By: /s/COLLEEN M. CUNNIFFE
-----------------------------------
Name: Colleen M. Cunniffe
Title: Authorized Agent
METROPOLITAN LIFE INSURANCE COMPANY,
By: /s/JAMES R. DINGLER
-----------------------------------
Name: James R. Dingler
Title: Director
MORGAN STANLEY DEAN WITTER PRIME
INCOME TRUST,
By: /s/SHELIA A. FINNERTY
-----------------------------------
Name: Shelia A. Finnerty
Title: Vice President
NATIONAL BANK OF CANADA, A
CANADIAN CHARTERED BANK,
By: /s/MICHAEL E. WILLIAMS
-----------------------------------
Name: Michael E. Williams
Title: Vice President / Manager
By: /s/ROBERT A. INCORVATI
-----------------------------------
Name: Robert A. Incorvati
Title: Vice President
<PAGE>
NORTH AMERICAN SENIOR FLOATING
RATE FUND,
By: CypressTree Investment Management
Company, Inc. as Portfolio Manager
By: /s/JEFFREY HEMER
-----------------------------------
Name: Jeffrey Hemer
Title: Principal
PINEHURST TRADING, INC.,
By: /s/KELLY C. WALKER
-----------------------------------
Name: Kelly C. Walker
Title: Vice President
PROVIDENT BANK OF MARYLAND,
By: /s/FRIEDA M.A. MCWILLIAMS
-----------------------------------
Name: Frieda M.A. McWilliams
Title: Vice President
SCOTIABANC, INC., individually and as a co-
agent,
By: /s/CAROLYN A. CALLOWAY
-----------------------------------
Name: Carolyn A. Calloway
Title: Relationship Manager
<PAGE>
SEQUILS I, LTD.,
By: TCW Advisors, Inc. as its Collateral
Manager
By: /s/JUSTIN L. DRISCOLL
-----------------------------------
Name: Justin L. Driscoll
Title: Senior Vice President
By: /s/JONATHAN R. INSULL
-----------------------------------
Name: Jonathan R. Insull
Title: Vice President
SUMMIT BANK,
By: /s/CHRISTOPHER P. KLECZKOWSKI
-----------------------------------
Name: Christopher P. Kleczkowski
Title: Vice President
THE UNION BANK OF CALIFORNIA, N.A.,
By: /s/JAMES L. LEAHY
-----------------------------------
Name: James L. Leahy
Title: Senior Vice President
U.S. BANK NATIONAL ASSOCIATION,
By: /s/BRIAN C. O'NEIL
-----------------------------------
Name: Brian C. O'Neil
Title: Vice President
USTRUST,
By: /s/ERRIN SHAGEL
-----------------------------------
Name: Errin Shagel
Title: Vice President
EXHIBIT 10(b)
HANGER ORTHOPEDIC GROUP, INC.
$150,000,000
11 1/4% SENIOR SUBORDINATED NOTES DUE 2009
PURCHASE AGREEMENT
June 9, 1999
DEUTSCHE BANK SECURITIES INC.
CHASE SECURITIES INC.
PARIBAS CORPORATION
c/o Deutsche Bank Securities Inc.
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
Hanger Orthopedic Group, Inc., a Delaware corporation (the "COMPANY"),
hereby confirms its agreement with you (the "INITIAL PURCHASERS"), as set
forth below.
1. THE SECURITIES. Subject to the terms and conditions herein contained,
the Company proposes to issue and sell to the Initial Purchasers $150,000,000
aggregate principal amount of its 11 1/4% Senior Subordinated Notes Due 2009,
Series A (thE "NOtes"). The Notes are to be issued under an indenture (thE
"INDENTure") to be dated as of June 16, 1999 by and between the Company and
U.S. Bank Trust, National Association, as Trustee (thE "TRUStee"). Each of the
Company's domestic subsidiarie s (the "GUARANTORS") is jointly and severally
guaranteeing (the "GUARANTEES"), on a senior subordinated basis, the Company's
obligations under the Indenture and the Notes.
The Notes will be offered and sold to the Initial Purchasers without
being registered under the Securities Act of 1933, as amended (the "ACT"), in
reliance on exemptions therefrom.
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum dated May 21, 1999 (the "PRELIMINARY
MEMORANDUM"), and a final offering memorandum dated June 9, 1999 (the "FINAL
MEMORANDUM"; the Preliminary Memorandum and the Final Memorandum each herein
being referred to as a "MEMORANDUM") setting forth or including a description
of the terms of the Notes, the terms of the offering of the Notes, a
description of the Company and any material developments relating to the
<PAGE>
Company occurring after the date of the most recent historical financial
statements included therein.
The Initial Purchasers and their direct and indirect transferees of the
Notes will be entitled to the benefits of the Registration Rights Agreement,
substantially in the form attached hereto as EXHIBIT A (the "REGISTRATION
RIGHTS AGREEMENT"), pursuant to which the Company and the Guarantors agree,
among other things, to file a registration statement (the "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "COMMISSION")
registering the Notes or the Exchange Notes (as defined in the Registration
Rights Agreement) under the Act.
2. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to and agrees with each of the Initial Purchasers that:
(a) Neither the Preliminary Memorandum as of the date thereof nor the
Final Memorandum nor any amendment or supplement thereto as of the date
thereof and at all times subsequent thereto up to the Closing Date (as defined
in Section 3 below) contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this Section 2(a) do not apply to statements or omissions made in reliance
upon and in conformity with information relating to any of the Initial
Purchasers furnished to the Company in writing by the Initial Purchasers
expressly for use in the Preliminary Memorandum, the Final Memorandum or any
amendment or supplement thereto.
(b) As of the Closing Date, the Company will have the authorized, issued
and outstanding capitalization set forth in the Final Memorandum; all of the
subsidiaries of the Company are listed in SCHEDULE 2 attached hereto (each, a
"SUBSIDIARY" and collectively, the "SUBSIDIARIES"); all of the outstanding
shares of capital stock of the Company and the Subsidiaries have been, and as
of the Closing Date will be, duly authorized and validly issued, are fully
paid and nonassessable and were not issued in violation of any preemptive or
similar rights; all of the outstanding shares of capital stock of the Company
and of each of the Subsidiaries will be free and clear of all liens,
encumbrances, equities and claims or restrictions on transferability (other
than those imposed by the Act and the securities or "Blue Sky" laws of certain
jurisdictions) or voting; except as set forth in the Final Memorandum, there
are no (i) options, warrants or other rights to purchase, (ii) agreements or
other obligations to issue or (iii) other rights to convert any obligation
into, or exchange any securities for, shares of capital stock of or ownership
interests in the Company or any of the Subsidiaries outstanding. Except for
the Subsidiaries or as disclosed in the Final Memorandum, the Company does not
own, directly or indirectly, any shares of capital stock or any other equity
or long-term debt securities or have any equity interest in any firm,
partnership, joint venture or other entity.
(c) Each of the Company and the Subsidiaries is duly incorporated,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation and has all requisite corporate (or partnership
-2-
<PAGE>
or limited liability company) power and authority to own its properties and
conduct its business as now conducted and as described in the Final
Memorandum; each of the Company and the Subsidiaries is duly qualified to do
business as a foreign corporation in good standing in all other jurisdictions
where the ownership or leasing of its properties or the conduct of its
business requires such qualification, except where the failure to be so
qualified would not, individually or in the aggregate, have a material adverse
effect on the general affairs, management, business, condition (financial or
otherwise), prospects or results of operations of the Company and the
Subsidiaries, taken as a whole (any such event, a "MATERIAL ADVERSE EFFECT").
(d) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Indenture, the
Notes, the Exchange Notes and the Private Exchange Notes (as defined in the
Registration Rights Agreement). The Notes, when issued, will be in the form
contemplated by the Indenture. The Notes, the Exchange Notes and the Private
Exchange Notes have each been duly and validly authorized by the Company and,
when executed by the Company and authenticated by the Trustee in accordance
with the provisions of the Indenture and, in the case of the Notes, when
delivered to and paid for by the Initial Purchasers in accordance with the
terms of this Agreement, will constitute valid and legally binding obligations
of the Company entitled to the benefits of the Indenture, and enforceable
against the Company in accordance with their terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought.
(e) The Company and each of the Guarantors has all requisite corporate
(or partnership or limited liability company) power and authority to execute,
deliver and perform its obligations under the Indenture. The Indenture meets
the requirements for qualification under the Trust Indenture Act of 1939, as
amended (the "TIA"). The Indenture has been duly and validly authorized by the
Company and each of the Guarantors and, when executed and delivered by the
Company and each of the Guarantors (assuming the due authorization, execution
and delivery by the Trustee), will constitute a valid and legally binding
agreement of the Company and each of the Guarantors, enforceable against the
Company and each of the Guarantors in accordance with its terms, except that
the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought.
(f) The Company and each of the Guarantors has all requisite corporate
(or partnership or limited liability company) power and authority to execute,
deliver and perform its obligations under the Registration Rights Agreement.
The Registration Rights Agreement has been duly and validly authorized by the
Company and each of the Guarantors and, when executed and delivered by the
Company and each of the Guarantors, will constitute a valid and legally
binding agreement of the Company and each of the Guarantors enforceable
against the Company and each of the Guarantors in accordance with its terms,
except that (A) the enforcement thereof may be subject to (i) bankruptcy,
-3-
<PAGE>
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights generally and (ii) general principles
of equity and the discretion of the court before which any proceeding therefor
may be brought and (B) any rights to indemnity or contribution thereunder may
be limited by federal and state securities laws and public policy
considerations.
(g) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. This Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by the Company. This Agreement has been duly
executed and delivered by the Company.
(h) No consent, approval, authorization or order of any court or
governmental agency or body, or third party is required for the issuance and
sale by the Company of the Notes to the Initial Purchasers, the issuance by
any Guarantor of its Guarantee or the consummation by the Company or any of
the Guarantors of the other transactions contemplated hereby, except such as
have been obtained and such as may be required under state securities or "Blue
Sky" laws in connection with the purchase and resale of the Notes by the
Initial Purchasers. None of the Company or the Subsidiaries is (i) in
violation of its certificate of incorporation or bylaws (or similar
organizational document), (ii) in breach or violation of any statute,
judgment, decree, order, rule or regulation applicable to any of them or any
of their respective properties or assets, except for any such breach or
violation which would not, individually or in the aggregate, have a Material
Adverse Effect, or (iii) in breach of or default under (nor has any event
occurred which, with notice or passage of time or both, would constitute a
default under) or in violation of any of the terms or provisions of any
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract or other agreement or
instrument to which any of them is a party or to which any of them or their
respective properties or assets is subject (collectively, "CONTRACTS"), except
for any such breach, default, violation or event which would not, individually
or in the aggregate, have a Material Adverse Effect.
(i) The execution, delivery and performance by the Company of this
Agreement and the Notes and by the Company and each Guarantor of the Indenture
and the Registration Rights Agreement, and the consummation by the Company and
each Guarantor of the transactions contemplated hereby and thereby (including,
without limitation, the issuance and sale of the Notes to the Initial
Purchasers) will not conflict with or constitute or result in a breach of or a
default under (or an event which with notice or passage of time or both would
constitute a default under) or violation of any of (i) the terms or provisions
of any Contract, except for any such conflict, breach, violation, default or
event which would not, individually or in the aggregate, have a Material
Adverse Effect, (ii) the certificate of incorporation or bylaws (or similar
organizational document) of the Company or any of the Subsidiaries, or (iii)
(assuming compliance with all applicable state securities or "Blue Sky" laws
and assuming the accuracy of the representations and warranties of the Initial
Purchasers in Section 8 hereof) any statute, judgment, decree, order, rule or
regulation applicable to the Company or any of the Subsidiaries or any of
their respective properties or assets, except for any such conflict, breach or
-4-
<PAGE>
violation which would not, individually or in the aggregate, have a Material
Adverse Effect.
(j) The audited consolidated financial statements of the Company and the
Subsidiaries included in the Final Memorandum present fairly in all material
respects the financial position, results of operations and cash flows of the
Company and the Subsidiaries at the dates and for the periods to which they
relate and have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis, except as otherwise stated therein.
The summary and selected financial and statistical data in the Final
Memorandum present fairly in all material respects the information shown
therein and have been prepared and compiled on a basis consistent with the
audited financial statements included therein, except as otherwise stated
therein. PricewaterhouseCoopers LLP (the "INDEPENDENT ACCOUNTANTS") is an
independent public accounting firm within the meaning of the Act and the rules
and regulations promulgated thereunder.
(k) The pro forma financial statements (including the notes thereto) and
the other pro forma financial information included in the Final Memorandum (i)
comply as to form in all material respects with the applicable requirements of
Regulation S-X promulgated under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), (ii) have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements, and (iii) have been properly computed on the bases described
therein; and the assumptions used in the preparation of the pro forma
financial data and other pro forma financial information included in the Final
Memorandum are reasonable and the adjustments used therein are appropriate to
give effect to the transactions or circumstances referred to therein.
(l) There is not pending or, to the knowledge of the Company, threatened
any action, suit, proceeding, inquiry or investigation to which the Company or
any of the Subsidiaries is a party, or to which the property or assets of the
Company or any of the Subsidiaries are subject, before or brought by any
court, arbitrator or governmental agency or body which, if determined
adversely to the Company or any of the Subsidiaries, would, individually or in
the aggregate, have a Material Adverse Effect or which seeks to restrain,
enjoin, prevent the consummation of or otherwise challenge the issuance or
sale of the Notes to be sold hereunder or the consummation of the other
transactions described in the Final Memorandum.
(m) The Company and each of the Subsidiaries holds all licenses,
certificates and permits from governmental authorities ("PERMITS") which are
necessary to the conduct of their businesses, except where the failure to do
so would not have a Material Adverse Effect; and neither the Company nor any
of the Subsidiaries has infringed any patents, patent rights, trade names,
trademarks or copyrights, which infringement is material to the business of
the Company and the Subsidiaries taken as a ------- whole. The Company knows
of no material infringement by others of patents, patent rights, trade names,
trademarks or copyrights owned by or licensed to the Company.
-5-
<PAGE>
(n) Since the date of the most recent financial statements appearing in
the Final Memorandum, except as described therein, (i) none of the Company or
the Subsidiaries has incurred any liabilities or obligations, direct or
contingent, or entered into or agreed to enter into any transactions or
contracts (written or oral) not in the ordinary course of business which
liabilities, obligations, transactions or contracts would, individually or in
the aggregate, be material to the general affairs, management, business,
condition (financial or otherwise), prospects or results of operations of the
Companies and its Subsidiaries, taken as a whole, (ii) none of the Company or
the Subsidiaries has purchased any of its outstanding capital stock, nor
declared, paid or otherwise made any dividend or distribution of any kind on
its capital stock (other than with respect to any of such Subsidiaries, the
purchase of, or dividend or distribution on, capital stock owned by the
Company) and (iii) there has not been any material change in the capital stock
or long-term indebtedness of the Company or the Subsidiaries.
(o) Each of the Company and the Subsidiaries has filed all necessary
federal, state and foreign income and franchise tax returns, except where the
failure to so file such returns would not, individually or in the aggregate,
have a Material Adverse Effect, and has paid all taxes shown as due thereon;
and other than tax deficiencies which the Company or any Subsidiary is
contesting in good faith and for which the Company or such Subsidiary has
provided adequate reserves, there is no tax deficiency that has been asserted
against the Company or any of the Subsidiaries that would have, individually
or in the aggregate, a Material Adverse Effect.
(p) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Company and the
Subsidiaries believe to be reliable and accurate.
(q) None of the Company, the Subsidiaries or any agent acting on their
behalf has taken or will take any action that might cause this Agreement or
the sale of the Notes to violate Regulation T, U or X of the Board of
Governors of the Federal Reserve System, in each case as in effect, or as the
same may hereafter be in effect, on the Closing Date.
(r) Each of the Company and the Subsidiaries has good and marketable
title to all real property and good title to all personal property described
in the Final Memorandum as being owned by it and good and marketable title to
a leasehold estate in the real and personal property described in the Final
Memorandum as being leased by it free and clear of all liens, charges,
encumbrances or restrictions, except as described in the Final Memorandum or
to the extent the failure to have such title or the existence of such liens,
charges, encumbrances or restrictions would not, individually or in the
aggregate, have a Material Adverse Effect. All leases, contracts and
agreements to which the Company or any of the Subsidiaries is a party or by
which any of them is bound are valid and enforceable against the Company or
such Subsidiary, and are valid and enforceable against the other party or
parties thereto and are in full force and effect with only such exceptions as
would not, individually or in the aggregate, have a Material Adverse Effect.
The Company and the Subsidiaries own or possess adequate licenses or other
rights to use all patents, trademarks, service marks, trade names, copyrights
and know-how necessary to conduct the businesses now or proposed to be
operated by them as described in the Final Memorandum, and none of the Company
-6-
<PAGE>
or the Subsidiaries has received any notice of infringement of or conflict
with (or knows of any such infringement of or conflict with) asserted rights
of others with respect to any patents, trademarks, service marks, trade names,
copyrights or know-how which, if such assertion of infringement or conflict
were sustained, would have a Material Adverse Effect.
(s) There are no legal or governmental proceedings involving or
affecting the Company or any Subsidiary or any of their respective properties
or assets which would be required to be described in a prospectus pursuant to
the Act that are not described in the Final Memorandum, nor are there any
material contracts or other documents which would be required to be described
in a prospectus pursuant to the Act that are not described in the Final
Memorandum.
(t) Each of the Company and the Subsidiaries carries insurance in such
amounts and covering such risks as is adequate for the conduct of its business
and the value of its properties.
(u) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder (the "CODE"); and each "pension plan" for
which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would
cause the loss of such qualification.
(v) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(w) Neither the Company nor any Subsidiary is an "investment company"
within the meaning of such term under the Investment Company Act of 1940 and
the rules and regulations of the Commission thereunder.
(x) The Notes, the Indenture and the Registration Rights Agreement will
conform in all material respects to the descriptions thereof in the Final
Memorandum.
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(y) No holder of securities of the Company or any Subsidiary will be
entitled to have such securities registered under the registration statements
required to be filed by the Company pursuant to the Registration Rights
Agreement other than as expressly permitted thereby.
(z) Immediately after the consummation of the transactions contemplated
by this Agreement, the fair value and present fair saleable value of the
assets of each of the Company and the Subsidiaries (each on a consolidated
basis) will exceed the sum of its stated liabilities and identified contingent
liabilities; none of the Company or the Subsidiaries (each on a consolidated
basis) is, nor will any of the Company or the Subsidiaries (each on a
consolidated basis) be, after giving effect to the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, (a) left with unreasonably small capital with which to
carry on its business as it is proposed to be conducted, (b) unable to pay its
debts (contingent or otherwise) as they mature or (c) otherwise insolvent.
(aa) None of the Company, the Subsidiaries or any of their respective
Affiliates (as defined in Rule 501(b) of Regulation D under the Act) has
directly, or through any agent, (i) sold, offered for sale, solicited offers
to buy or otherwise negotiated in respect of, any "security" (as defined in
the Act) which is or could be integrated with the sale of the Notes in a
manner that would require the registration under the Act of the Notes or the
Guarantees or (ii) engaged in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) in
connection with the offering of the Notes or in any manner involving a public
offering within the meaning of Section 4(2) of the Act. Assuming the accuracy
of the representations and warranties of the Initial Purchasers in Section 8
hereof, it is not necessary in connection with the offer, sale and delivery of
the Notes to the Initial Purchasers in the manner contemplated by this
Agreement to register any of the Notes under the Act or to qualify the
Indenture under the TIA.
(bb) No securities of the Company or any Subsidiary are of the same
class (within the meaning of Rule 144A under the Act) as the Notes or the
Guarantees and listed on a national securities exchange registered under
Section 6 of the Exchange Act, or quoted in a U.S. automated inter-dealer
quotation system.
(cc) None of the Company or the Subsidiaries has taken, nor will any of
them take, directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or manipulation of
the price of the Notes.
(dd) None of the Company, the Subsidiaries, any of their respective
Affiliates or any person acting on its or their behalf (other than the Initial
Purchasers) has engaged in any directed selling efforts (as that term is
defined in Regulation S under the Act ("REGULATION S")) with respect to the
Notes; and the Company, the Subsidiaries and their respective Affiliates and
any person acting on its or their behalf (other than the Initial Purchasers)
have complied with the offering restrictions requirement of Regulation S.
(ee) Neither the Company nor any Subsidiary has engaged in any
activities which are prohibited, or are cause for civil penalties of mandatory
or permissive exclusion from Medicare or Medicaid, under Section 1320a-7,
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1320a-7a, 1320a-7b, or 1395nn of Title 42 of the United States Code, the
federal CHAMPUS statute, or the regulations promulgated pursuant to such
statutes or regulations or related state or local statues or which are
prohibited by any private accrediting organization from which the Company or
any of its Subsidiaries seeks accreditation or by generally recognized
professional standards of care or conduct. Neither the Company nor to the
knowledge of the Company any other person who has a direct or indirect
ownership or control interest in the Company or any Subsidiary or who is an
officer, director, agent or managing employee of the Company or any
Subsidiary: (1) has had a civil monetary penalty assessed against it under
Section 1128A of the Social Security Act ("SSA"); (2) has been excluded from
participation under the Medicare program or a Federal Health Care Program (as
that term is defined in SSA Section 1128(B)(f)); or (3) has been convicted (as
that term is defined in 42 C.F.R. (S) 1001.2) of any of the categories of
offenses described in SSA Section 1128(a) and (b)(1), (2) and (3).
In addition to the above representations and warranties, the Company
hereby makes to the Initial Purchasers each of the representations and
warranties contained in Section II of the Stock Purchase Agreement dated as of
April 2, 1999 by and among NovaCare, Inc., NC Resources, Inc., the Company and
HPO Acquisition Corporation, and such representations and warranties, as so
made by the Company, shall be incorporated into this Agreement by reference as
if set forth in full herein.
Any certificate signed by any officer of the Company or any Subsidiary
and delivered to any Initial Purchaser or to counsel for the Initial
Purchasers shall be deemed a joint and several representation and warranty by
the Company and each of the Subsidiaries to each Initial Purchaser as to the
matters covered thereby.
3. PURCHASE, SALE AND DELIVERY OF THE NOTES. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Initial Purchasers, and the Initial Purchasers, acting
severally and not jointly, agree to purchase the Notes in the respective
amounts set forth on SCHEDULE 1 hereto from the Company at 97.0% of their
principal amount. One or more certificates in definitive form for the Notes
that the Initial Purchasers have agreed to purchase hereunder, and in such
denomination or denominations and registered in such name or names as the
Initial Purchasers request upon notice to the Company at least 36 hours prior
to the Closing Date, shall be delivered by or on behalf of the Company to the
Initial Purchasers, against payment by or on behalf of the Initial Purchasers
of the purchase price therefor by wire transfer (same day funds), net of the
overnight cost of such funds, to such account or accounts as the Company shall
specify prior to the Closing Date, or by such means as the parties hereto
shall agree prior to the Closing Date. Such delivery of and payment for the
Notes shall be made at the offices of Willkie Farr & Gallagher, 787 Seventh
Avenue, New York, New York at 10:00 A.M., New York time, on June 16, 1999, or
at such other place, time or date as the Initial Purchasers, on the one hand,
and the Company, on the other hand, may agree upon, such time and date of
delivery against payment being herein referred to as the "CLOSING DATE." The
Company will make such certificate or certificates for the Notes available for
checking and packaging by the Initial Purchasers at the offices of Deutsche
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Bank Securities Inc. in New York, New York, or at such other place as Deutsche
Bank Securities Inc. may designate, at least 24 hours prior to the Closing
Date.
4. OFFERING BY THE INITIAL PURCHASERS. The Initial Purchasers propose to
make an offering of the Notes at the price and upon the terms set forth in the
Final Memorandum, as soon as practicable after this Agreement is entered into
and as in the judgment of the Initial Purchasers is advisable.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with each
of the Initial Purchasers that:
(a) The Company will not amend or supplement the Final Memorandum or any
amendment or supplement thereto of which the Initial Purchasers shall not
previously have been advised and furnished a copy for a reasonable period of
time prior to the proposed amendment or supplement and as to which the Initial
Purchasers shall not have given their consent. The Company will promptly, upon
the reasonable request of the Initial Purchasers or counsel for the Initial
Purchasers, make any amendments or supplements to the Preliminary Memorandum
or the Final Memorandum that may be necessary or advisable in connection with
the resale of the Notes by the Initial Purchasers.
(b) The Company will cooperate with the Initial Purchasers in arranging
for the qualification of the Notes for offering and sale under the securities
or "Blue Sky" laws of such jurisdictions as the Initial Purchasers may
designate and will continue such qualifications in effect for as long as may
be necessary to complete the resale of the Notes; PROVIDED, HOWEVER, that in
connection therewith, the Company shall not be required to qualify as a
foreign corporation or to execute a general consent to service of process in
any jurisdiction or subject itself to taxation in excess of a nominal dollar
amount in any such jurisdiction where it is not then so subject.
(c) If, at any time prior to the completion of the distribution by the
Initial Purchasers of the Notes or the Private Exchange Notes, any event
occurs or information becomes known as a result of which the Final Memorandum
as then amended or supplemented would include any untrue statement of a
material fact, or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if for any other reason it is necessary at any time
to amend or supplement the Final Memorandum to comply with applicable law, the
Company will promptly notify the Initial Purchasers thereof and will prepare,
at the expense of the Company, an amendment or supplement to the Final
Memorandum that corrects such statement or omission or effects such
compliance.
(d) The Company will, without charge, provide to the Initial Purchasers
and to counsel for the Initial Purchasers as many copies of the Preliminary
Memorandum and the Final Memorandum or any amendment or supplement thereto as
the Initial Purchasers may reasonably request.
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(e) The Company will deposit the net proceeds from the sale of the
Notes, together with cash, U.S. government obligations and/or other "Cash
Equivalents" (as defined in the Final Memorandum) in the amounts described in
"Description of the Notes--Pledge for Special Mandatory Redemption" in the
Final Memorandum with the Trustee in a special account established under the
Indenture, pending the closing of the acquisition (the "ACQUISITION") of
Novacare Orthotics & Prosthetics, Inc. ("NOVACARE O&P"). Upon the closing of
the Acquisition, the Company will apply the net proceeds from the sale of the
Notes as set forth under "Sources and Uses of Funds" in the Final Memorandum.
(f) For so long as any of the Notes remain outstanding, the Company will
furnish to the Initial Purchasers copies of all reports and other
communications (financial or otherwise) furnished by the Company to the
Trustee or to the holders of the Notes and, as soon as available, copies of
any reports or financial statements furnished to or filed by the Company with
the Commission or any national securities exchange on which any class of
securities of the Company may be listed.
(g) Prior to the Closing Date, the Company will furnish to the Initial
Purchasers, as soon as they have been prepared, a copy of any unaudited
interim financial statements of the Company for any period subsequent to the
period covered by the most recent financial statements appearing in the Final
Memorandum.
(h) None of the Company, any of its Affiliates or anyone acting on
behalf of the Company or any such Affiliate will sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any "security" (as
defined in the Act) which could be integrated with the sale of the Notes in a
manner which would require the registration under the Act of the Notes or the
Guarantees.
(i) The Company will not, and will not permit any of the Subsidiaries
to, engage in any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Act) in connection with the
offering of the Notes or in any manner involving a public offering within the
meaning of Section 4(2) of the Act.
(j) For so long as any of the Notes remain outstanding, the Company will
make available at its expense, upon request, to any holder of such Notes and
any prospective purchasers thereof the information specified in Rule
144A(d)(4) under the Act, unless the Company is then subject to Section 13 or
15(d) of the Exchange Act.
(k) The Company will use its best efforts to (i) permit the Notes to be
designated PORTAL securities in accordance with the rules and regulations
adopted by the NASD relating to trading in the Private Offerings, Resales and
Trading through Automated Linkages market (the "PORTAL MARKET") and (ii)
permit the Notes to be eligible for clearance and settlement through The
Depository Trust Company.
(l) In connection with Notes offered and sold in an offshore transaction
(as defined in Regulation S) the Company will not register any transfer of
such Notes not made in accordance with the provisions of Regulation S and will
not, except in accordance with the provisions of Regulation S, if applicable,
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issue any such Notes in the form of definitive securities.
(m) Immediately upon consummation of the Acquisition, the Company shall
cause Novacare O&P and each of its subsidiaries to execute and deliver a
supplemental indenture in which such entity agrees to be bound by the terms of
the Indenture as a Guarantor.
6. EXPENSES. The Company agrees to pay all costs and expenses incident
to the performance of its obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to (i) the printing, word processing or other production of documents
with respect to the transactions contemplated hereby, including any costs of
printing the Preliminary Memorandum and the Final Memorandum and any amendment
or supplement thereto, and any "Blue Sky" memoranda, (ii) all arrangements
relating to the delivery to the Initial Purchasers of copies of the foregoing
documents, (iii) the fees and disbursements of the counsel, the accountants
and any other experts or advisors retained by the Company, (iv) preparation
(including printing), issuance and delivery to the Initial Purchasers of the
Notes, (v) the qualification of the Notes under state securities and "Blue
Sky" laws, including filing fees and fees and disbursements of counsel for the
Initial Purchasers relating thereto, (vi) expenses in connection with any
meetings with prospective investors in the Notes, (vii) fees and expenses of
the Trustee including fees and expenses of counsel, (viii) all expenses and
listing fees incurred in connection with the application for quotation of the
Notes on the PORTAL Market and (ix) any fees charged by investment rating
agencies for the rating of the Notes. If the sale of the Notes provided for
herein is not consummated because any condition to the obligations of the
Initial Purchasers set forth in Section 7 hereof is not satisfied, because
this Agreement is terminated or because of any failure, refusal or inability
on the part of the Company to perform all obligations and satisfy all
conditions on their part to be performed or satisfied hereunder (other than
solely by reason of a default by the Initial Purchasers of their obligations
hereunder after all conditions hereunder have been satisfied in accordance
herewith), the Company agrees to promptly reimburse the Initial Purchasers
upon demand for all out-of-pocket expenses (including fees, disbursements and
charges of Willkie Farr & Gallagher, counsel for the Initial Purchasers) that
shall have been incurred by the Initial Purchasers in connection with the
proposed purchase and sale of the Notes.
7. CONDITIONS OF THE INITIAL PURCHASERS' OBLIGATIONS. The obligation of
the Initial Purchasers to purchase and pay for the Notes shall, in their sole
discretion, be subject to the satisfaction or waiver of the following
conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchasers shall have received the
opinion, dated as of the Closing Date and addressed to the Initial Purchasers,
of Freedman, Levy, Kroll & Simonds, counsel for the Company and the
Guarantors, in form and substance satisfactory to counsel for the Initial
Purchasers, to the effect that:
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(i) Each of the Company and the Subsidiaries is duly incorporated,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation and has all requisite corporate (or
partnership or limited liability) power and authority to own its
properties and to conduct its business as described in the Final
Memorandum. Each of the Company and the Subsidiaries is duly qualified
to do business as a foreign corporation in good standing in all other
jurisdictions where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the
failure to be so qualified would not, individually or in the aggregate,
have a Material Adverse Effect.
(ii) The Company has the authorized, issued and outstanding
capitalization set forth in the Final Memorandum; all of the outstanding
shares of capital stock of the Company and the Subsidiaries have been
duly authorized and validly issued, are fully paid and nonassessable and
were not issued in violation of any preemptive or similar rights; all of
the outstanding shares of capital stock of the Subsidiaries are owned,
directly or indirectly, by the Company (except for Hanger Europe, N.V.),
free and clear of all perfected security interests and, to the knowledge
of such counsel, free and clear of all other liens, encumbrances,
equities and claims or restrictions on transferability (other than those
imposed by the Act and the securities or "Blue Sky" laws of certain
jurisdictions) or voting.
(iii) Except as set forth in the Final Memorandum (A) no options,
warrants or other rights to purchase from the Company or any Subsidiary
shares of capital stock or ownership interests in the Company or any
Subsidiary are outstanding, (B) no agreements or other obligations to
issue, or other rights to convert, any obligation into, or exchange any
securities for, shares of capital stock or ownership interests in the
Company or any Subsidiary are outstanding and (C) no holder of
securities of the Company or any Subsidiary is entitled to have such
securities registered under a registration statement filed by the
Company pursuant to the Registration Rights Agreement.
(iv) The Company and each Guarantor has all requisite corporate
(or partnership or limited liability company) power and authority to
execute, deliver and perform each of its obligations under the
Indenture, the Notes, the Exchange Notes and the Private Exchange Notes;
the Indenture meets the requirements for qualification under the TIA;
the Indenture has been duly and validly authorized by the Company and
each Guarantor and, when duly executed and delivered by the Company and
each Guarantor (assuming the due authorization, execution and delivery
thereof by the Trustee), will constitute the valid and legally binding
agreement of the Company and each Guarantor, enforceable against the
Company and each Guarantor in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
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<PAGE>
(v) The Notes are in the form contemplated by the Indenture. The
Notes have each been duly and validly authorized by the Company and,
when duly executed and delivered by the Company and paid for by the
Initial Purchasers in accordance with the terms of this Agreement
(assuming the due authorization, execution and delivery of the Indenture
by the Trustee and due authentication and delivery of the Notes by the
Trustee in accordance with the Indenture), will constitute the valid and
legally binding obligations of the Company, entitled to the benefits of
the Indenture, and enforceable against the Company in accordance with
their terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and
(ii) general principles of equity and the discretion of the court before
which any proceeding therefor may be brought.
(vi) The Exchange Notes and the Private Exchange Notes have been
duly and validly authorized by the Company, and when the Exchange Notes
and the Private Exchange Notes have been duly executed and delivered by
the Company in accordance with the terms of the Registration Rights
Agreement and the Indenture (assuming the due authorization, execution
and delivery of the Indenture by the Trustee and due authentication and
delivery of the Exchange Notes and the Private Exchange Notes by the
Trustee in accordance with the Indenture), will constitute the valid and
legally binding obligations of the Company, entitled to the benefits of
the Indenture, and enforceable against the Company in accordance with
their terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and
(ii) general principles of equity and the discretion of the court before
which any proceeding therefor may be brought.
(vii) The Company and each Guarantor has all requisite corporate
(or partnership or limited liability company) power and authority to
execute, deliver and perform its obligations under the Registration
Rights Agreement; the Registration Rights Agreement has been duly and
validly authorized by the Company and each Guarantor and, when duly
executed and delivered by the Company and each Guarantor (assuming due
authorization, execution and delivery thereof by the Initial
Purchasers), will constitute the valid and legally binding agreement of
the Company and each Guarantor, enforceable against the Company and each
Guarantor in accordance with its terms, except that (A) the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may be
brought and (B) an rights to indemnity or contribution thereunder may be
limited by federal and state securities laws and public policy
considerations.
(viii) The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement and
to consummate the transactions contemplated hereby; and this Agreement
and the consummation by the Company of the transactions contemplated
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<PAGE>
hereby have been duly and validly authorized by the Company. This
Agreement has been duly executed and delivered by the Company.
(ix) The Indenture, the Notes, the Guarantees and the Registration
Rights Agreement conform in all material respects to the descriptions
thereof contained in the Final Memorandum.
(x) No legal or governmental proceedings are pending or, to the
knowledge of such counsel, threatened to which any of the Company or the
Subsidiaries is a party or to which the property or assets of the
Company or any Subsidiary is subject which, if determined adversely to
the Company or the Subsidiaries, would result, individually or in the
aggregate, in a Material Adverse Effect, or which seeks to restrain,
enjoin, prevent the consummation of or otherwise challenge the issuance
or sale of the Notes to be sold hereunder or the consummation of the
other transactions described in the Final Memorandum under the caption
"The Acquisition and Related Financing Transactions."
(xi) None of the Company or the Subsidiaries is (i) in violation
of its certificate of incorporation or bylaws (or similar organizational
document), (ii) to the knowledge such counsel, in breach or violation of
any statute, judgment, decree, order, rule or regulation applicable to
any of them or any of their respective properties or assets, except for
any such breach or violation which would not, individually or in the
aggregate, have a Material Adverse Effect, or (iii) in breach or default
under (nor has any event occurred which, with notice or passage of time
or both, would constitute a default under) or in violation of any of the
terms or provisions of any Contract known to such counsel (including in
any event any of the foregoing which have been filed by the Company with
the Commission), except for any such breach, default, violation or event
which would not, individually or in the aggregate, have a Material
Adverse Effect.
(xii) The execution, delivery and performance of this Agreement,
the Indenture, the Registration Rights Agreement and the consummation of
the transactions contemplated hereby and thereby (including, without
limitation, the issuance and sale of the Notes to the Initial
Purchasers) will not conflict with or constitute or result in a breach
or a default under (or an event which with notice or passage of time or
both would constitute a default under) or violation of any of (i) the
terms or provisions of any Contract known to such counsel (including in
any event any of the foregoing which have been filed by the Company with
the Commission), except for any such conflict, breach, violation,
default or event which would not, individually or in the aggregate, have
a Material Adverse Effect, (ii) the certificate of incorporation or
bylaws (or similar organizational document) of the Company or any of the
Subsidiaries, or (iii) (assuming compliance with all applicable state
securities or "Blue Sky" laws and assuming the accuracy of the
representations and warranties of the Initial Purchasers in Section 8
hereof) any statute, judgment, decree, order, rule or regulation known
to such counsel to be applicable to the Company or any of the
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Subsidiaries or any of their respective properties or assets, except for
any such conflict, breach or violation which would not, individually or
in the aggregate, have a Material Adverse Effect.
(xiii) No consent, approval, authorization or order of any
governmental authority is required for the issuance and sale by the
Company of the Notes to the Initial Purchasers, the issuance by any
Guarantor of its Guarantee or the consummation by the Company or any
Guarantor of the other transactions contemplated hereby, except such as
may be required under Blue Sky laws, as to which such counsel need
express no opinion, and those which have previously been obtained.
(xiv) The Company and the Subsidiaries have obtained all Permits
necessary to conduct the businesses now or proposed to be conducted by
them as described in the Final Memorandum, the lack of which would,
individually or in the aggregate, have a Material Adverse Effect; and
each of the Company and the Subsidiaries has fulfilled and performed all
of its obligations with respect to such Permits and no event has
occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Permit.
(xv) To the best of such counsel's knowledge, the Company and the
Subsidiaries own or possess adequate licenses or other rights to use all
patents, trademarks, service marks, trade names, copyrights and know-how
necessary to conduct the businesses now or proposed to be operated by
them as described in the Final Memorandum, and none of the Company or
the Subsidiaries has received any notice of infringement of or conflict
with asserted rights of others with respect to any patents, trademarks,
service marks, trade names, copyrights or know-how which, if such
assertion of infringement or conflict were sustained, would have a
Material Adverse Effect.
(xvi) To the knowledge of such counsel, there are no legal or
governmental proceedings involving or affecting the Company or the
Subsidiaries or any of their respective properties or assets which would
be required to be described in a prospectus pursuant to the Act that are
not described in the Final Memorandum, nor are there any material
contracts or other documents which would be required to be described in
a prospectus pursuant to the Act that are not described in the Final
Memorandum.
(xvii) None of the Company or the Subsidiaries is, or immediately
after the sale of the Notes to be sold hereunder and the application of
the proceeds from such sale (as described in the Final Memorandum under
the caption "Sources and Uses of Funds") will be, an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended.
(xviii) No registration under the Act of the Notes or the
Guarantees is required in connection with the sale of the Notes to the
Initial Purchasers as contemplated by this Agreement and the Final
Memorandum or in connection with the initial resale of the Notes by the
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Initial Purchasers in accordance with Section 8 of this Agreement, and
prior to the commencement of the Exchange Offer (as defined in the
Registration Rights Agreement) or the effectiveness of the Shelf
Registration Statement (as defined in the Registration Rights
Agreement), the Indenture is not required to be qualified under the TIA,
in each case assuming (i) (A) that the purchasers who buy such Notes in
the initial resale thereof are qualified institutional buyers as defined
in Rule 144A promulgated under the Act ("QIBS") or accredited investors
as defined in Rule 501(a) (1), (2), (3) or (7) promulgated under the Act
("ACCREDITED INVESTORS") or (B) that the offer or sale of the Notes is
made in an offshore transaction as defined in Regulation S, (ii) the
accuracy of the Initial Purchasers' representations in Section 8 and
those of the Company contained in this Agreement regarding the absence
of a general solicitation in connection with the sale of such Notes to
the Initial Purchasers and the initial resale thereof and (iii) the due
performance by the Initial Purchasers of the agreements set forth in
Section 8 hereof.
(xix) Neither the consummation of the transactions contemplated by
this Agreement nor the sale, issuance, execution or delivery of the
Notes will violate Regulation T, U or X of the Board of Governors of the
Federal Reserve System.
At the time the foregoing opinion is delivered, Freedman, Levy, Kroll &
Simonds shall additionally state that it has participated in conferences with
officers and other representatives of the Company, representatives of the
independent public accountants for the Company, representatives of the Initial
Purchasers and counsel for the Initial Purchasers, at which conferences the
contents of the Final Memorandum and related matters were discussed, and,
although it has not independently verified and is not passing upon and assumes
no responsibility for the accuracy, completeness or fairness of the statements
contained in the Final Memorandum (except to the extent specified in
subsection 7(a)(ix)), no facts have come to its attention which lead it to
believe that the Final Memorandum, on the date thereof or at the Closing Date,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading (it being understood that such firm need express no
opinion with respect to the financial statements and related notes thereto and
the other financial, statistical and accounting data included in the Final
Memorandum). The opinion of Freedman, Levy, Kroll & Simonds described in this
Section 7(a) shall be rendered to the Initial Purchasers at the request of the
Company and shall so state therein.
References to the Final Memorandum in this subsection (a) shall include
any amendment or supplement thereto prepared in accordance with the provisions
of this Agreement at the Closing Date.
(b) On the Closing Date, the Initial Purchasers shall have received the
opinion, in form and substance satisfactory to the Initial Purchasers, dated
as of the Closing Date and addressed to the Initial Purchasers, of Willkie
Farr & Gallagher, counsel for the Initial Purchasers, with respect to certain
legal matters relating to this Agreement and such other related matters as the
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Initial Purchasers may reasonably require. In rendering such opinion, Willkie
Farr & Gallagher shall have received and may rely upon such certificates and
other documents and information as it may reasonably request to pass upon such
matters.
(c) The Initial Purchasers shall have received from the Independent
Accountants a comfort letter or letters dated the date hereof and the Closing
Date, in form and substance satisfactory to counsel for the Initial
Purchasers.
(d) The representations and warranties of the Company contained in this
Agreement (including, without limitation, the representations and warranties
referenced in the penultimate paragraph of Section 2) shall be true and
correct on and as of the date hereof and on and as of the Closing Date as if
made on and as of the Closing Date; the statements of the Company's officers
made pursuant to any certificate delivered in accordance with the provisions
hereof shall be true and correct on and as of the date made and on and as of
the Closing Date; the Company shall have performed all covenants and
agreements and satisfied all conditions on their part to be performed or
satisfied hereunder at or prior to the Closing Date; and, except as described
in the Final Memorandum (exclusive of any amendment or supplement thereto
after the date hereof), subsequent to the date of the most recent financial
statements in such Final Memorandum, there shall have been no event or
development, and no information shall have become known, that, individually or
in the aggregate, has or would be reasonably likely to have a Material Adverse
Effect.
(e) The sale of the Notes hereunder shall not be enjoined (temporarily
or permanently) on the Closing Date.
(f) Subsequent to the date of the most recent financial statements in
the Final Memorandum (exclusive of any amendment or supplement thereto after
the date hereof), none of the Company, any of the Subsidiaries, NovaCare O&P,
or any of its subsidiaries shall have sustained any loss or interference with
respect to its business or properties from fire, flood, hurricane, accident or
other calamity, whether or not covered by insurance, or from any strike, labor
dispute, slow down or work stoppage or from any legal or governmental
proceeding, order or decree, which loss or interference, individually or in
the aggregate, has or would be reasonably likely to have a Material Adverse
Effect.
(g) The Initial Purchasers shall have received a certificate of the
Company, dated the Closing Date, signed on behalf of the Company by its
Chairman of the Board, President or any Senior Vice President and the Chief
Financial Officer, to the effect that:
(i) The representations and warranties of the Company contained in
this Agreement (including, without limitation, the representations and
warranties referenced in the penultimate paragraph of Section 2) are
true and correct on and as of the date hereof and on and as of the
Closing Date, and the Company has performed all covenants and agreements
and satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date;
-18-
<PAGE>
(ii) At the Closing Date, since the date hereof or since the date
of the most recent financial statements in the Final Memorandum
(exclusive of any amendment or supplement thereto after the date
hereof), no event or development has occurred, and no information has
become known, that, individually or in the aggregate, has or would be
reasonably likely to have a Material Adverse Effect; and
(iii) The sale of the Notes hereunder has not been enjoined
(temporarily or permanently).
(h) On the Closing Date, the Initial Purchasers shall have received the
Registration Rights Agreement executed by the Company and each Guarantor and
such agreement shall be in full force and effect at all times from and after
the Closing Date.
On or before the Closing Date, the Initial Purchasers and counsel for
the Initial Purchasers shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and the Subsidiaries as
they shall have heretofore reasonably requested from the Company.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the
provisions hereof only if they are reasonably satisfactory in all material
respects to the Initial Purchasers and counsel for the Initial Purchasers. The
Company shall furnish to the Initial Purchasers such conformed copies of such
documents, opinions, certificates, letters, schedules and instruments in such
quantities as the Initial Purchasers shall reasonably request.
8. OFFERING OF NOTES; RESTRICTIONS ON TRANSFER. (a) Each of the Initial
Purchasers represents and warrants (as to itself only) that it is a QIB. Each
of the Initial Purchasers agrees with the Company (as to itself only) that (i)
it has not and will not solicit offers for, or offer or sell, the Notes by any
form of general solicitation or general advertising (as those terms are used
in Regulation D under the Act) or in any manner involving a public offering
within the meaning of Section 4(2) of the Act; and (ii) it has and will
solicit offers for the Notes only from, and will offer the Notes only to (A)
in the case of offers inside the United States, (x) persons whom such Initial
Purchaser reasonably believes to be QIBs or, if any such person is buying for
one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to such Initial
Purchasers that each such account is a QIB, to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A, and, in each
case, in transactions under Rule 144A or (y) a limited number of other
institutional investors reasonably believed by such Initial Purchaser to be
Accredited Investors that, prior to their purchase of the Notes, deliver to
such Initial Purchaser a letter containing the representations and agreements
set forth in the applicable exhibit to the Indenture and (B) in the case of
offers outside the United States, to persons other than U.S. persons ("FOREIGN
PURCHASERS," which term shall include dealers or other professional
fiduciaries in the United States acting on a discretionary basis for foreign
beneficial owners (other than an estate or trust)); PROVIDED, HOWEVER, that,
in the case of this clause (B), in purchasing such Notes such persons are
-19-
<PAGE>
deemed to have represented and agreed as provided under the caption "Transfer
Restrictions" contained in the Final Memorandum (or, if the Final Memorandum
is not in existence, in the most recent Memorandum).
(b) Each of the Initial Purchasers represents and warrants (as to itself
only) with respect to offers and sales outside the United States that (i) it
has complied and will comply with all applicable laws and regulations in each
jurisdiction in which it acquires, offers, sells or delivers Notes or has in
its possession or distributes any Memorandum or any such other material, in
all cases at its own expense; (ii) the Notes have not been and will not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except in accordance with Regulation S under the Act or
pursuant to an exemption from the registration requirements of the Act; (iii)
it has offered the Notes and will offer and sell the Notes (A) as part of its
distribution at any time and (B) otherwise until 40 days after the later of
the commencement of the offering and the Closing Date, only in accordance with
Rule 903 of Regulation S and, accordingly, neither it nor any persons acting
on its behalf have engaged or will engage in any directed selling efforts
(within the meaning of Regulation S) with respect to the Notes, and any such
persons have complied and will comply with the offering restrictions
requirement of Regulation S; and (iv) it agrees that, at or prior to
confirmation of sales of the Notes, it will have sent to each distributor,
dealer or person receiving a selling concession, fee or other remuneration
that purchases Notes from it during the restricted period a confirmation or
notice to substantially the following effect:
"The Securities covered hereby have not been registered
under the United States Securities Act of 1933 (the
"Securities Act") and may not be offered and sold within the
United States or to, or for the account or benefit of, U.S.
persons (i) as part of the distribution of the Securities at
any time or (ii) otherwise until 40 days after the later of
the commencement of the offering and the closing date of the
offering, except in either case in accordance with
Regulation S (or Rule 144A if available) under the
Securities Act. Terms used above have the meaning given to
them in Regulation S."
Terms used in this Section 8 and not defined in this Agreement have the
meanings given to them in Regulation S.
9. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to indemnify
and hold harmless the Initial Purchasers, and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which any Initial Purchaser or such controlling person may
become subject under the Act, the Exchange Act or otherwise, insofar as any
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon:
-20-
<PAGE>
(i) any untrue statement or alleged untrue statement of any
material fact contained in any Memorandum or any amendment or supplement
thereto or any application or other document, or any amendment or
supplement thereto, executed by the Company or based upon written
information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Notes under the securities or "Blue
Sky" laws thereof or filed with any securities association or securities
exchange (each an "APPLICATI "); or
(ii) the omission or alleged omission to state, in any Memorandum
or any amendment or supplement thereto or any Application, a material
fact required to be stated therein or necessary to make the statements
therein not misleading,
and will reimburse, as incurred, the Initial Purchasers and each such
controlling person for any legal or other expenses incurred by the Initial
Purchasers or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action; PROVIDED, HOWEVER, the Company
will not be liable in any such case to the extent that any such loss, claim,
damage, or liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in any
Memorandum or any amendment or supplement thereto or any Application in
reliance upon and in conformity with written information concerning the
Initial Purchasers furnished to the Company by the Initial Purchasers
specifically for use therein. This indemnity agreement will be in addition to
any liability that the Company may otherwise have to the indemnified parties.
The Company shall not be liable under this Sectio 9 for any settlement of any
claim or action effected without its prior written consent, which shall not be
unreasonably withheld.
(b) The Initial Purchasers agree to indemnify and hold harmless the
Company, its directors, its officers and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any losses, claims, damages or liabilities to which the
Company or any such director, officer or controlling person may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any Memorandum or any amendment or supplement
thereto or any Application, or (ii) the omission or the alleged omission to
state therein a material fact required to be stated in any Memorandum or any
amendment or supplement thereto or any Application, or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information concerning such Initial Purchaser, furnished to the Company by the
Initial Purchasers specifically for use therein; and subject to the limitation
set forth immediately preceding this clause, will reimburse, as incurred, any
legal or other expenses incurred by the Company or any such director, officer
or controlling person in connection with investigating or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action in respect thereof. This indemnity agreement will
be in addition to any liability that the Initial Purchasers may otherwise have
-21-
<PAGE>
to the indemnified parties. The Initial Purchasers shall not be liable under
this Section 9 for any settlement of any claim or action effected without
their consent, which shall not be unreasonably withheld. The Company shall
not, without the prior written consent of the Initial Purchasers, effect any
settlement or compromise of any pending or threatened proceeding in respect of
which any Initial Purchaser is or could have been a party, or indemnity could
have been sought hereunder by any Initial Purchaser, unless such settlement
(A) includes an unconditional written release of the Initial Purchasers and
all respective controlling persons party to such proceeding, in form and
substance reasonably satisfactory to the Initial Purchasers, from all
liability on claims that are the subject matter of such proceeding and (B)
does not include any statement as to an admission of fault, culpability or
failure to act by or on behalf of any Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this Section 9
of notice of the commencement of any action for which such indemnified party
is entitled to indemnification under this Section 9, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 9, notify the indemnifying party of the commencement
thereof in writing; but the omission to so notify the indemnifying party (i)
will not relieve it from any liability under paragraph (a) or (b) above unless
and to the extent such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraphs (a) and (b)
above. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory
to such indemnified party; PROVIDED, HOWEVER, that if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party would
present such counsel with a conflict of interest, (ii) the defendants in any
such action include both the indemnified party and the indemnifying party and
the indemnified party shall have been advised by counsel that there may be one
or more legal defenses available to it and/or other indemnified parties that
are different from or additional to those available to the indemnifying party,
or (iii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after receipt by the indemnifying party of notice of
the institution of such action, then, in each such case, the indemnifying
party shall not have the right to direct the defense of such action on behalf
of such indemnified party or parties and such indemnified party or parties
shall have the right to select separate counsel to defend such action on
behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by such indemnified party of counsel appointed to
defend such action, the indemnifying party will not be liable to such
indemnified party under this Section 9 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being understood, however,
that in connection with such action the indemnifying party shall not be liable
for the expenses of more than one separate counsel (in addition to local
-22-
<PAGE>
counsel) in any one action or separate but substantially similar actions in
the same jurisdiction arising out of the same general allegations or
circumstances, designated by the Initial Purchasers in the case of paragraph
(a) of this Section 9 or the Company in the case of paragraph (b) of this
Section 9, representing the indemnified parties under such paragraph (a) or
paragraph (b), as the case may be, who are parties to such action or actions)
or (ii) the indemnifying party has authorized in writing the employment of
counsel for the indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the prior
written consent of the indemnifying party (which consent shall not be
unreasonably withheld), unless such indemnified party waived in writing its
rights under this Section 9, in which case the indemnified party may effect
such a settlement without such consent.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 9 is unavailable to, or insufficient
to hold harmless, an indemnified party in respect of any losses, claims,
damages or liabilities (or actions in respect thereof), each indemnifying
party, in order to provide for just and equitable contribution, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect (i) the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Notes or (ii) if the
allocation provided by the foregoing clause (i) is not permitted by applicable
law, not only such relative benefits but also the relative fault of the
indemnifying party or parties on the one hand and the indemnified party on the
other in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by the Company on
the one hand and any Initial Purchaser on the other shall be deemed to be in
the same proportion as the total proceeds from the offering (before deducting
expenses) received by the Company bear to the total discounts and commissions
received by such Initial Purchaser. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company on the
one hand, or such Initial Purchaser on the other, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission or alleged statement or omission, and any other
equitable considerations appropriate in the circumstances. The Company and the
Initial Purchasers agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), no Initial
Purchaser shall be obligated to make contributions hereunder that in the
aggregate exceed the total discounts, commissions and other compensation
received by such Initial Purchaser under this Agreement, less the aggregate
amount of any damages that such Initial Purchaser has otherwise been required
to pay by reason of the untrue or alleged untrue statements or the omissions
or alleged omissions to state a material fact, and no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
-23-
<PAGE>
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each person,
if any, who controls an Initial Purchaser within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Initial Purchasers, and each director of the Company, each
officer of the Company and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
shall have the same rights to contribution as the Company.
10. SURVIVAL CLAUSE. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, its
officers and the Initial Purchasers set forth in this Agreement or made by or
on behalf of them pursuant to this Agreement shall remain in full force and
effect, regardless of (i) any investigation made by or on behalf of the
Company, any of its officers or directors, the Initial Purchasers or any
controlling person referred to in Section 9 hereof and (ii) delivery of and
payment for the Notes. The respective agreements, covenants, indemnities and
other statements set forth in Sections 6, 9 and 14 hereof shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement.
11. TERMINATION. (a) This Agreement may be terminated in the sole
discretion of the Initial Purchasers by notice to the Company given prior to
the Closing Date in the event that the Company shall have failed, refused or
been unable to perform all obligations and satisfy all conditions on its part
to be performed or satisfied hereunder at or prior thereto or, if at or prior
to the Closing Date:
(i) any of the Company, the Subsidiaries or NovaCare O&P or any of
its subsidiaries shall have sustained any loss or interference with
respect to its businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from
any strike, labor dispute, slow down or work stoppage or any legal or
governmental proceeding, which loss or interference, in the sole
judgment of the Initial Purchasers, has had or has a Material Adverse
Effect, or there shall have been, in the sole judgment of the Initial
Purchasers, any event or development that, individually or in the
aggregate, has or could be reasonably likely to have a Material Adverse
Effect (including without limitation a change in control of the Company
or the Subsidiaries), except in each case as described in the Final
Memorandum (exclusive of any amendment or supplement thereto);
(ii) trading in securities of the Company or in securities
generally on the New York Stock Exchange, American Stock Exchange or the
Nasdaq National Market shall have been suspended or minimum or maximum
prices shall have been established on any such exchange or market;
(iii) a banking moratorium shall have been declared by New York or
United States authorities;
-24-
<PAGE>
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international
calamity or emergency, or (C) any material change in the financial
markets of the United States which, in the case of (A), (B) or (C) above
and in the sole judgment of the Initial Purchasers, makes it
impracticable or inadvisable to proceed with the offering or the
delivery of the Notes as contemplated by the Final Memorandum; or
(v) any securities of the Company shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11 shall be
without liability of any party to any other party except as provided in
Section 10 hereof.
12. INFORMATION SUPPLIED BY THE INITIAL PURCHASERS. The statements set
forth in the second and third sentences of the fifth paragraph and the first,
second, third and fourth sentences of the seventh paragraph under the heading
"Private Placement" in the Final Memorandum (to the extent such statements
relate to the Initial Purchasers) constitute the only information furnished by
the Initial Purchasers to the Company for the purposes of Sections 2(a) and 9
hereof.
13. NOTICES. All communications hereunder shall be in writing and, if
sent to the Initial Purchasers, shall be mailed or delivered to Deutsche Bank
Securities Inc., 130 Liberty Street, New York, New York 10006, Attention:
Corporate Finance Department, with a copy to Willkie Farr & Gallagher, 787
Seventh Avenue, New York, New York 10019, Attention: William J. Grant, Jr.,
and if sent to the Company, shall be mailed or delivered to the Company at
7700 Old Georgetown Road, Bethesda, Maryland, Attention: Ivan R. Sabel; with a
copy to Freedman, Levy, Kroll & Simonds, Washington Square, 1050 Connecticut
Avenue, N.W., Washington, D.C,. 20036-5366, Attention: Jay W. Freedman.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; and one
business day after being timely delivered to a next-day air courier.
14. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchasers, the Company and their respective
successors and legal representatives, and nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any other person any
legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained; this Agreement and all
conditions and provisions hereof being intended to be and being for the sole
and exclusive benefit of such persons and for the benefit of no other person
except that (i) the indemnities of the Company contained in Section 9 of this
Agreement shall also be for the benefit of any person or persons who control
the Initial Purchasers within the meaning of Section 15 of the Act or Section
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<PAGE>
20 of the Exchange Act and (ii) the indemnities of the Initial Purchasers
contained in Section 9 of this Agreement shall also be for the benefit of the
directors of the Company, its officers and any person or persons who control
the Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act. No purchaser of Notes from the Initial Purchasers will be deemed
a successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT,
AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO
ANY PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company
and the Initial Purchasers.
Very truly yours,
HANGER ORTHOPEDIC GROUP, INC.
By: /s/IVAN R. SABEL
------------------------------------
Name: Ivan R. Sabel
Title: Chairman, President and Chief
Executive Officer
DEUTSCHE BANK SECURITIES INC.
By: /s/JULIE PERSILY
------------------------
Name: Julie Persily
Title: Managing Director
CHASE SECURITIES INC.
By: /s/IRA GINSBERG
---------------------
Name: Ira Ginsburg
Title: Vice President
PARIBAS CORPORATION
By: /s/ROBERT E. HOWARD
------------------------
Name: Robert E. Howard
Title: Managing Director
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
Principal
Amount of
Initial Purchaser Notes
- ----------------- -----
<S> <C>
Deutsche Bank Securities Inc......................................... 90,000,000
Chase Securities Inc................................................. 37,500,000
Paribas Corporation.................................................. 22,500,000
------------
Total...................................................... $ 150,000,000
</TABLE>
<PAGE>
SCHEDULE 2
<TABLE>
<CAPTION>
SUBSIDIARIES OF THE COMPANY
Jurisdiction of
Name Incorporation
- ---- -------------
<S> <C>
Hanger Prosthetics & Orthotics, Inc. Delaware
Eugene Tuefel & Son Orthotics & Prosthetics, Inc. Pennsylvania
Southern Prosthetic Supply, Inc. Georgia
Seattle Orthopedic Group, Inc. Delaware
OPNET, Inc. Nevada
HPO Acquisition Corp. Delaware
Hanger Europe, N.V. Belgium
</TABLE>
EXHIBIT 10(C)
HANGER ORTHOPEDIC GROUP, INC.
as Issuer,
and
THE GUARANTORS
(defined herein)
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
-----------------------
INDENTURE
Dated as of June 16, 1999
-----------------------
up to $300,000,000
11 1/4% Senior Subordinated Notes due 2009
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
------- ---------
<S> <C>
310(a)(1)..................................................... 7.10
(a)(2)..................................................... 7.10
(a)(3)..................................................... N.A.
(a)(4)..................................................... N.A.
(a)(5)..................................................... 7.8; 7.10
(b)........................................................ 7.8; 7.10; 13.2
(c)........................................................ N.A.
311(a)........................................................ 7.11
(b)........................................................ 7.11
(c)........................................................ N.A.
312(a)........................................................ 2.5
(b)........................................................ 13.3
(c)........................................................ 13.3
313(a)........................................................ 7.6
(b)(1)..................................................... N.A.
(b)(2)..................................................... 7.6
(c)........................................................ 7.6; 13.2
(d)........................................................ 7.6
314(a)........................................................ 4.6; 4.8; 13.2
(b)........................................................ N.A.
(c)(1)..................................................... 13.4
(c)(2)..................................................... 13.4
(c)(3)..................................................... N.A.
(d)........................................................ N.A.
(e)........................................................ 13.5
(f)........................................................ N.A.
315(a)........................................................ 7.1(b)
(b)........................................................ 7.5; 13.2
(c)........................................................ 7.1(a)
(d)........................................................ 7.1(c)
(e)........................................................ 6.11
316(a)(last sentence)......................................... 2.9
(a)(1)(A).................................................. 6.5
(a)(1)(B).................................................. 6.4
(a)(2)..................................................... N.A.
(b)........................................................ 6.7
(c)........................................................ 9.5
317(a)(1)..................................................... 6.8
(a)(2)..................................................... 6.9
(b)........................................................ 2.4
318(a)........................................................ 13.1
<PAGE>
(c)........................................................ 13.1
</TABLE>
--------------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions. ................................................ 1
Section 1.2. Incorporation by Reference of TIA............................. 35
Section 1.3. Rules of Construction......................................... 36
ARTICLE II. THE NOTES
Section 2.1. Form and Dating............................................... 36
Section 2.2. Execution and Authentication;
Aggregate Principal Amount................................... 37
Section 2.3. Registrar and Paying Agent.................................... 39
Section 2.4. Paying Agent To Hold Assets in Trust.......................... 40
Section 2.5. Noteholder Lists.............................................. 40
Section 2.6. Transfer and Exchange......................................... 41
Section 2.7. Replacement Notes............................................. 41
Section 2.8. Outstanding Notes............................................. 42
Section 2.9. Treasury Notes................................................ 42
Section 2.10. Temporary Notes.............................................. 43
Section 2.11. Cancellation................................................. 43
Section 2.12. Defaulted Interest........................................... 44
Section 2.13. CUSIP Number................................................. 44
Section 2.14. Deposit of Moneys............................................ 44
Section 2.15. Book-Entry Provisions for Global Notes....................... 44
Section 2.16. Special Transfer Provisions.................................. 46
ARTICLE III. REDEMPTION; PLEDGE FOR SPECIAL MANDATORY REDEMPTION
Section 3.1. Notices to Trustee............................................ 49
Section 3.2. Selection of Notes To Be Redeemed............................. 50
Section 3.3. Notice of Redemption.......................................... 50
Section 3.4. Effect of Notice of Redemption................................ 51
Section 3.5. Deposit of Redemption Price................................... 52
Section 3.6. Notes Redeemed in Part........................................ 52
Section 3.7. Pledge for Special Mandatory Redemption....................... 52
ARTICLE IV. COVENANTS
Section 4.1. Payment of Notes.............................................. 54
Section 4.2. Maintenance of Office or Agency............................... 54
Section 4.3. Corporate Existence........................................... 54
(i)
<PAGE>
Section 4.4. Payment of Taxes and Other Claims............................. 55
Section 4.5. Conduct of Business........................................... 55
Section 4.6. Compliance Certificate; Notice of Default..................... 55
Section 4.7. Compliance with Laws.......................................... 56
Section 4.8. Reports to Holders............................................ 57
Section 4.9. Waiver of Stay, Extension or Usury Laws....................... 58
Section 4.10. Limitation on Restricted Payments............................ 58
Section 4.11. Limitation on Transactions with Affiliates................... 61
Section 4.12. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted
Subsidiaries................................................ 62
Section 4.13. Prohibition on Incurrence of Senior
Subordinated Debt........................................... 63
Section 4.14. Limitation on Incurrence of Additional
Indebtedness................................................ 64
Section 4.15. Offer to Repurchase Upon a Change of Control................. 64
Section 4.16. Limitation on Asset Sales.................................... 67
Section 4.17. Limitation on Issuances and Sales of Capital
Stock of Restricted Subsidiaries............................ 71
Section 4.18. Limitation on Liens.......................................... 71
Section 4.19. Payments for Consent......................................... 72
Section 4.20. Additional Guarantees........................................ 72
Section 4.21. Designation of Subsidiaries.................................. 73
ARTICLE V. SUCCESSOR CORPORATION
Section 5.1. When Company May Merge, Etc................................... 73
Section 5.2. Successor Corporation Substituted............................. 75
Section 5.3. When a Guarantor May Merge, Etc............................... 75
ARTICLE VI. DEFAULT AND REMEDIES
Section 6.1. Events of Default............................................. 76
Section 6.2. Acceleration. ................................................ 78
Section 6.3. Other Remedies................................................ 79
Section 6.4. Waiver of Past Defaults....................................... 79
Section 6.5. Control by Majority........................................... 80
Section 6.6. Limitation on Suits........................................... 80
Section 6.7. Rights of Holders To Receive Payment.......................... 81
Section 6.8. Collection Suit by Trustee.................................... 81
Section 6.9. Trustee May File Proofs of Claim.............................. 81
Section 6.10. Priorities. ................................................ 82
Section 6.11. Undertaking for Costs........................................ 83
Section 6.12. Restoration of Rights and Remedies........................... 83
(ii)
<PAGE>
ARTICLE VII. TRUSTEE
Section 7.1. Duties of Trustee............................................. 83
Section 7.2. Rights of Trustee............................................. 85
Section 7.3. Individual Rights of Trustee.................................. 86
Section 7.4. Trustee's Disclaimer.......................................... 86
Section 7.5. Notice of Default............................................. 86
Section 7.6. Reports by Trustee to Holders................................. 87
Section 7.7. Compensation and Indemnity.................................... 87
Section 7.8. Replacement of Trustee........................................ 89
Section 7.9. Successor Trustee by Merger, Etc.............................. 90
Section 7.10. Eligibility; Disqualification................................ 90
Section 7.11. Preferential Collection of Claims Against
Company..................................................... 90
ARTICLE VIII. DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.1. Satisfaction and Discharge.................................... 91
Section 8.2. Legal Defeasance and Covenant Defeasance...................... 91
Section 8.3. Conditions to Legal Defeasance or Covenant
Defeasance................................................... 93
Section 8.4. Application of Trust Money.................................... 95
Section 8.5. Repayment to the Company or the Guarantors.................... 95
Section 8.6. Reinstatement................................................. 96
ARTICLE IX. AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1. Without Consent of Holders.................................... 97
Section 9.2. With Consent of Holders....................................... 98
Section 9.3. Compliance with TIA........................................... 99
Section 9.4. Revocation and Effect of Consents............................. 99
Section 9.5. Notation on or Exchange of Notes..............................100
Section 9.6. Trustee To Sign Amendments, Etc...............................101
ARTICLE X. SUBORDINATION
Section 10.1. Notes Subordinated to Senior Debt............................101
Section 10.2. No Payment on Notes in Certain Circumstances.................101
Section 10.3. Payment Over of Proceeds Upon Dissolution,
Etc.........................................................103
Section 10.4. Payments May Be Paid Prior to Dissolution....................105
Section 10.5. Subrogation. ................................................105
Section 10.6. Obligations of the Company Unconditional.....................106
Section 10.7. Notice to Trustee............................................106
Section 10.8. Reliance on Judicial Order or Certificate of
Liquidating Agent...........................................107
(iii)
<PAGE>
Section 10.9. Trustee's Relation to Senior Debt............................107
Section 10.10. Subordination Rights Not Impaired by Acts or
Omissions of the Company or Holders of Senior
Debt.......................................................108
Section 10.11. Noteholders Authorize Trustee To Effectuate
Subordination of Notes.....................................109
Section 10.12. This Article X Not To Prevent
Events of Default..........................................109
Section 10.13. Trustee's Compensation Not Prejudiced.......................109
ARTICLE XI. GUARANTEES
Section 11.1. Unconditional Guarantee......................................110
Section 11.2. Severability.................................................111
Section 11.3. Release of a Guarantor.......................................111
Section 11.4. Limitation of Guarantor's Liability..........................112
Section 11.5. Guarantors May Consolidate, Etc., on Certain
Terms.......................................................112
Section 11.6. Contribution.................................................113
Section 11.7. Waiver of Subrogation........................................114
ARTICLE XII. SUBORDINATION OF GUARANTEES
Section 12.1. Subordination of Guarantee...................................114
Section 12.2. No Payment on Guarantees in
Certain Circumstances.......................................115
Section 12.3. Payment Over of Proceeds Upon Dissolution,
Etc.........................................................117
Section 12.4. Payments May Be Paid Prior to Dissolution....................118
Section 12.5. Subrogation. ................................................119
Section 12.6. Obligations of Each Subsidiary Guarantor
Unconditional...............................................119
Section 12.7. Notice to Trustee............................................120
Section 12.8. Reliance on Judicial Order or Certificate of
Liquidating Agent...........................................121
Section 12.9. Trustee's Relation to Guarantor Senior Debt..................121
Section 12.10. Subordination Rights Not Impaired by Acts or
Omissions of a Guarantor or Holders of
Guarantor Senior Debt......................................122
Section 12.11. Noteholders Authorize Trustee To Effectuate
Subordination of Guarantees................................122
Section 12.12. This Article XII Not To Prevent
Events of Default..........................................123
Section 12.13. Trustee's Compensation Not Prejudiced.......................123
(iv)
<PAGE>
ARTICLE XIII. MISCELLANEOUS
Section 13.1. TIA Controls.................................................123
Section 13.2. Notices. ................................................124
Section 13.3. Communications by Holders with Other Holders.................125
Section 13.4. Certificate and Opinion as to
Conditions Precedent........................................125
Section 13.5. Statements Required in Certificate or Opinion................126
Section 13.6. Rules by Trustee, Paying Agent, Registrar....................126
Section 13.7. Legal Holidays...............................................126
Section 13.8. Governing Law; Waiver........................................127
Section 13.9. No Adverse Interpretation of Other Agreements................127
Section 13.10. No Recourse Against Others..................................127
Section 13.11. Successors. ................................................128
Section 13.12. Duplicate Originals.........................................128
Section 13.13. Severability................................................128
SIGNATURES.................................................................113
EXHIBIT A(1) - FORM OF INITIAL NOTE......................................A.1-1
EXHIBIT A(2) - FORM OF EXCHANGE NOTE.....................................A.2-1
EXHIBIT B - FORM OF LEGEND FOR GLOBAL NOTES.............................B-1
EXHIBIT C - FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS TO
NON-QIB ACCREDITED INVESTORS................................C-1
EXHIBIT D - FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS
PURSUANT TO REGULATION S....................................D-1
EXHIBIT E - FORM OF SUPPLEMENTAL INDENTURE..............................E-1
NOTE: THIS TABLE OF CONTENTS SHALL NOT, FOR ANY PURPOSE, BE DEEMED TO BE PART
OF THE INDENTURE.
(v)
<PAGE>
INDENTURE
INDENTURE, dated as of June 16, 1999, by and among Hanger Orthopedic
Group, Inc., a Delaware corporation (the "COMPANY"), the Guarantors (as
hereinafter defined) and U.S. Bank Trust National Association, as Trustee (the
"TRUSTEE").
The Company has duly authorized the creation of an issue of 11 1/4%
Senior Subordinated Notes due 2009 and, to provide therefor, the Company has
duly authorized the execution and delivery of this Indenture. All things
necessary to make the Notes, when duly issued and executed, by the Company and
authenticated and delivered hereunder, the valid obligations of the Company,
and to make this Indenture a valid and binding agreement of the Company, have
been done.
Each party hereto agrees as follows for the benefit of the other parties
and for the equal and ratable benefit of the Holders of the Notes.
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. DEFINITIONS.
"ACCELERATION NOTICE" has the meaning provided in Section 6.2.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
of the Company or at the time it merges or consolidates with the Company or
any of its Subsidiaries or assumed in connection with the acquisition of
assets from such Person and in each case whether or not incurred by such
Person in connection with, or in anticipation or contemplation of, such Person
becoming a Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.
"ACQUISITION" means the acquisition by the Company of all of the
outstanding Capital Stock of NovaCare Orthotics & Prosthetics, Inc. pursuant
to the terms of the Stock Purchase Agreement.
"ACT" means the Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.
<PAGE>
"ADJUSTED NET ASSETS" of a Guarantor at any date shall mean the lesser
of the amount by which (x) the fair value of the property of such Guarantor
exceeds the total amount of liabilities, including, without limitation,
contingent liabilities (after giving effect to all other fixed and contingent
liabilities incurred or assumed on such date), but excluding liabilities under
the Guarantee of such Guarantor at such date and (y) the present fair salable
value of the assets of such Guarantor at such date exceeds the amount that
will be required to pay the probable liability of such Guarantor on its debts
(after giving effect to all other fixed and contingent liabilities incurred or
assumed on such date and after giving effect to any collection from any
Subsidiary of such Guarantor in respect of the obligations of such Subsidiary
under the Guarantee), excluding debt in respect of the Guarantee, as they
become absolute and matured.
"AFFILIATE" means, with respect to any specified Person, any other
Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person.
The term "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"AFFILIATE TRANSACTION" has the meaning provided in Section 4.11.
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"ASSET ACQUISITION" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which
such Person (x) shall become a Restricted Subsidiary of the Company or any
Restricted Subsidiary of the Company, or (y) shall be merged with or into the
Company or any Restricted Subsidiary of the Company, or (b) the acquisition by
the Company or any Restricted Subsidiary of the Company of the assets of any
Person (other than a Restricted Subsidiary of the Company) which constitute
all or substantially all of the assets of such Person or comprises any
division or line of business of such Person or any other properties or assets
of such Person other than in the ordinary course of business.
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<PAGE>
"ASSET SALE" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the Company or
any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company of: (i) any Capital Stock of any Restricted
Subsidiary of the Company; or (ii) any other property or assets of the Company
or any Restricted Subsidiary of the Company other than in the ordinary course
of business; PROVIDED, HOWEVER, that Asset Sales shall not include: (a) a
transaction or series of related transactions for which the Company or its
Restricted Subsidiaries receive aggregate consideration of less than $500,000;
and (b) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of the Company as permitted under Section 5.1.
"AUTHENTICATING AGENT" has the meaning provided in Section 2.2.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar Federal, state
or foreign law for the relief of debtors.
"BLOCKAGE PERIOD" has the meaning provided in Section 10.2(a).
"BOARD OF DIRECTORS" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be
in full force and effect on the date of such certification, and delivered to
the Trustee.
"BUSINESS DAY" means a day that is not a Legal Holiday.
"CAPITAL STOCK" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other
equivalents (however designated and whether or not voting) of corporate stock,
including each class of Common Stock and Preferred Stock of such Person; and
(ii) with respect to any Person that is not a corporation, any and all
partnership, membership or other equity interests of such Person.
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<PAGE>
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the obligations
of such Person under a lease that are required to be classified and accounted
for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the
capitalized amount of such obligations at such date, determined in accordance
with GAAP.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the date
of acquisition thereof combined capital and surplus of not less than $250.0
million; (v) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (i) above entered
into with any bank meeting the qualifications specified in clause (iv) above;
and (vi) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (i) through (v)
above.
"CHANGE OF CONTROL" means the occurrence of one or more of the following
events:
(i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of the Company to any Person or
group of related Persons for purposes of Section 13(d) of the
Exchange Act (a "Group"), together with any Affiliates thereof
-4-
<PAGE>
(whether or not otherwise in compliance with the provisions of
this Indenture);
(ii) the approval by the holders of Capital Stock of the
Company of any plan or proposal for the liquidation or dissolution
of the Company (whether or not otherwise in compliance with the
provisions of this Indenture);
(iii) any Person or Group shall be or become the owner,
directly or indirectly, beneficially or of record, of shares
representing more than 40% of the aggregate ordinary voting power
represented by the issued and outstanding Capital Stock of the
Company;
(iv) any Person or Group, other than Chase, shall be or
become the owner, directly or indirectly, beneficially or of
record, of shares representing more than 25% of the aggregate
ordinary voting power represented by the issued and outstanding
Capital Stock of the Company, provided that Chase then owns,
directly or indirectly, beneficially or of record, a lesser
percentage of such aggregate voting power; or
(v) the replacement of a majority of the Board of Directors
of the Company over a two-year period from the directors who
constituted the Board of Directors of the Company at the beginning
of such period, and such replacement shall not have been approved
by a vote of at least a majority of the Board of Directors of the
Company then still in office who either were members of such Board
of Directors at the beginning of such period or whose election as
a member of such Board of Directors was previously so approved.
"CHANGE OF CONTROL OFFER" has the meaning provided in Section 4.15.
"CHANGE OF CONTROL PAYMENT DATE" has the meaning provided in Section
4.15.
"CEDEL" means Cedel S.A.
"CHASE" means Chase Capital Partners and its Affiliates.
-5-
<PAGE>
"COMMON STOCK" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on
the Issue Date or issued after the Issue Date, and includes, without
limitation, all series and classes of such common stock.
"COMPANY" means Hanger Orthopedic Group, Inc., a Delaware corporation
and its successors that become a party to this Indenture in accordance with
its terms.
"CONSOLIDATED EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income; and (ii) to the
extent Consolidated Net Income has been reduced thereby (1) all income taxes
of such Person and its Restricted Subsidiaries paid or accrued in accordance
with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses or taxes attributable
to sales or dispositions outside the ordinary course of business); (2)
Consolidated Interest Expense; and (3) Consolidated Non-cash Charges LESS any
non-cash items increasing Consolidated Net Income for such period, all as
determined on a consolidated basis for such Person and its Restricted
Subsidiaries in accordance with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "FOUR QUARTER PERIOD") ending prior to the date of the
transaction giving rise to the need to calculate the Consolidated Fixed Charge
Coverage Ratio for which financial statements are available (the "TRANSACTION
DATE") to Consolidated Fixed Charges of such Person for the Four Quarter
Period. In addition to and without limitation of the foregoing, for purposes
of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges"
shall be calculated after giving effect on a pro forma basis for the period of
such calculation to:
(i) the incurrence or repayment of any Indebtedness of such
Person or any of its Restricted Subsidiaries (and the application
of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness
(and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of
business for working capital purposes pursuant to working capital
facilities, occurring during the Four Quarter Period or at any
time subsequent to the last day of the Four Quarter Period and on
or prior to the Transaction Date, as if such incurrence or
repayment, as the case may be (and the application of the proceeds
-6-
<PAGE>
thereof), occurred on the first day of the Four Quarter Period;
and
(ii) any asset sales or other dispositions or Asset
Acquisitions (including, without limitation, any Asset Acquisition
giving rise to the need to make such calculation as a result of
such Person or one of its Restricted Subsidiaries (including any
Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable
for Acquired Indebtedness and also including any Consolidated
EBITDA (including any pro forma expense and cost reductions
calculated on a basis consistent with Regulation S-X under the
Exchange Act) attributable to the assets which are the subject of
the Asset Acquisition or asset sale or other disposition during
the Four Quarter Period) occurring during the Four Quarter Period
or at any time subsequent to the last day of the Four Quarter
Period and on or prior to the Transaction Date, as if such asset
sale or other disposition or Asset Acquisition (including the
incurrence, assumption or liability for any such Acquired
Indebtedness) occurred on the first day of the Four Quarter
Period.
If such Person or any of its Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the preceding sentence shall give
effect to the incurrence of such guaranteed Indebtedness as if such Person or
any Restricted Subsidiary of such Person had directly incurred or otherwise
assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio":
(1) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on
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<PAGE>
such Indebtedness in effect on the Transaction Date; and
(2) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by agreements relating to Interest Swap
Obligations, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements.
"CONSOLIDATED FIXED CHARGES" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense
PLUS (ii) the product of (x) the amount of all dividends on any series of
Preferred Stock of such Person (other than dividends accrued on the Redeemable
Preferred Stock and other than dividends paid in Qualified Capital Stock)
paid, accrued or scheduled to be paid or accrued during such period TIMES (y)
a fraction, the numerator of which is one and the denominator of which is one
minus the then current effective consolidated federal, state and local tax
rate of such Person, expressed as a decimal.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for
any period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount and amortization or
write-off of deferred financing costs, (b) the net costs under Interest Swap
Obligations, (c) all capitalized interest and (d) the interest portion of any
deferred payment obligation AND (ii) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Wholly Owned
Restricted Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP; PROVIDED that there shall be excluded therefrom:
(i) after-tax gains from Asset Sales (without regard to the
$500,000 limitation set forth in the definition thereof) or
-8-
<PAGE>
abandonments or reserves relating thereto;
(ii) after-tax items classified as extraordinary or
nonrecurring gains;
(iii) the net income of any Person acquired in a "pooling of
interests" transaction accrued prior to the date it becomes a
Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary
of the referent Person;
(iv) the net income (but not loss) of any Wholly Owned
Restricted Subsidiary of the referent Person to the extent that
the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is restricted by a contract,
operation of law or otherwise;
(v) the net income of any Person, other than a Wholly Owned
Restricted Subsidiary of the referent Person, except to the extent
of cash dividends or distributions paid to the referent Person or
to a Wholly Owned Restricted Subsidiary of the referent Person by
such Person;
(vi) any restoration to income of any contingency reserve,
except to the extent that provision for such reserve was made out
of Consolidated Net Income accrued at any time following the Issue
Date;
(vii) income or loss attributable to discontinued operations
(including, without limitation, operations disposed of during such
period whether or not such operations were classified as
discontinued); and
(viii) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent
Person's assets, any earnings of the successor corporation prior
to such consolidation, merger or transfer of assets.
"CONSOLIDATED NET WORTH" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
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<PAGE>
Disqualified Capital Stock of such Person.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person, for
any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Restricted Subsidiaries reducing Consolidated
Net Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP (excluding any such
charges constituting an extraordinary item or loss or any such charge which
requires an accrual of or a reserve for cash charges or expenditures for any
future period).
"COVENANT DEFEASANCE" has the meaning provided in Section 8.2(c).
"CREDIT AGREEMENT" means the Credit Agreement to be entered into on or
about the Issue Date, between the Company, the lenders party thereto in their
capacities as lenders thereunder and The Chase Manhattan Bank, Bankers Trust
Company, and Paribas, as agents, together with the related documents thereto
(including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder (PROVIDED that such increase in borrowings is
permitted by Section 4.14) or adding Restricted Subsidiaries of the Company as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DEADLINE DATE" means July 7, 1999.
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<PAGE>
"DEFAULT" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"DEPOSITORY" means The Depository Trust Company, its nominees and
successors.
"DEPOSITORY PARTICIPANTS" has the meaning provided in Section 2.15.
"DESIGNATED SENIOR DEBT" means (i) Indebtedness under or in respect of
the Credit Agreement and (ii) any other Indebtedness that, at the time of
determination, has an aggregate principal amount of at least $25.0 million and
is specifically designated in the instrument evidencing such Indebtedness as
"Designated Senior Debt" by the Company.
"DESIGNATION AMOUNT" means, at the time the Company designates any of
its Subsidiaries as an "Unrestricted Subsidiary" under this Indenture, the
fair market value of the Investment of the Company and the Restricted
Subsidiaries in such Subsidiary on such date.
"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder
thereof), or upon the happening of any event (other than an event which would
constitute a Change of Control), matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or is redeemable at the
sole option of the holder thereof (except, in each case, upon the occurrence
of a Change of Control) on or prior to the final maturity date of the Notes.
"DISTRIBUTION COMPLIANCE PERIOD" has the meaning provided in Regulation
S.
"DOMESTIC RESTRICTED SUBSIDIARY" means a Restricted Subsidiary
incorporated or otherwise organized or existing under the laws of the United
States, any state thereof or any territory or possession of the United States.
"EUROCLEAR" means Euroclear System.
"EVENT OF DEFAULT" has the meaning provided in Section 6.1.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"EXCHANGE NOTES" means the 11 1/4% Senior Subordinated Notes due 2009 to
be issued in exchange for the Initial Notes pursuant to the Registration
Rights Agreement or, with respect to Initial Notes issued under this Indenture
subsequent to the Issue Date pursuant to Section 2.2, a registration rights
agreement substantially identical to the Registration Rights Agreement.
"EXCHANGE OFFER" has the meaning assigned to such term in the
Registration Rights Agreement, dated as of June 16, 1999, by and among the
Company, the Guarantors, and BT Alex. Brown Incorporated, Deutsche Bank
Securities Inc., Chase Securities Inc. and Paribas Corporation as initial
purchasers (the "REGISTRATION RIGHTS AGREEMENT").
"FAIR MARKET VALUE" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length, free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. Fair
market value shall be determined by the Board of Directors of the Company
acting reasonably and in good faith and shall be evidenced by a Board
Resolution of the Board of Directors of the Company delivered to the Trustee.
"FUNDING GUARANTOR" has the meaning provided in Section 11.6.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"GLOBAL NOTES" has the meaning provided in Section 2.1.
"GUARANTEE" means the Guarantees executed and delivered by any Guarantor
with respect to the Company's Obligations under this Indenture and the Notes.
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"GUARANTOR" means each of the Company's Domestic Restricted
Subsidiaries, whether existing on the Issue Date or thereafter created. Each
Restricted Subsidiary of the Company created subsequent to the Issue Date will
execute a supplemental indenture in which such Restricted Subsidiary agrees to
be bound by the terms of this Indenture as a Guarantor; PROVIDED that any
Person constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Guarantee is released in accordance with the
terms of this Indenture.
"GUARANTOR BLOCKAGE PERIOD" has the meaning provided in Section 12.2(a).
"GUARANTOR PAYMENT BLOCKAGE NOTICE" has the meaning provided in Section
12.2(a).
"GUARANTOR DESIGNATED SENIOR DEBT", with respect to any Guarantor, means
(i) Indebtedness under or in respect of the Credit Agreement and (ii) any
other Indebtedness of such Guarantor that, at the time of determination, has
an aggregate principal amount of at least $25.0 million (including the
principal amount of Obligations of the Company and its Subsidiaries under such
Indebtedness) and is specifically designated in the instrument evidencing such
Indebtedness as "Designated Senior Debt" or "Guarantor Designated Senior Debt"
by the Company or any of its Subsidiaries.
"GUARANTOR SENIOR DEBT" means, with respect to any Guarantor: the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for
in the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of a Guarantor,
whether outstanding on the Issue Date or thereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Guarantee of such Guarantor. Without limiting the generality of
the foregoing, "Guarantor Senior Debt" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) on, and all other amounts owing in respect of:
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(i) all monetary obligations of every nature of the Company
under the Credit Agreement, including, without limitation,
obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and
indemnities;
(ii) all Interest Swap Obligations; and
(iii) all obligations under Currency Agreements; in each
case whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include:
(a) any Indebtedness of such Guarantor to a Subsidiary of
such Guarantor;
(b) Indebtedness to, or guaranteed on behalf of, any
shareholder, director, officer or employee of such Guarantor or
any Subsidiary of such Guarantor (including, without limitation,
amounts owed for compensation, but excluding any Guarantor Senior
Debt held by any Person who becomes such a shareholder as a result
of the exercise of remedies under such Guarantor Senior Debt);
(c) Indebtedness to trade creditors and other amounts
incurred in connection with obtaining goods, materials or
services;
(d) Indebtedness represented by Disqualified Capital Stock;
(e) any liability for federal, state, local or other taxes
owed or owing by such Guarantor;
(f) that portion of any Indebtedness incurred in violation
of Section 4.14 (but, as to any such obligation, no such violation
shall be deemed to exist for purposes of this clause (f) if the
holder(s) of such obligation or their representative and the
Trustee shall have received an Officers' Certificate of the
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Company to the effect that the incurrence of such Indebtedness
does not (or, in the case of revolving credit indebtedness, that
the incurrence of the entire committed amount thereof at the date
on which the initial borrowing thereunder is made would not)
violate such provisions of this Indenture);
(g) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States
Code, is without recourse to the Company; and
(h) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of such
Guarantor.
"HOLDER" or "NOTEHOLDER" means the person in whose name a Note is
registered on the Registrar's books.
"IAI GLOBAL NOTE" means, a permanent global Note in the form of EXHIBIT
A-1 hereto bearing the legend in EXHIBIT B hereto and the Private Placement
Legend and deposited with or on behalf of and registered in the name of the
Depository or its nominee, issued in a denomination equal to the outstanding
principal amount of the Notes initially sold to Institutional Accredited
Investors.
"INCUR" has the meaning provided in Section 4.14.
"INDEBTEDNESS" means with respect to any Person, 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 Capitalized Lease Obligations of such Person;
(iv) all Obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale
obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued
liabilities arising in the ordinary course of business that are
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not overdue by 90 days or more or are being contested in good
faith by appropriate proceedings promptly instituted and
diligently conducted);
(v) all Obligations for the reimbursement of any obligor on
any letter of credit, banker's acceptance or similar credit
transaction;
(vi) guarantees and other contingent obligations in respect
of Indebtedness referred to in clauses (i) through (v) above and
clause (viii) below;
(vii) all Obligations of any other Person of the type
referred to in clauses (i) through (vi) which are secured by any
lien on any property or asset of such Person, the amount of such
Obligation being deemed to be the lesser of the fair market value
of such property or asset or the amount of the Obligation so
secured;
(viii) all Obligations under currency agreements and
interest swap agreements of such Person; and
(ix) all Disqualified Capital Stock issued by such Person
with the amount of Indebtedness represented by such Disqualified
Capital Stock being equal to the greater of its voluntary or
involuntary liquidation preference and its maximum fixed
repurchase price, but excluding accrued dividends, if any. For
purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock
were purchased on any date on which Indebtedness shall be required
to be determined pursuant to this Indenture, and if such price is
based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be
determined reasonably and in good faith by the Board of Directors
of the issuer of such Disqualified Capital Stock.
"INDEPENDENT FINANCIAL ADVISOR" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified
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to perform the task for which it is to be engaged.
"INDENTURE" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"INITIAL NOTES" means, collectively, (i) the 11 1/4% Senior Subordinated
Notes due 2009 of the Company issued on the Issue Date and (ii) one or more
series of 11 1/4% Senior Subordinated Notes due 2009 that are issued under
this Indenture subsequent to the Issue Date pursuant to Section 2.2, in each
case for so long as such securities constitute Restricted Securities.
"INSOLVENCY OR LIQUIDATION PROCEEDINGS" means with respect to any Person
(i) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding relative to
such Person or to the creditors of such Person, as such, or to the assets of
such Person, or (ii) any liquidation, dissolution, reorganization or winding
up of such Person, whether voluntary or involuntary, or (iii) any assignment
for the benefit of creditors or any other marshaling of assets and liabilities
of such Person.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
"INTEREST PAYMENT DATE" when used with respect to any Note, means the
stated maturity of an installment of interest specified in such Note.
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person pursuant
to any arrangement (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements) with any other Person, whereby,
directly or indirectly, such Person is entitled to receive from time to time
periodic payments calculated by applying either a floating or a fixed rate of
interest on a stated notional amount in exchange for periodic payments made by
such other Person calculated by applying a fixed or a floating rate of
interest on the same notional amount.
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"INVESTMENT" means, with respect to any Person, any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, Notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit
by the Company and its Restricted Subsidiaries on commercially reasonable
terms in accordance with normal trade practices of the Company or such
Restricted Subsidiary, as the case may be. If the Company or any Restricted
Subsidiary of the Company sells or otherwise disposes of any Common Stock of
any direct or indirect Restricted Subsidiary of the Company such that, after
giving effect to any such sale or disposition, the Company no longer owns,
directly or indirectly, 100% of the outstanding Common Stock of such
Restricted Subsidiary, the Company shall be deemed to have made an Investment
on the date of any such sale or disposition equal to the fair market value of
the Common Stock of such Restricted Subsidiary not sold or disposed of.
"ISSUE DATE" means the date of original issuance of the Notes.
"LEGAL DEFEASANCE" has the meaning provided in Section 8.2(b).
"LEGAL HOLIDAY" has the meaning provided in Section 13.7.
"LIEN" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"MANDATORY REDEMPTION DATE" means the earliest of (a) July 27, 1999 if
the Acquisition has not been consummated on or prior to the Deadline Date or
(b) the 20th day (or if such day is not a Business Day, the first Business Day
thereafter) following the date that the Company elects to abandon the
Acquisition or (c) the 20th day (or if such day is not a Business Day, the
first Business Day thereafter) following the date that the Stock Purchase
Agreement is terminated.
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"MANDATORY REDEMPTION PRICE" means 101% of the principal amount of all
of the Notes outstanding on the Mandatory Redemption Date, together with
accrued and unpaid interest thereon to the date of redemption.
"MATURITY DATE" means June 15, 2009.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds
in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of:
(i) reasonable out-of-pocket expenses and fees relating to
such Asset Sale (including, without limitation, legal, accounting
and investment banking fees and sales commissions),
(ii) taxes paid or payable after taking into account any
reduction in consolidated tax liability due to available tax
credits or deductions and any tax sharing arrangements,
(iii) repayment of Indebtedness that is secured by the
Property or assets that are the subject of such Asset Sale, and
(iv) appropriate amounts to be provided by the Company or
any Restricted Subsidiary, as the case may be, as a reserve, in
accordance with GAAP, against any liabilities associated with such
Asset Sale and retained by the Company or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with
such Asset Sale.
"NET PROCEEDS OFFER" has the meaning provided in Section 4.16(b).
"NET PROCEEDS OFFER PAYMENT DATE" has the meaning provided in Section
4.16(b).
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"NON-U.S. PERSON" means a Person other than a "U.S. Person" (as defined
in Regulation S under the Securities Act).
"NOTES" means, collectively, the Initial Notes, the Private Exchange
Notes, if any, and the Unrestricted Notes, treated as a single class of
securities, as amended or supplemented from time to time in accordance with
the terms hereof, that are issued pursuant to this Indenture.
"OBLIGATIONS" means all obligations for principal, premium, interest,
penalties, fees, indemnification, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"OFFER TRIGGER DATE" has the meaning provided in Section 4.16(b).
"OFFICER" means, with respect to any person, the Chairman of the Board,
the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Treasurer, the Controller, or the Secretary of such
person, or any other officer designated by the Board of Directors serving in a
similar capacity.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a certificate
signed by two Officers or by an Officer and either an Assistant Treasurer or
an Assistant Secretary of such Person and otherwise complying with the
requirements of Sections 13.4 and 13.5, as they relate to the making of an
Officers' Certificate.
"OPINION OF COUNSEL" means a written opinion from legal counsel, who may
be counsel for the Company and who is reasonably acceptable to the Trustee,
complying with the requirements of Sections 13.4 and 13.5, as they relate to
the giving of an Opinion of Counsel.
"PAYING AGENT" has the meaning provided in Section 2.3.
"PAYMENT BLOCKAGE NOTICE" has the meaning provided in Section 10.2(a).
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"PERMITTED INDEBTEDNESS" means, without duplication, each of the
following:
(i) Indebtedness represented by the Notes issued in the
Offering in an aggregate principal amount not to exceed $150.0
million;
(ii) Indebtedness incurred pursuant to the Credit Agreement
in an aggregate principal amount at any time outstanding not to
exceed $300.0 million less: (a) the amount of all mandatory
principal payments actually made by the Company in respect of the
term loans thereunder (excluding any such payments to the extent
refinanced at the time of payment under a replaced Credit
Agreement); and (b) reduced by any required permanent repayments
(which are accompanied by a corresponding permanent commitment
reduction) thereunder;
(iii) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount
of any scheduled amortization payments or mandatory prepayments
when actually paid or permanent reductions thereon;
(iv) Interest Swap Obligations of the Company covering
Indebtedness of the Company or any of its Restricted Subsidiaries
and Interest Swap Obligations of any Restricted Subsidiary of the
Company covering Indebtedness of such Restricted Subsidiary,
PROVIDED, HOWEVER, that such Interest Swap Obligations are entered
into to protect the Company and its Restricted Subsidiaries from
fluctuations in interest rates on Indebtedness incurred in
accordance with this Indenture to the extent the notional
principal amount of such Interest Swap Obligation does not exceed
the principal amount of the Indebtedness to which such Interest
Swap Obligation relates;
(v) Indebtedness under Currency Agreements, provided that in
the case of Currency Agreements which relate to Indebtedness, such
Currency Agreements do not increase the Indebtedness of the
Company and its Restricted Subsidiaries outstanding other than as
a result of fluctuations in foreign currency exchange rates or by
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reason of fees, indemnities and compensation payable thereunder;
(vi) Indebtedness of a Restricted Subsidiary of the Company
to the Company or to a Wholly Owned Restricted Subsidiary of the
Company for so long as such Indebtedness is held by the Company or
a Wholly Owned Restricted Subsidiary of the Company, in each case
subject to no Lien held by a Person other than the Company or a
Wholly Owned Restricted Subsidiary of the Company (other than a
Lien to collateralize Indebtedness described in clause (ii) of
this definition of "Permitted Indebtedness"), PROVIDED that if, as
of any date, any Person other than the Company or a Wholly Owned
Restricted Subsidiary of the Company owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness
(other than a Lien to collateralize Indebtedness described in
clause (ii) of this definition of "Permitted Indebtedness"), such
date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such
Indebtedness;
(vii) Indebtedness of the Company to a Wholly Owned
Restricted Subsidiary of the Company for so long as such
Indebtedness is held by a Wholly Owned Restricted Subsidiary of
the Company, in each case subject to no Lien (other than a Lien to
secure Indebtedness described in clause (ii) of this definition of
"Permitted Indebtedness"), PROVIDED that (a) any Indebtedness of
the Company to any Wholly Owned Restricted Subsidiary of the
Company is unsecured and subordinated, pursuant to a written
agreement, to the Company's obligations under this Indenture and
the Notes and (b) if as of any date any Person other than a Wholly
Owned Restricted Subsidiary of the Company owns or holds any such
Indebtedness or any Person holds a Lien in respect of such
Indebtedness (other than a Lien to secure Indebtedness described
in clause (ii) of this definition of "Permitted Indebtedness"),
such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the Company;
(viii) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar
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instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary
course of business, provided, however, that such Indebtedness is
extinguished within two business days of incurrence;
(ix) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of
the Company or such Restricted Subsidiary, as the case may be, in
order to provide security for workers' compensation claims,
payment obligations in connection with self-insurance or similar
requirements in the ordinary course of business;
(x) Indebtedness represented by Capitalized Lease
Obligations and Purchase Money Indebtedness of the Company and its
Restricted Subsidiaries incurred in the ordinary course of
business not to exceed $10.0 million at any one time outstanding;
(xi) Refinancing Indebtedness;
(xii) Unsecured Indebtedness of the Company payable to one
or more sellers of any Person acquired by the Company or any
Wholly Owned Restricted Subsidiary of the Company, incurred in
connection with such acquisition in compliance with the terms of
this Indenture, not to exceed $15.0 million in the aggregate at
any one time outstanding and in each case subordinated in right of
payment to the Notes and the Guarantees;
(xiii) additional Indebtedness of the Company and its
Restricted Subsidiaries in an aggregate principal amount not to
exceed $25.0 million at any one time outstanding (which amount
may, but need not, be incurred in whole or in part under the
Credit Agreement); and
(xiv) Indebtedness represented by the Redeemable Preferred
Stock, including any additional shares issued in payment of
dividends thereon.
For purposes of determining compliance with Section 4.14, in the event that an
item of Indebtedness meets the criteria of more than one of the categories of
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Permitted Indebtedness described in clauses (i) through (xii) above or is
entitled to be incurred pursuant to the Consolidated Fixed Charge Coverage
Ratio provisions of such Section 4.14, the Company shall, in its sole
discretion, classify (or later reclassify) such item of Indebtedness in any
manner that complies with Section 4.14. Accrual of interest, accretion or
amortization of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms, and
the payment of dividends on Disqualified Capital Stock in the form of
additional shares of the same class of Disqualified Capital Stock shall not be
deemed to be an incurrence of Indebtedness or an issuance of Disqualified
Capital Stock for purposes of Section 4.14.
"PERMITTED INVESTMENTS" means:
(i) Investments by the Company or any Restricted Subsidiary
of the Company in any Person that is or will become immediately
after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a
Wholly Owned Restricted Subsidiary of the Company;
(ii) Investments in the Company by any Restricted Subsidiary
of the Company; PROVIDED that any Indebtedness evidencing such
Investment (other than any guarantee of Indebtedness of the
Company described in clause (ii) of the definition of Permitted
Indebtedness) is unsecured and subordinated, pursuant to a written
agreement, to the Company's obligations under the Notes and this
Indenture;
(iii) investments in cash and Cash Equivalents;
(iv) loans and advances to employees and officers of the
Company and its Restricted Subsidiaries in the ordinary course of
business for bona fide business purposes not in excess of $1.0
million at any one time outstanding;
(v) Currency Agreements and Interest Swap Obligations
entered into in the ordinary course of the Company's or its
Restricted Subsidiaries' businesses and otherwise in compliance
with this Indenture;
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(vi) additional Investments not to exceed $10.0 million at
any one time outstanding;
(vii) Investments in securities of trade creditors or
customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers; and
(viii) Investments made by the Company or its Restricted
Subsidiaries as a result of consideration received in connection
with an Asset Sale made in compliance with Section 4.16.
"PERMITTED LIENS" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or
claims either (a) not delinquent or (b) contested in good faith by
appropriate proceedings and as to which the Company or its
Restricted Subsidiaries shall have set aside on its books such
reserves as may be required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and
other Liens imposed by law incurred in the ordinary course of
business for sums not yet delinquent or being contested in good
faith, if such reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance and other types of social security, including any Lien
securing letters of credit issued in the ordinary course of
business consistent with past practice in connection therewith or
to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed
money);
(iv) judgment Liens not giving rise to an Event of Default
so long as such Lien is adequately bonded and any appropriate
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legal proceedings which may have been duly initiated for the
review of such judgment shall not have been finally terminated or
the period within which such proceedings may be initiated shall
not have expired;
(v) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not
interfering in any material respect with the ordinary conduct of
the business of the Company or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized
Lease Obligation; PROVIDED that such Liens do not extend to any
property or assets which is not leased property subject to such
Capitalized Lease Obligation;
(vii) purchase money Liens to finance property or assets of
the Company or any Restricted Subsidiary of the Company acquired
in the ordinary course of business; PROVIDED, HOWEVER, that (A)
the related purchase money Indebtedness shall not exceed the cost
of such property or assets and shall not be secured by any
property or assets of the Company or any Restricted Subsidiary of
the Company, other than the property and assets so acquired and
(B) the Lien securing such Indebtedness shall be created within 90
days of such acquisition;
(viii) Liens upon specific items of inventory or other goods
and proceeds of any Person securing such Person's obligations in
respect of bankers' acceptances issued or created for the account
of such Person to facilitate the purchase, shipment or storage of
such inventory or other goods;
(ix) Liens securing reimbursement obligations with respect
to commercial letters of credit which encumber documents and other
property relating to such letters of credit and products and
proceeds thereof;
(x) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual, or warranty
requirements of the Company or any of its Restricted Subsidiaries,
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including rights of offset and set-off;
(xi) Liens securing Interest Swap Obligations which Interest
Swap Obligations relate to Indebtedness that is otherwise
permitted under this Indenture;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Acquired Indebtedness incurred in
accordance with Section 4.14; PROVIDED that (A) such Liens secured
such Acquired Indebtedness at the time of and prior to the
incurrence of such Acquired Indebtedness by the Company or a
Restricted Subsidiary of the Company, and were not granted in
connection with, or in anticipation of, the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary of
the Company, and (B) such Liens do not extend to or cover any
property or assets of the Company or of any of its Restricted
Subsidiaries, other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became
Acquired Indebtedness of the Company or a Restricted Subsidiary of
the Company, and are no more favorable to the lienholders than
those securing the Acquired Indebtedness prior to the incurrence
of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company; and
(xiv) Liens on assets of the Company securing Senior Debt
described in clause (ii) of the definition of "Permitted
Indebtedness" and Liens or assets of any Restricted Subsidiary
securing guarantees of Senior Debt described in clause (ii) of the
definition of "Permitted Indebtedness".
"PERSON" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"PHYSICAL NOTES" has the meaning provided in Section 2.1.
"PLEDGED PROPERTY" has the meaning provided in Section 3.7.
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"PREFERRED STOCK" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"PRINCIPAL" of any Indebtedness (including the Notes) means the
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"PRIVATE EXCHANGE NOTES" has the meaning set forth in the Registration
Rights Agreement.
"PRIVATE PLACEMENT LEGEND" means the legend initially set forth on the
Initial Notes in the form set forth in EXHIBIT A(L).
"PROCEEDS PURCHASE DATE" has the meaning provided in Section 4.16.
"PRO FORMA" means, with respect to any calculation made or required to
be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act, as determined by
the Board of Directors of the Company in consultation with its independent
public accountants.
"PROPERTY" of any person means all types of real, personal, tangible,
intangible or mixed property owned by such person whether or not included in
the most recent consolidated balance sheet of such person and its Subsidiaries
under GAAP.
"PUBLIC EQUITY OFFERING" means an underwritten equity offering, pursuant
to an effective registration statement under the Act, of the Qualified Capital
Stock of the Company, or of any entity of which the Company is a direct or
indirect subsidiary, to the extent the proceeds thereof shall have been
received or contributed to the Company.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company and its
Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property or equipment.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not
Disqualified Capital Stock.
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"QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"RECORD DATE" means, with respect to any Note, any of the Record Dates
specified in such Note, whether or not a Legal Holiday.
"REDEEMABLE PREFERRED STOCK" means the 7% Redeemable Preferred Stock,
par value $0.01 per share, to be issued by the Company in connection with the
Acquisition.
"REDEMPTION DATE" when used with respect to any Note to be redeemed,
means the date fixed for such redemption pursuant to this Indenture and the
Notes, including, without limitation, any Mandatory Redemption Date.
"REDEMPTION PRICE" when used with respect to any Note to be redeemed,
means the price fixed for such redemption pursuant to this Indenture and the
Notes, including, without limitation, any Mandatory Redemption Price.
"REFINANCE" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"REFINANCING INDEBTEDNESS" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance
with Section 4.14 (other than pursuant to clauses (ii), (iv), (v), (vi),
(vii), (viii), (ix), (x) or (xii) of the definition of "Permitted
Indebtedness"), in each case that does not:
(1) result in an increase in the aggregate principal amount
of Indebtedness of such Person as of the date of such proposed
Refinancing (plus the amount of any premium or penalty required to
be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred
by the Company in connection with such Refinancing) or
(2) create Indebtedness with (A) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity
of the Indebtedness being Refinanced or (B) a final maturity
earlier than the final maturity of the Indebtedness being
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Refinanced;
PROVIDED that (x) if such Indebtedness being Refinanced is solely Indebtedness
of the Company, then such Refinancing Indebtedness shall be Indebtedness
solely of the Company and (y) if such Indebtedness being Refinanced is
subordinate or junior to the Notes, then such Refinancing Indebtedness shall
be subordinate to the Notes at least to the same extent and in the same manner
as the Indebtedness being Refinanced.
"REGISTRAR" has the meaning provided in Section 2.3.
"REGISTRATION RIGHTS AGREEMENT" has the meaning provided in the
definition of "Exchange Offer."
"REGULATION S" means Regulation S under the Act.
"REGULATION S GLOBAL NOTE" means a permanent global Note in the form of
Exhibit A-1 hereto bearing the legend in EXHIBIT B hereto and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depository or its nominee, issued in a denomination equal to the
outstanding principal amount of the Notes initially sold in reliance on Rule
903 of Regulation S.
"REPRESENTATIVE" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Debt in respect of any Designated Senior Debt.
"RESTRICTED PAYMENT" has the meaning provided in Section 4.10.
"RESTRICTED SECURITY" has the meaning assigned to such term in Rule
144(a)(3) under the Act; provided that the Trustee shall be entitled to
request and conclusively rely on an Opinion of Counsel with respect to whether
any Note constitutes a Restricted Security.
"RESTRICTED SUBSIDIARY" of any Person means any Subsidiary of such
Person which, at the time of determination, is not an Unrestricted Subsidiary.
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"RULE 144A" means Rule 144A under the Act.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company
or such Restricted Subsidiary to such Person or to any other Person from whom
funds have been or are to be advanced by such Person on the security of such
Property.
"SEC" means the United States Securities and Exchange Commission and any
successor agency.
"SENIOR DEBT" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the
generality of the foregoing, "Senior Debt" shall also include the principal
of, premium, if any, interest (including any interest accruing subsequent to
the filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) on, and all other amounts owing in respect of:
(i) all monetary obligations of every nature of the Company
under the Credit Agreement, including, without limitation,
obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and
indemnities;
(ii) all Interest Swap Obligations; and
(iii) all obligations under Currency Agreements, in each
case whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Senior Debt" shall not include:
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(a) any Indebtedness of the Company to a Subsidiary of the
Company;
(b) Indebtedness to, or guaranteed on behalf of, any
shareholder, director, officer or employee of the Company or any
Subsidiary of the Company (including, without limitation, amounts
owed for compensation but excluding any Senior Debt held by any
Person who becomes such a shareholder as a result of the exercise
of remedies under such Senior Debt);
(c) Indebtedness to trade creditors and other amounts
incurred in connection with obtaining goods, materials or
services;
(d) Indebtedness represented by Disqualified Capital Stock;
(e) any liability for federal, state, local or other taxes
owed or owing by the Company;
(f) that portion of any Indebtedness incurred in violation
of Section 4.14 (but, as to any such obligation, no such violation
shall be deemed to exist for purposes of this clause (f) if the
holder(s) of such obligation or their representative and the
Trustee shall have received an Officers' Certificate of the
Company to the effect that the incurrence of such Indebtedness
does not (or, in the case of revolving credit indebtedness, that
the incurrence of the entire committed amount thereof at the date
on which the initial borrowing thereunder is made would not)
violate such provisions of this Indenture);
(g) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States
Code, is without recourse to the Company; and
(h) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of the
Company.
"SIGNIFICANT SUBSIDIARY", with respect to any Person, means any
Restricted Subsidiary of such Person that satisfies the criteria for a
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"significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the
Exchange Act.
"SPECIAL MANDATORY REDEMPTION" means a mandatory redemption of the Notes
pursuant to paragraph 6(c) of the Notes.
"STOCK PURCHASE AGREEMENT" means the stock purchase agreement dated as
of April 2, 1999 by and among the Company, HPO Acquisition Corp., NC
Resources, Inc. and NovaCare Orthotics & Prosthetics, Inc., as amended on May
19, 1999.
"SUBSIDIARY", with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under
ordinary circumstances is at the time, directly or indirectly, owned by such
Person.
"SURVIVING ENTITY" has the meaning provided in Section 5.1.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of this Indenture, except
as otherwise provided in Section 9.4.
"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"TRUST OFFICER" means any officer of the Trustee assigned by the Trustee
to administer this Indenture, or in the case of a successor trustee, an
officer assigned to the department, division or group performing the
corporation trust work of such successor and assigned to administer this
Indenture.
"U.S. GOVERNMENT OBLIGATIONS" means non-callable direct obligations of,
and non-callable obligations guaranteed by, the United States of America for
the payment of which the full faith and credit of the United States of America
is pledged.
"U.S. LEGAL TENDER" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
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"UNRESTRICTED NOTES" means one or more Notes that do not and are not
required to bear the Private Placement Legend in the form set forth on EXHIBIT
A(L), including, without limitation, the Exchange Notes in the form set forth
as EXHIBIT A(2) hereto.
"UNRESTRICTED SUBSIDIARY" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below; and (ii) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any
property of, the Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated; PROVIDED that (a) the
Company would be permitted under this Indenture to make an Investment under
all applicable provisions of Section 4.10 at the time of such designation
(assuming the effectiveness of such designation) in an amount equal to the
Designation Amount, and the Company certifies the foregoing to the Trustee;
and (b) each Subsidiary to be so designated and each of its Subsidiaries has
not at the time of designation, and does not thereafter, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable with
respect to any Indebtedness pursuant to which the lender has recourse to any
of the assets of the Company or any of its Restricted Subsidiaries. The Board
of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary only if (x) immediately after giving effect to such designation,
the Company is able to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with Section 4.14; and (y)
immediately before and immediately after giving effect to such designation, no
Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate of the Company certifying
that such designation complied with the foregoing provisions.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the
then outstanding aggregate principal amount of such Indebtedness into (ii) the
sum of the total of the products obtained by multiplying (a) the amount of
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each then remaining installment, sinking fund, serial maturity or other
required payment of principal, including payment at final maturity, in respect
thereof, by (b) the number of years (calculated to the nearest one-twelfth)
which will elapse between such date and the making of such payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means any Wholly
Owned Subsidiary of such Person which at the time of determination is a
Restricted Subsidiary of such Person.
"WHOLLY OWNED SUBSIDIARY" of any Person means any Subsidiary of such
Person of which all the outstanding voting securities (other than in the case
of a foreign Subsidiary, directors' qualifying shares or an immaterial amount
of shares required to be owned by other Persons pursuant to applicable law)
are owned by such Person or any Wholly Owned Subsidiary of such Person.
Section 1.2. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such provision
is incorporated by reference in, and made a part of, this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture security holder" means a Holder or a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, the Guarantors,
or any other obligor on the Notes or the Guarantees.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
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Section 1.3. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular; and
(5) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
ARTICLE II.
THE NOTES
Section 2.1. FORM AND DATING.
(a) The Initial Notes, the notation thereon relating to the Guarantees
and the Trustee's certificate of authentication shall be substantially in the
form of EXHIBIT A(1) hereto. The Exchange Notes, the notation thereon relating
to the Guarantees and the Trustee's certificate of authentication shall be
substantially in the form of EXHIBIT A(2) hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
depository rule or usage. The Company and the Trustee shall approve the form
of the Notes and any notation, legend or endorsement on them. Each Note shall
be dated the date of its issuance.
The terms and provisions contained in the Notes and the Guarantees
annexed hereto as EXHIBITS A(L) and A(2), shall constitute, and are hereby
expressly made, a part of this Indenture and, to the extent applicable, the
Company, the Guarantors and the Trustee, by their execution and delivery of
this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
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(b) Notes offered and sold to Institutional Accredited Investors shall
be issued initially in the form of one or more IAI Global Notes.
(c) Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Notes in registered
form, substantially in the form set forth in EXHIBIT A(L) (together with the
IAI Global Notes and the Regulation S Global Notes, the "GLOBAL NOTES"),
deposited with the Trustee, as custodian for the Depository, and shall bear
the Private Placement Legend and the legend set forth in EXHIBIT B hereto,
duly executed by the Company and the Guarantors, and authenticated by the
Trustee as hereinafter provided.
(d) Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Global Note, which shall be
deposited on behalf of the purchasers of the Notes represented thereby with
the Trustee, at its New York office, as custodian for the Depository, and
registered in the name of the Depository or the nominee of the Depository,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided.
(e) The aggregate principal amount of any Global Note may from time to
time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depository, as hereinafter provided.
Section 2.2. EXECUTION AND AUTHENTICATION; AGGREGATE PRINCIPAL
AMOUNT.
Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to the Notes for the Company by manual or facsimile
signature.
If an Officer or Assistant Secretary whose signature is on a Note was an
Officer or Assistant Secretary at the time of such execution but no longer
holds that office or position at the time the Trustee authenticates the Note,
the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
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shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue in
the aggregate principal amount not to exceed $300,000,000 in one or more
series, provided that the aggregate principal amount of Initial Notes issued
on the Issue Date shall not exceed $150,000,000, (ii) Private Exchange Notes
from time to time only in exchange for a like principal amount of Initial
Notes and (iii) Unrestricted Notes from time to time only (x) in exchange for
a like principal amount of Initial Notes or (y) in an aggregate principal
amount of not more than the excess of $300,000,000 over the sum of the
aggregate principal amount of (A) Initial Notes then outstanding, (B) Private
Exchange Notes then outstanding and (C) Unrestricted Notes issued in
accordance with (iii)(x) above, in each case upon a written order of the
Company in the form of an Officers' Certificate of the Company. Each such
written order shall specify the amount of Notes to be authenticated and the
date on which the Notes are to be authenticated, whether the Notes are to be
Initial Notes, Private Exchange Notes or Unrestricted Notes and whether the
Notes are to be issued as Physical Notes or Global Notes or such other
information as the Trustee may reasonably request. In addition, with respect
to authentication pursuant to clauses (ii) or (iii) of the first sentence of
this paragraph, the first such written order from the Company shall be
accompanied by an Opinion of Counsel of the Company in a form reasonably
satisfactory to the Trustee stating that the issuance of the Private Exchange
Notes or the Unrestricted Notes, as the case may be, does not give rise to an
Event of Default, complies with this Indenture and has been duly authorized by
the Company. The aggregate principal amount of Notes outstanding at any time
may not exceed $300,000,000, except as provided in Section 2.8.
In the event that the Company shall issue and the Trustee shall
authenticate any Notes issued under this Indenture subsequent to the Issue
Date pursuant to clauses (i) and (iii) of the first sentence of the
immediately preceding paragraph, the Company shall use its best efforts to
obtain the same "CUSIP" number for such Notes as is printed on the Notes
outstanding at such time; PROVIDED, HOWEVER, that if any series of Notes
issued under this Indenture subsequent to the Issue Date is determined,
pursuant to an Opinion of Counsel of the Company in a form reasonably
satisfactory to the Trustee to be a different class of security than the Notes
outstanding at such time for federal income tax purposes, the Company may
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obtain a "CUSIP" number for such Notes that is different than the "CUSIP"
number printed on the Notes then outstanding. Notwithstanding the foregoing,
all Notes issued under this Indenture shall vote and consent together on all
matters as one class and no series of Notes will have the right to vote or
consent as a separate class on any matter.
The Trustee may appoint an authenticating agent (the "AUTHENTICATING
AGENT") reasonably acceptable to the Company to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may
authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
Authenticating Agent. An Authenticating Agent has the same rights as an Agent
to deal with the Company and Affiliates of the Company.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
Section 2.3. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency (which shall be located
in the Borough of Manhattan in the City of New York, State of New York) where
(a) Notes may be presented or surrendered for registration of transfer or for
exchange ("REGISTRAR"), (b) Notes may be presented or surrendered for payment
("PAYING AGENT") and (c) notices and demands to or upon the Company in respect
of the Notes and this Indenture may be served. The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Company, upon
prior written notice to the Trustee, may have one or more co-Registrars and
one or more additional paying agents reasonably acceptable to the Trustee. The
term "Paying Agent" includes any additional Paying Agent. Neither the Company
nor any Affiliate of the Company may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee, in advance, of the
name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
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shall act as such and shall be entitled to appropriate compensation in
accordance with Section 7.7.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of demands and notices in connection with the Notes,
until such time as the Trustee has resigned or a successor has been appointed.
The Paying Agent or Registrar may resign upon 30 days prior written notice to
the Company.
Section 2.4. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that, subject to Articles X and XII, each Paying Agent shall
hold in trust for the benefit of the Holders or the Trustee all assets held by
the Paying Agent for the payment of principal of, or interest on, the Notes
(whether such assets have been distributed to it by the Company or any other
obligor on the Notes), and the Company and the Paying Agent shall notify the
Trustee in writing of any Default by the Company (or any other obligor on the
Notes) in making any such payment. The Company at any time may require a
Paying Agent to distribute all assets held by it to the Trustee and account
for any assets disbursed and the Trustee may at any time during the
continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee
and to account for any assets distributed. Upon distribution to the Trustee of
all assets that shall have been delivered by the Company to the Paying Agent,
the Paying Agent shall have no further liability for such assets.
Section 2.5. NOTEHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders. If the Trustee is not the Registrar, the Company shall furnish or
cause the Registrar to furnish to the Trustee as of each Record Date and
before each related Interest Payment Date and at such other times as the
Trustee may request in writing a list as of such date and in such form as the
Trustee may reasonably require of the names and addresses of Noteholders,
which list may be conclusively relied upon by the Trustee.
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Section 2.6. TRANSFER AND EXCHANGE.
Subject to the provisions of Sections 2.15 and 2.16, when Notes are
presented to the Registrar or a co-Registrar with a request to register the
transfer of such Notes or to exchange such Notes for an equal principal amount
of Notes of other authorized denominations, the Registrar or co-Registrar
shall register the transfer or make the exchange as requested if its
requirements for such transaction are met; PROVIDED, HOWEVER, that the Notes
presented or surrendered for registration of transfer or exchange shall be
duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Registrar or co-Registrar, duly executed
by the Holder thereof or his attorney duly authorized in writing. To permit
registrations of transfer and exchanges, the Company shall issue and execute
and the Trustee shall authenticate Notes at the Registrar's or co-Registrar's
request. No service charge shall be made to a Noteholder for any registration
of transfer or exchange. The Company may require from such Noteholder payment
of a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchanges or transfers pursuant to Sections
2.10, 3.6, 4.15, 4.16 or 9.5, in which event the Company shall be responsible
for the payment of such taxes).
The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the
opening of business 15 days before the mailing of a notice of redemption of
Notes and ending at the close of business on the day of such mailing and (ii)
selected for redemption in whole or in part pursuant to Article III, except
the unredeemed portion of any Note being redeemed in part.
Any Holder of a Global Note shall, by acceptance of such Global Note,
agree that transfers of beneficial interests in such Global Note may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Global Note shall be required to be reflected in a book entry.
Section 2.7. REPLACEMENT NOTES.
If a mutilated Note is surrendered to the Trustee or if the Holder of a
Note claims that the Note has been lost, destroyed or wrongfully taken, the
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Company shall issue and execute and the Trustee shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, such Holder must provide an affidavit of lost
certificate and an indemnity bond or other indemnity, sufficient in the
judgment of both the Company and the Trustee, to protect the Company, the
Trustee or any Agent from any loss which any of them may suffer if a Note is
replaced. The Company may charge such Holder for its reasonable, out-of-pocket
expenses in replacing a Note, including reasonable fees and expenses of the
Trustee and counsel and the Trustee may charge the Company for the Trustee's
reasonable out-of-pocket expenses in replacing such Note. Every replacement
Note shall constitute an additional Obligation of the Company.
Section 2.8. OUTSTANDING NOTES.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those canceled by it, those delivered to
it for cancellation and those described in this Section as not outstanding.
Subject to the provisions of Section 2.9, a Note does not cease to be
outstanding because the Company, any Guarantor or any of their respective
Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.7 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
BONA FIDE purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.7.
If on a Redemption Date or the Maturity Date the Paying Agent holds U.S.
Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Notes payable on that date and is not
prohibited from paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Notes shall cease to be
outstanding and interest on them shall cease to accrue.
Section 2.9. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver, consent or notice, Notes owned
by the Company, any Guarantor or any of their respective Affiliates shall be
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considered as though they are not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which a Trust Officer of the Trustee
actually knows are so owned shall be so considered. The Company shall notify
the Trustee, in writing, when it, any Guarantor or any of their respective
Affiliates repurchases or otherwise acquires Notes, and of the aggregate
principal amount of such Notes so repurchased or otherwise acquired.
Section 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon receipt of a written
order of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of temporary Notes to be authenticated
and the date on which the temporary Notes are to be authenticated, and shall
direct the Trustee to authenticate such Notes and certify that all conditions
precedent to the issuance of such Notes contained herein have been complied
with. Temporary Notes shall be substantially in the form of definitive Notes
but may have variations that the Company and the Trustee consider appropriate
for temporary Notes. Without unreasonable delay, the Company shall prepare and
the Trustee shall authenticate upon receipt of a written order of the Company
pursuant to Section 2.2 definitive Notes in exchange for temporary Notes.
Section 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee,
or at the direction of the Trustee, the Registrar or the Paying Agent, and no
one else, shall cancel and, at the written direction of the Company, shall
dispose of all Notes surrendered for registration of transfer, exchange,
payment or cancellation. Subject to Section 2.7, the Company may not issue new
Notes to replace Notes that it has paid or delivered to the Trustee for
cancellation. If the Company or any Guarantor shall acquire any of the Notes,
such acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Notes unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 2.11.
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Section 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest, plus (to the extent lawful) any interest payable
on the defaulted interest to the Persons who are Holders on a subsequent
special record date, which date shall be the fifteenth day next preceding the
date fixed by the Company for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. At least 15 days
before the subsequent special record date, the Company shall mail to each
Holder, with a copy to the Trustee, a notice that states the subsequent
special record date, the payment date and the amount of defaulted interest,
and interest payable on such defaulted interest, if any, to be paid.
Section 2.13. CUSIP NUMBER.
The Company in issuing the Notes may use one or more "CUSIP" numbers,
and if so, the appropriate CUSIP number(s) shall be included in all notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made by the Trustee as to the
correctness or accuracy of any CUSIP number(s) printed in the notice or on the
Notes, and that reliance may be placed only on the other identification
numbers printed on the Notes. The Company shall promptly notify the Trustee of
any change in the CUSIP number.
Section 2.14. DEPOSIT OF MONEYS.
Prior to 10:00 a.m., New York City time, on each Interest Payment Date,
Redemption Date, Change of Control Payment Date and on the Maturity Date, the
Company shall have deposited with the Paying Agent in immediately available
funds money sufficient to make cash payments, if any, due on such Interest
Payment Date, Redemption Date, Change of Control Payment Date or Maturity
Date, as the case may be, in a timely manner which permits the Paying Agent to
remit payment to the Holders on such Interest Payment Date, Redemption Date,
Change of Control Payment Date or Maturity Date, as the case may be.
Section 2.15. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES.
(a) The Global Notes initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth
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in EXHIBIT B. Members of, or participants in, the Depository ("DEPOSITORY
PARTICIPANTS") shall have no rights under this Indenture with respect to any
Global Note held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Notes, and the Depository may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of the Global Notes for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the
Depository or impair, as between the Depository and its Depository
Participants, the operation of customary practices governing the exercise of
the rights of a holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers in whole,
but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in a Global Note may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository (and, if applicable, Euroclear and Cedel) and the provisions of
Section 2.16. In addition, Physical Notes shall be transferred to all
beneficial owners in exchange for their beneficial interests in a Global Note
if (i) the Depository notifies the Company that it is unwilling or unable to
continue as Depository for such Global Note and a successor depository is not
appointed by the Company within 90 days of such notice or (ii) an Event of
Default has occurred and is continuing and the Registrar has received a
request from the Depository to issue Physical Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in a Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of such Global Note in an amount equal to the principal
amount of the beneficial interest in such Global Note to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more Physical Notes of like tenor and amount.
(d) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to paragraph (b), such Global Note shall be deemed
to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
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owner identified by the Depository in exchange for its beneficial interest in
such Global Note, an equal aggregate principal amount of Physical Notes of
authorized denominations.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in Global Note pursuant to paragraph (b) or (c)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.16, bear the Private Placement Legend.
(f) The Holder of a Global Note may grant proxies and otherwise
authorize any person, including Depository Participants and persons that may
hold interests through Depository Participants, to take any action which a
Holder is entitled to take under this Indenture or the Notes.
Section 2.16. SPECIAL TRANSFER PROVISIONS.
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS AND NON-U.S.
PERSONS. The following provisions shall apply with respect to the registration
of any proposed transfer of a Note constituting a Restricted Security to any
Institutional Accredited Investor which is not a QIB or to any Non-U.S.
Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after the
second anniversary of the date of this Indenture and the transferor
certifies that it is not, and for the preceding three months has not
been, an Affiliate of the Company or any Guarantor, and that the
Restricted Security was not acquired from the Company or an Affiliate of
the Company less than two years prior to the date of the proposed
transfer or (y) (1) in the case of a transfer to an Institutional
Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the
proposed transferee has delivered to the Registrar a certificate
substantially in the form of EXHIBIT C hereto or (2) in the case of a
transfer to a Non-U.S. Person, the proposed transferor has delivered to
the Registrar a certificate substantially in the form of EXHIBIT D
hereto;
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(ii) if the proposed transferee is a Depository Participant and
the Notes to be transferred consist of Physical Notes which after
transfer are to be evidenced by an interest in an IAI Global Note or a
Regulation S Global Note, as the case may be, upon receipt by the
Registrar of (x) written instructions given in accordance with the
Depository's and the Registrar's procedures and (y) the appropriate
certificate, if any, required by clause (y) of paragraph (i) above, the
Registrar shall register the transfer and reflect on its books and
records the date and an increase in the principal amount of an IAI
Global Note or Regulation S Global Note, as the case may be, in an
amount equal to the principal amount of Physical Notes to be
transferred, and the Trustee shall cancel the Physical Notes so
transferred; and
(i) if the proposed transferor is a Depository Participant seeking
to transfer an interest in a Global Note, upon receipt by the Registrar
of (x) written instructions given in accordance with the Depository's
and the Registrar's procedures and (y) the appropriate certificate, if
any, required by clause (y) of paragraph (i) above, the Registrar shall
register the transfer and reflect on its books and records the date and
(A) a decrease in the principal amount of the Global Note from which
such interests are to be transferred in an amount equal to the principal
amount of the Notes to be transferred and (B) an increase in the
principal amount of an IAI Global Note or a Regulation S Global Note, as
the case may be, in an amount equal to the principal amount of the Notes
to be transferred.
(b) TRANSFERS TO QIBS. The following provisions shall apply with respect
to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for
on the form of Note stating, or has otherwise advised the Company and
the Registrar in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the
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certification provided for on the form of Note stating, or has otherwise
advised the Company and the Registrar in writing, that it is purchasing
the Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is
a QIB within the meaning of Rule 144A, and is aware that the sale to it
is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A; and
(ii) if the proposed transferee is a Depository Participant, and
the Notes to be transferred consist of Physical Notes which after
transfer are to be evidenced by an interest in a Global Note, upon
receipt by the Registrar of written instructions given in accordance
with the Depository's and the Registrar's procedures, the Registrar
shall reflect on its books and records the date and an increase in the
principal amount of such Global Note in an amount equal to the principal
amount of the Physical Notes to be transferred, and the Trustee shall
cancel the Physical Notes so transferred; and
(iii) if the proposed transferor is a Depository Participant
seeking to transfer an interest in the IAI Global Note or the Regulation
S Global Note, upon receipt by the Registrar of written instructions
given in accordance with the Depository's and the Registrar's
procedures, the Registrar shall register the transfer and reflect on its
books and records the date and (A) a decrease in the principal amount of
the IAI Global Note or the Regulation S Global Note, as the case may be,
in an amount equal to the principal amount of the Notes to be
transferred and (B) an increase in the principal amount of the Global
Note in an amount equal to the principal amount of the Notes to be
transferred.
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(c) PRIVATE PLACEMENT LEGEND. Upon the registration of transfer,
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the registration of transfer, exchange or replacement of Notes bearing
the Private Placement Legend, the Registrar shall deliver only Notes that bear
the Private Placement Legend unless (i) the circumstances contemplated by
paragraph (a)(i)(x) of this Section 2.16 exist or (ii) there is delivered to
the Registrar an Opinion of Counsel reasonably satisfactory to the Company and
the Trustee to the effect that neither such Private Placement Legend nor the
related restrictions on transfer are required in order to maintain compliance
with the provisions of the Act.
(d) GENERAL. By its acceptance of any Note bearing the Private Placement
Legend, each Holder of such a Note acknowledges the restrictions on transfer
of such Note set forth in this Indenture and in the Private Placement Legend
and agrees that it will transfer such Note only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16
for a period of three years. The Company shall have the right to inspect and
make copies of all such letters, notices or other written communications at
any reasonable time upon the giving of reasonable written notice to the
Registrar.
ARTICLE III.
REDEMPTION; PLEDGE FOR SPECIAL MANDATORY REDEMPTION
Section 3.1. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to Paragraph Six of the
Notes, or if the Company is required to redeem all of the Notes pursuant to a
Special Mandatory Redemption, it shall, in either case, notify both the
Trustee and the Paying Agent in writing of the Redemption Date and the
principal amount of the Notes to be redeemed. The Company shall give each
notice provided for in this Section 3.1 at least 30 days (or 45 days if the
Company causes the Trustee to give notice of redemption to the Holders
pursuant to Section 3.3 hereof) before the Redemption Date (except as provided
in Section 3.7), together with an Officers' Certificate and Opinion of Counsel
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stating that such redemption shall comply with the conditions contained herein
and in the Notes.
Section 3.2. SELECTION OF NOTES TO BE REDEEMED.
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption shall be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which such Notes are listed or, if such Notes are not
then listed on a national securities exchange, on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate; PROVIDED,
HOWEVER, that if a partial redemption is made with the proceeds of a Public
Equity Offering, selection of the Notes or portions thereof for redemption
shall be made by the Trustee only on a pro rata basis or on as nearly a pro
rata basis as is practicable (subject to Depository procedures), unless such
method is otherwise prohibited. The Trustee shall make the selection from the
Notes outstanding and not previously called for redemption and shall promptly
notify the Company in writing of the Notes selected for redemption and, in the
case of any Note selected for partial redemption, the principal amount thereof
to be redeemed. Notes in denominations of $1,000 may be redeemed only in
whole. The Trustee may select for redemption portions (equal to $1,000 or any
integral multiple thereof) of the principal of Notes that have denominations
larger than $1,000. Provisions of this Indenture that apply to Notes called
for redemption also apply to portions of Notes called for redemption.
Section 3.3. NOTICE OF REDEMPTION.
At least 30 days (other than with respect to a Special Mandatory
Redemption) but not more than 60 days before a Redemption Date, the Company
shall mail or cause to be mailed a notice of redemption by first class mail,
postage prepaid, to each Holder whose Notes are to be redeemed, with a copy to
the Trustee and any Paying Agent; provided that, with respect to a Special
Mandatory Redemption, such notice shall be so mailed promptly after the
occurrence of the event triggering such Special Mandatory Redemption.
Each notice for redemption shall identify the Notes to be redeemed and
shall state:
(1) the Redemption Date;
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(2) the Redemption Price and the amount of accrued interest, if
any, to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such
redemption is being made;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if
any;
(6) that, unless (a) the Company defaults in making the redemption
payment or (b) such redemption payment is prohibited pursuant to Article
X or XII hereof or otherwise, interest on Notes called for redemption
ceases to accrue on and after the Redemption Date, and the only
remaining right of the Holders of such Notes is to receive payment of
the Redemption Price plus accrued interest, if any, to the Redemption
Date, upon surrender to the Paying Agent of the Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount (equal to $1,000 or any integral multiple thereof) of
such Note to be redeemed and that, on or after the Redemption Date, and
upon surrender of such Note, a new Note or Notes in the aggregate
principal amount equal to the unredeemed portion thereof will be issued;
and
(8) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Notes to be
redeemed and the aggregate principal amount of Notes to be outstanding
after such partial redemption.
Section 3.4. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.3,
Notes called for redemption become due and payable on the Redemption Date and
at the Redemption Price plus accrued interest, if any. Upon surrender to the
Trustee or Paying Agent, such Notes called for redemption, unless prohibited
pursuant to Article X or XII or otherwise pursuant to this Indenture, shall be
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paid at the Redemption Price (which shall include accrued interest thereon to
the Redemption Date), but installments of interest, the maturity of which is
on or prior to the Redemption Date, shall be payable to Holders of record at
the close of business on the relevant record dates referred to in the Notes.
Section 3.5. DEPOSIT OF REDEMPTION PRICE.
Except as otherwise provided in Section 3.7, on or before the Redemption
Date, the Company shall deposit with the Paying Agent in immediately available
funds U.S. Legal Tender sufficient to pay the Redemption Price plus accrued
interest, if any, of all Notes or portions thereof to be redeemed on that
date. The Paying Agent shall promptly return to the Company any U.S. Legal
Tender so deposited which is not required for that purpose, except with
respect to monies owed as obligations to the Trustee pursuant to Article VII.
If the Company complies with the preceding paragraph and payment of the
Notes is not prohibited under Article X or XII or otherwise, then, unless the
Company defaults in the payment of such Redemption Price plus accrued
interest, if any, interest on the Notes to be redeemed shall cease to accrue
on and after the applicable Redemption Date, whether or not such Notes are
presented for payment.
Section 3.6. NOTES REDEEMED IN PART.
Upon surrender of a Note that is to be redeemed in part, the Company
shall issue and execute, and the Trustee shall authenticate for the Holder, a
new Note or Notes equal in principal amount to the unredeemed portion of the
Note surrendered.
Section 3.7. PLEDGE FOR SPECIAL MANDATORY REDEMPTION.
(a) On the Issue Date, the Company shall deposit with the Trustee for
credit to a special account established by the Trustee the net proceeds of the
Notes and cash, U.S. Government Obligations and/or other Cash Equivalents
(such proceeds, cash, U.S. Government Obligations and/or other Cash
Equivalents, together with the interest, dividends and distributions thereon,
the "PLEDGED PROPERTY") in an aggregate amount sufficient (taking into account
all scheduled interest, dividends, earnings and other distributions thereon
and the initial investment of such cash) to redeem the Notes at the Mandatory
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Redemption Price, assuming such redemption occurs on July 27, 1999.
(b) If the Trustee receives a notice of a Special Mandatory Redemption
from the Company or if the Trustee does not receive a notice to the effect
described in paragraph (c) of this Section 3.7 on or before the Deadline Date,
the Trustee shall liquidate all Pledged Property held by it no later than the
Business Day prior to the Mandatory Redemption Date and release to the Paying
Agent an amount of Pledged Property in cash equal to the aggregate Mandatory
Redemption Price of the Notes for payment to Holders on the Mandatory
Redemption Date. Concurrently with such release to the Paying Agent, the
Trustee shall release any excess Pledged Property to the Company which, in
turn, will be permitted to use such funds in its discretion, including to
dividend such excess to its stockholders. If the cash proceeds of the Pledged
Property are less than the Mandatory Redemption Price, the Company shall be
obligated to deliver an amount equal to the deficiency to the Paying Agent
prior to the Mandatory Redemption Date.
(c) If the Trustee receives notice that the closing of the Acquisition
will occur on or prior to the Deadline Date, the Trustee will release all
Pledged Property to the Company upon presentation of an Officer's Certificate
of the Company, certifying to the Trustee that (A) the Company and NovaCare
Orthotics & Prosthetics, Inc. propose concurrently to consummate the
Acquisition pursuant to the terms of the Stock Purchase Agreement, as it may
be amended, (B) the terms of the transactions to be entered into and the
business to be acquired from NovaCare Orthotics & Prosthetics, Inc. conform in
all material respects to the description thereof contained in the Offering
Memorandum dated June 9, 1999 with respect to the offering of the Notes,
subject only to any changes provided for or contemplated in such Offering
Memorandum or otherwise permitted pursuant to the terms of the Stock Purchase
Agreement, (C) all conditions to the closing of the Acquisition have been
satisfied or waived, and (D) immediately following such release (and, in any
event, within one Business Day thereafter) such funds will be used to pay a
portion of the purchase price for the Acquisition.
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ARTICLE IV.
COVENANTS
Section 4.1. PAYMENT OF NOTES.
The Company shall pay the principal of and interest on the Notes on the
dates and in the manner provided in the Notes and in this Indenture. An
installment of principal of or interest on the Notes shall be considered paid
on the date it is due if the Trustee or Paying Agent (other than the Company
or an Affiliate of the Company) holds, prior to 11:00 a.m. New York City time
on that date, U.S. Legal Tender designated for and sufficient to pay the
installment in full and is not prohibited from paying such money to the
Holders pursuant to the terms of this Indenture.
The Company shall pay, to the extent such payments are lawful, interest
on overdue principal and on overdue installments of interest (without regard
to any applicable grace periods) from time to time on demand at the rate borne
by the Notes. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Section 4.2. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain the office or agency required under Section
2.3. The Company shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 13.2.
Section 4.3. CORPORATE EXISTENCE.
Except as otherwise permitted by Article V, the Company shall do or
cause to be done, at its own cost and expense, all things necessary to
preserve and keep in full force and effect its corporate existence and the
corporate existence of each of the Restricted Subsidiaries in accordance with
the respective organizational documents of each such Restricted Subsidiary and
the material rights (charter and statutory) and franchises of the Company and
each such Restricted Subsidiary; PROVIDED, HOWEVER, that the Company shall not
be required to preserve, with respect to itself, any material right or
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franchise and, with respect to any of its Subsidiaries, any such existence,
material right or franchise, if the Board of Directors of the Company shall
determine in good faith that the preservation thereof is no longer desirable
in the conduct of the business of the Company and its Subsidiaries, taken as a
whole.
Section 4.4. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments
and governmental charges (including withholding taxes and any penalties,
interest and additions to taxes) levied or imposed upon it or any of its
Subsidiaries or its Properties or any of its Subsidiaries' Properties and (ii)
all material lawful claims for labor, materials and supplies that, if unpaid,
might by law become a Lien upon its Properties or any of its Subsidiaries'
Properties; PROVIDED, HOWEVER, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings properly instituted and diligently
conducted for which adequate reserves, to the extent required under GAAP, have
been taken.
Section 4.5. CONDUCT OF BUSINESS.
The Company and its Restricted Subsidiaries shall not engage in any
businesses which are not the same, similar or reasonably related to the
businesses in which the Company and its Restricted Subsidiaries are engaged on
the Issue Date.
Section 4.6. Compliance Certificate; NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year of the Company, an Officers' Certificate which
complies with TIA ss. 314(a)(4) stating that a review of its activities during
the preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether it has kept, observed, performed
and fulfilled its Obligations under this Indenture (without regard to any
period of grace or requirement of notice provided hereunder) and further
stating, as to each such Officer signing such certificate, that to such
Officer's knowledge the Company during such preceding fiscal year has kept,
observed, performed and fulfilled each and every such covenant and the
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Obligations contained in this Indenture and the Notes and no Default or Event
of Default occurred during such year and at the date of such certificate there
is no Default or Event of Default that has occurred and is continuing or, if
such signers do know of such Default or Event of Default, the certificate
shall describe the Default or Event of Default and its status with
particularity. The Officers' Certificate shall also notify the Trustee should
the Company elect to change the manner in which it fixes its fiscal year end.
(b) The annual financial statements delivered pursuant to Section 4.8
shall be accompanied by a written report of the Company's independent
accountants (who shall be a firm of established national reputation) that in
conducting their audit of such financial statements nothing has come to their
attention that would lead them to believe that the Company has violated any
provisions of Article IV, V or VI of this Indenture insofar as they relate to
accounting matters or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation that would not be disclosed
in the course of an audit examination conducted in accordance with generally
accepted auditing standards.
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Company
shall deliver to the Trustee, at its address set forth in Section 13.2 hereof,
by registered or certified mail or by telegram, telex or facsimile
transmission followed by hard copy by registered or certified mail an
Officers' Certificate specifying such event, notice or other action (including
any action the Company is taking or proposes to take in respect thereof)
promptly upon any such officer obtaining knowledge of any Default or an Event
of Default.
Section 4.7. COMPLIANCE WITH LAWS.
The Company shall, and shall cause each of its Subsidiaries to, comply
with all applicable statutes, rules, regulations, orders and restrictions of
the United States of America, all foreign jurisdictions the laws of which any
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Subsidiary are subject, all states and municipalities thereof, and of any
governmental department, commission, board, regulatory authority, bureau,
agency and instrumentality of the foregoing, in respect of the conduct of its
businesses and the ownership of its properties, except for such noncompliances
as could not singly or in the aggregate have a material adverse effect on the
business or financial condition of the Company and its Subsidiaries, taken as
a whole.
Section 4.8. REPORTS TO HOLDERS.
Regardless of whether or not required by the rules and regulations of
the SEC, so long as any Notes are outstanding, the Company shall deliver to
the Trustee within 15 days after the filing of the same with the SEC, copies
of:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of the Company and
its consolidated Subsidiaries (showing in reasonable detail, either on the
face of the financial statements or in the footnotes thereto and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, the financial condition and results of operations of the Company
and its Restricted Subsidiaries separate from the financial condition and
results of operations of the Unrestricted Subsidiaries of the Company, if any)
and, with respect to the annual information only, a report thereon by the
Company's certified independent accountants; and
(2) all current reports that would be required to be filed with the SEC
on Form 8-K if the Company were required to file such reports, in each case
within the time periods specified in the SEC's rules and regulations.
In addition, following the consummation of the Exchange Offer, whether
or not required by the rules and regulations of the SEC, the Company shall
file a copy of all such information and reports with the SEC for public
availability within the time periods specified in the SEC's rules and
regulations (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, the Company shall, for so long as any Notes remain
outstanding, furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered
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pursuant to Rule 144A(d)(4) under the Securities Act.
Section 4.9. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company and each Guarantor covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive the
Company or any such Guarantor, as the case may be, from paying all or any
portion of the principal of or interest on the Notes or performing its
Guarantee, as the case may be and as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the covenants or
the performance of this Indenture; and (to the extent that it may lawfully do
so) the Company and each Guarantor hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not hinder, delay or
impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law had
been enacted.
Section 4.10. LIMITATION ON RESTRICTED PAYMENTS.
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any
dividend or make any distribution (other than dividends or distributions
payable in Qualified Capital Stock of the Company) on or in respect of shares
of the Company's Capital Stock to holders of such Capital Stock; (2) purchase,
redeem or otherwise acquire or retire for value any Capital Stock of the
Company or any warrants, rights or options to purchase or acquire shares of
any class of such Capital Stock; (3) make any principal payment on, purchase,
defease, redeem, prepay, decrease or otherwise acquire or retire for value,
prior to any scheduled final maturity, scheduled repayment or scheduled
sinking fund payment, any Indebtedness of the Company or any Guarantor that is
subordinate or junior in right of payment to the Notes (other than any such
Indebtedness that is held by the Company or a Guarantor); or (4) make any
Investment (other than Permitted Investments), including any Designation
Amount (each of the foregoing actions set forth in clauses (1) through (4)
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being referred to as a "RESTRICTED PAYMENT"); if at the time of such
Restricted Payment or immediately after giving effect thereto, (i) a Default
or an Event of Default shall have occurred and be continuing; or (ii) the
Company is not able to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with Section 4.14; or (iii) the
aggregate amount of Restricted Payments (including such proposed Restricted
Payment) made subsequent to the Issue Date (the amount expended for such
purposes, if other than in cash, being the fair market value of such property
as determined in good faith by the Board of Directors of the Company) shall
exceed the sum of: (w) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such loss)
of the Company earned from and after the first day of the first full fiscal
quarter following the Issue Date and on or prior to the last day of the latest
fiscal quarter for which consolidated financial statements of the Company are
available preceding the date the Restricted Payment occurs (treating such
period as a single accounting period); plus (x) 100% of the aggregate net cash
proceeds received by the Company from any Person (other than a Subsidiary of
the Company) from the issuance and sale subsequent to the Issue Date and on or
prior to the date the Restricted Payment occurs of Qualified Capital Stock of
the Company; plus (y) without duplication of any amounts included in clause
(iii)(x) above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's Capital
Stock (excluding, in the case of clauses (iii)(x) and (y), any net cash
proceeds from a Public Equity Offering to the extent used to redeem the Notes
in compliance with the provisions set forth in paragraph 6(b) of the Notes;
plus (z) without duplication, the sum of: (A) the aggregate amount returned in
cash on or with respect to Investments (other than Permitted Investments) made
subsequent to the Issue Date whether through interest payments, principal
payments, dividends or other distributions or payments; (B) the net cash
proceeds received by the Company or any of its Restricted Subsidiaries from
the disposition of all or any portion of such Investments (other than to an
Unrestricted Subsidiary of the Company); and (C) upon redesignation of an
Unrestricted Subsidiary as a Restricted Subsidiary, the fair market value of
such Subsidiary; PROVIDED, HOWEVER, that the sum of clauses (A), (B) and (C)
above shall not exceed the aggregate amount of all such Investments made
subsequent to the Issue Date.
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Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any
dividend within 60 days after the date of declaration of such dividend if the
dividend would have been permitted on the date of declaration; (2) if no
Default or Event of Default shall have occurred and be continuing, the
acquisition of any shares of Capital Stock of the Company, either (i) solely
in exchange for shares of Qualified Capital Stock of the Company or (ii)
through the application of net proceeds of a substantially concurrent sale for
cash (other than to a Subsidiary of the Company) of shares of Qualified
Capital Stock of the Company; PROVIDED that, any such net proceeds pursuant to
the immediately preceding clause (2)(ii) are excluded from clause (4)(iii)(x)
of the immediately preceding sentence; (3) if no Default or Event of Default
shall have occurred and be continuing, the acquisition of any Indebtedness of
the Company or any Guarantor that is subordinate or junior in right of payment
to the Notes either (i) solely in exchange for shares of Qualified Capital
Stock of the Company, or (ii) through the application of net proceeds of a
substantially concurrent sale for cash (other than to a Subsidiary of the
Company) of (a) shares of Qualified Capital Stock of the Company or (b)
Refinancing Indebtedness; PROVIDED that, any such net proceeds pursuant to the
immediately preceding clause (3)(ii)(a) are excluded from clause (4)(iii)(x)
of the immediately preceding sentence; (4) so long as no Default or Event of
Default shall have occurred and be continuing, repurchases by the Company of
Common Stock of the Company from employees of the Company or any of its
Subsidiaries or their authorized representatives upon the death, disability or
termination of employment of such employees, in an aggregate amount not to
exceed $1.0 million in any calendar year; and (5) the acquisition of any
shares of (i) Redeemable Preferred Stock solely in exchange for shares of
Common Stock of the Company, or (ii) Common Stock of the Company solely in
exchange for shares of Common Stock of the Company of another class.
In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in accordance with clause (iii) of the first
paragraph of this Section 4.10, amounts expended pursuant to clauses (1) and
(4) of such paragraph shall be included in such calculation.
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Section 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each an
"AFFILIATE TRANSACTION"), other than (x) Affiliate Transactions permitted as
described below and (y) Affiliate Transactions on terms that are no less
favorable than those that might reasonably have been obtained in a comparable
transaction at such time on an arm's-length basis from a Person that is not an
Affiliate of the Company or such Restricted Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other
property with a fair market value in excess of $2.5 million shall be approved
by the Board of Directors of the Company or such Restricted Subsidiary, as the
case may be, such approval to be evidenced by a Board Resolution stating that
such Board of Directors has determined that such transaction complies with the
foregoing provisions. If the Company or any Restricted Subsidiary of the
Company enters into an Affiliate Transaction (or a series of related Affiliate
Transactions related to a common plan) that involves an aggregate fair market
value of more than $10.0 million, the Company or such Restricted Subsidiary,
as the case may be, shall, prior to the consummation thereof, obtain a
favorable opinion as to the fairness of such transaction or series of related
transactions to the Company or the relevant Restricted Subsidiary, as the case
may be, from a financial point of view, from an Independent Financial Advisor
and file the same with the Trustee.
The restrictions set forth in the first paragraph of this Section 4.11
shall not apply to: (i) reasonable fees and compensation paid to and indemnity
provided on behalf of, officers, directors, employees or consultants of the
Company or any Restricted Subsidiary of the Company as determined in good
faith by the Company's Board of Directors or senior management; (ii)
transactions exclusively between or among the Company and any of its Wholly
Owned Restricted Subsidiaries or exclusively between or among such Wholly
Owned Restricted Subsidiaries, provided such transactions are not otherwise
prohibited by this Indenture; (iii) any agreement (including any certificate
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of designations relating to Capital Stock) as in effect as of the Issue Date
or with respect to any certificate of designations pursuant to an agreement
dated as of the Issue Date, the date of the filing thereof, or any exhibit or
amendment thereto or any transaction contemplated thereby (including pursuant
to any amendment thereto) in any replacement agreement thereto so long as any
such amendment or replacement agreement is not more disadvantageous to the
Holders in any material respect than the original agreement as in effect on
the Issue Date; (iv) the issuance to Chase Equity Associates, L.P. and Paribas
North America, Inc. pursuant to the Securities Purchase Agreement dated on or
about the Issue Date of shares of Redeemable Preferred Stock, and the payment
of dividends on such shares in accordance with the terms of such Preferred
Stock; and (v) Restricted Payments permitted by this Indenture.
Section 4.13. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES.
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or
make any other distributions on or in respect of its Capital Stock; (b) make
loans or advances or to pay any Indebtedness or other obligation owed to the
Company or any other Restricted Subsidiary of the Company; or (c) transfer any
of its property or assets to the Company or any other Restricted Subsidiary of
the Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) this Indenture or the Credit Agreement; (3)
Liens on property described in clause (vi) or (vii) of the definition of
Permitted Liens, but only with respect to transfers referred to in clause (c)
above; (4) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of any Restricted Subsidiary of the Company;
(5) any instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person or the properties or assets of the Person so
acquired; (6) agreements existing on the Issue Date to the extent and in the
manner such agreements are in effect on the Issue Date; (7) any agreement
entered into for the sale or disposition of all or substantially all of the
Capital Stock or property of any Restricted Subsidiary pending the closing of
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such sale or disposition; or (8) an agreement governing Indebtedness incurred
to Refinance the Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (2), (3), (5) or (6) above; PROVIDED, HOWEVER,
that the provisions relating to such encumbrance or restriction contained in
any such Indebtedness are no less favorable to the Company in any material
respect as determined by the Board of Directors of the Company in their
reasonable and good faith judgment than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such clause
(2), (3), (5) or (6).
Section 4.13. PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED DEBT.
The Company shall not, and shall not permit any Restricted Subsidiary
that is a Guarantor to, incur or suffer to exist Indebtedness that is senior
in right of payment to the Notes or such Guarantor's Guarantee, as the case
may be, and subordinate in right of payment to any other Indebtedness of the
Company or such Guarantor, as the case may be.
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Section 4.14. LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or
otherwise become responsible for payment of (collectively, "INCUR") any
Indebtedness (other than Permitted Indebtedness); PROVIDED, HOWEVER, that if
no Default or Event of Default shall have occurred and be continuing at the
time of or as a consequence of the incurrence of any such Indebtedness, the
Company or any of its Restricted Subsidiaries that is or, upon such
incurrence, becomes a Guarantor may incur Indebtedness (including, without
limitation, Acquired Indebtedness) and any Restricted Subsidiary of the
Company that is not or will not, upon such incurrence, become a Guarantor may
incur Acquired Indebtedness, in each case if on the date of the incurrence of
such Indebtedness, after giving effect to the incurrence thereof, the
Consolidated Fixed Charge Coverage Ratio of the Company is greater than (a)
2.25 to 1.0, if the date of such incurrence is prior to December 15, 2001 or
(b) 2.5 to 1.0, if the date of such incurrence is on or after December 15,
2001.
For purposes of the foregoing paragraph, neither the accrual of interest
nor the accretion of discount on Indebtedness shall be deemed to be an
incurrence of Indebtedness.
Section 4.15. OFFER TO REPURCHASE UPON A CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder shall have
the right to require that the Company purchase all or a portion of such
Holder's Notes pursuant to the offer described in paragraph (b) (the "CHANGE
OF CONTROL OFFER"), at a purchase price equal to 101% of the principal amount
thereof plus accrued interest to the date of purchase.
(b) Within 30 days following the date upon which the Change of Control
occurred, the Company shall send, by first class mail, postage prepaid, a
notice to each Holder, with a copy to the Trustee, which notice shall govern
the terms of the Change of Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to
this Section 4.15 and that all Notes tendered will be accepted for
payment;
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(2) the purchase price (including the amount of accrued interest)
and the purchase date (which shall be no earlier than 30 days nor later
than 60 days from the date such notice is mailed, other than as may be
required by law) (the "CHANGE OF CONTROL PAYMENT DATE");
(3) that any Note not tendered will continue to accrue interest if
interest is then accruing;
(4) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Paying Agent at the address specified in the
notice prior to 5:00 p.m., New York City time, on the third Business Day
prior to the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than 5:00 p.m., New York City time,
on the third Business Day preceding the Change of Control Payment Date,
a telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Notes the Holder
delivered for purchase and a statement that such Holder is withdrawing
his election to have such Note purchased; and
(7) the circumstances and relevant facts regarding such Change of
Control.
(c) On or before the Change of Control Payment Date, the Company shall
(i) accept for payment Notes or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price plus accrued interest, if any, of all
Notes or portions thereof so tendered and accepted and (iii) deliver to the
Trustee Notes so accepted for cancellation pursuant to Section 2.11, together
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with an Officers' Certificate stating the Notes or portions thereof being
purchased by the Company. The Paying Agent shall promptly mail or deliver to
the Holders of Notes so accepted payment in an amount equal to the purchase
price plus accrued interest, if any, and the Company shall execute and issue,
and the Trustee shall promptly authenticate and mail or deliver to such
Holders new Notes equal in principal amount to any unpurchased portion of the
Notes surrendered. Any Notes not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date. For purposes of this
Section 4.15, the Trustee shall act as the Paying Agent.
(d) Prior to the mailing of the notice described in clause (b) above,
but in any event within 30 days following any Change of Control, the Company
shall: (i) repay in full and terminate all commitments under Indebtedness
under the Credit Agreement and all other Senior Debt the terms of which
require repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the Credit Agreement
and all other such Senior Debt and to repay the Indebtedness owed to each
lender which has accepted such offer; or (ii) obtain the requisite consents
under the Credit Agreement and all other Senior Debt to permit the repurchase
of the Notes as described above. The Company shall first comply with the
covenant in the immediately preceding sentence before it shall be required to
repurchase Notes pursuant to the other provisions of this Section 4.15. The
Company's failure to comply with this Section 4.15(d) shall constitute an
Event of Default described in clause (3) and not in clause (2) in Section 6.1
of this Indenture.
(e) The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with this
Section 4.15, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under
this Section 4.15 by virtue thereof.
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Section 4.16. LIMITATION ON ASSET SALES.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(i) the Company or the applicable Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at
least equal to the fair market value of the assets sold or otherwise
disposed of (as determined in good faith by the Company's Board of
Directors);
(ii) at least 85% of the consideration received by the Company or
the Restricted Subsidiary, as the case may be, from such Asset Sale
shall be in the form of cash or Cash Equivalents and is received at the
time of such disposition; and
(iii) upon the consummation of an Asset Sale, the Company shall
apply, or cause such Restricted Subsidiary to apply, the Net Cash
Proceeds relating to such Asset Sale within 180 days of receipt thereof
either:
(A) to prepay any Senior Debt or Guarantor Senior Debt and, in the
case of any Senior Debt under any revolving credit facility, effect a
permanent reduction in the availability under such revolving credit
facility;
(B) to make an investment in properties and assets that replace
the properties and assets that were the subject of such Asset Sale or in
properties and assets that will be used in the business of the Company
and its Restricted Subsidiaries as existing on the Issue Date or in
businesses reasonably related thereto ("REPLACEMENT ASSETS"); or
(C) a combination of prepayment and investment permitted by the
foregoing clauses (iii)(A) and (iii)(B).
(b) On the 181st day after an Asset Sale or such earlier date, if any,
as the Board of Directors of the Company or of such Restricted Subsidiary
determines not to apply the Net Cash Proceeds relating to such Asset Sale as
set forth in clause (iii) of paragraph (a) (each, an "OFFER TRIGGER DATE"),
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such aggregate amount of Net Cash Proceeds which have not been applied on or
before such Offer Trigger Date as permitted in clause (iii) of paragraph (a)
(each an "OFFER AMOUNT") shall be applied by the Company or such Restricted
Subsidiary to make an offer to purchase (the "NET PROCEEDS OFFER") on a date
(the "NET PROCEEDS OFFER PAYMENT DATE") not less than 30 nor more than 45 days
following the applicable Offer Trigger Date, from all Holders on a PRO RATA
basis, that amount of Notes equal to the Offer Amount at a price equal to 100%
of the principal amount of the Notes to be purchased, plus accrued and unpaid
interest thereon, if any, to the date of purchase; PROVIDED, HOWEVER, that if
at any time any non-cash consideration received by the Company or any
Restricted Subsidiary of the Company, as the case may be, in connection with
any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash
consideration), then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be
applied in accordance with this Section 4.16. The Company may defer making the
Net Proceeds Offer until there is an aggregate Offer Amount equal to or in
excess of $5.0 million resulting from one or more Asset Sales (at which time,
the entire Offer Amount, and not just the amount in excess of $5.0 million,
shall be applied as required pursuant to this paragraph).
(c) In the event of the transfer of substantially all (but not all) of
the property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under Section 5.1, which
transaction does not constitute a Change of Control, the successor corporation
shall be deemed to have sold the properties and assets of the Company and its
Restricted Subsidiaries not so transferred for purposes of this Section 4.16,
and shall comply with the provisions of this Section 4.16 with respect to such
deemed sale as if it were an Asset Sale. In addition, the fair market value of
such properties and assets of the Company or its Restricted Subsidiaries
deemed to be sold shall be deemed to be Net Cash Proceeds for purposes of this
Section 4.16.
(d) Each Net Proceeds Offer shall be mailed to the record Holders as
shown on the register of Holders within 25 days following the Offer Trigger
Date, with a copy to the Trustee. The notice shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
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Net Proceeds Offer and shall state the following terms:
(1) that the Net Proceeds Offer is being made pursuant to Section
4.16 and that all Notes tendered will be accepted for payment; PROVIDED,
HOWEVER, that if the aggregate principal amount of Notes tendered in a
Net Proceeds Offer plus accrued interest at the expiration of such offer
exceeds the aggregate amount of the Net Proceeds Offer Amount, the
Company shall select the Notes to be purchased on a pro rata basis
(based on amounts tendered) (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000
or integral multiples thereof shall be purchased);
(2) the purchase price (including the amount of accrued interest)
and the purchase date (which shall be 20 Business Days from the date
such notice is mailed, or such longer period as may be required by law)
(the "PROCEEDS PURCHASE DATE");
(3) that any Note not tendered will continue to accrue interest if
interest is then accruing;
(4) that, unless the Company defaults in making payment therefor,
any Note accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrue interest after the Proceeds Purchase Date;
(5) that Holders electing to have a Note purchased pursuant to a
Net Proceeds Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice
prior to 5:00 p.m., New York City time, on the Business Day immediately
preceeding the Proceeds Purchase Date;
(6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than 5:00 p.m., New York City time,
on the Business Day immediately preceeding the Proceeds Purchase Date, a
telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Notes the Holder delivered
for purchase and a statement that such Holder is withdrawing his
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election to have such Note purchased; and
(7) that Holders whose Notes were purchased only in part will be
issued new Notes equal to principal amount to the unpurchased portion of
the Notes surrendered.
(e) Upon receiving notice of the Net Proceeds Offer, Holders may elect
to tender their Notes in whole or in part in integral multiples of $1,000 in
exchange for cash. To the extent Holders properly tender Notes in an amount
exceeding the Offer Amount, Notes of tendering Holders shall be purchased on a
PRO RATA basis (based on amounts tendered). A Net Proceeds Offer shall remain
open for a period of 20 business days or such longer period as may be required
by law.
(f) On or before the Proceeds Purchase Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Net
Proceeds Offer which are to be purchased in accordance with item (b) above,
(ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the
purchase price of all Notes to be purchased and (iii) deliver to the Trustee
Notes so accepted for cancellation pursuant to Section 2.11, together with an
Officers' Certificate stating the Notes or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price plus accrued
interest, if any, and the Company shall execute and issue, and the Trustee
shall promptly authenticate and mail or deliver to such Holders new Notes
equal in principal amount to any unpurchased portion of the Notes surrendered.
The Company shall publicly announce the results of the Net Proceeds Offer on
or as soon as practicable after the Proceeds Purchase Date. For purposes of
this Section 4.16, the Trustee shall act as the Paying Agent.
(g) To the extent that the aggregate amount of Notes tendered pursuant
to a Net Proceeds Offer is less than the Net Proceeds Offer Amount, the
Company may use any remaining Net Proceeds Offer Amount for general corporate
purposes, and the Net Proceeds Offer Amount shall return to zero.
(h) The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to
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the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with Section 4.16,
the Company shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under Section 4.16 by
virtue thereof.
Section 4.17. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF
RESTRICTED SUBSIDIARIES.
The Company shall not permit any of its Restricted Subsidiaries to issue
any Capital Stock (other than to the Company or to a Wholly Owned Restricted
Subsidiary of the Company) or permit any Person (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company) to own any Capital Stock of
any Restricted Subsidiary of the Company.
Section 4.18. LIMITATION ON LIENS.
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property
or assets of the Company or any of its Restricted Subsidiaries whether owned
on the Issue Date or acquired after the Issue Date, or any proceeds therefrom,
or assign or otherwise convey any right to receive income or profits therefrom
unless: (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes, the Notes are secured
by a Lien on such property, assets or proceeds that is senior in priority to
such Liens; and (ii) in all other cases, the Notes are equally and ratably
secured, except for: (A) Liens existing as of the Issue Date to the extent and
in the manner such Liens are in effect on the Issue Date; (B) Liens securing
Senior Debt and Liens securing Guarantor Senior Debt; (C) Liens of the Company
or a Wholly Owned Restricted Subsidiary of the Company on assets of any
Restricted Subsidiary of the Company; (D) Liens securing Refinancing
Indebtedness which is incurred to Refinance any Indebtedness which has been
secured by a Lien permitted under this Indenture and which has been incurred
in accordance with the provisions of this Indenture, provided, however, that
such Liens: (i) are no less favorable to the Holders and are not more
favorable to the lienholders with respect to such Liens than the Liens in
respect of the Indebtedness being Refinanced; and (ii) do not extend to or
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cover any property or assets of the Company or any of its Restricted
Subsidiaries not securing the Indebtedness so Refinanced; and (E) Permitted
Liens.
Section 4.19. PAYMENTS FOR CONSENT.
Neither the Company nor any of its Restricted Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Notes unless such consideration (i) is
offered to be paid to all Holders and (ii) is paid to all Holders of the Notes
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement, on a PRO
RATA basis.
Section 4.20. ADDITIONAL GUARANTEES.
If the Company or any of its Restricted Subsidiaries transfers or causes
to be transferred, in one transaction or a series of related transactions, any
Property to any Domestic Restricted Subsidiary that is not a Guarantor, or if
the Company or any of its Restricted Subsidiaries shall organize, acquire or
otherwise invest in another Domestic Restricted Subsidiary having total assets
with a book value in excess of $500,000, then such transferee or acquired or
other Restricted Subsidiary shall: (1) execute and deliver to the Trustee a
supplemental indenture in form reasonably satisfactory to the Trustee pursuant
to which such Restricted Subsidiary shall unconditionally guarantee all of the
Company's obligations under the Notes and this Indenture on the terms set
forth in this Indenture; and (2) deliver to the Trustee an Opinion of Counsel
that such supplemental indenture has been duly authorized, executed and
delivered by such Restricted Subsidiary and constitutes a legal, valid,
binding and enforceable obligation of such Restricted Subsidiary, provided
that, in connection with any such Restricted Subsidiary that becomes such a
Restricted Subsidiary on the date of the Acquisition as the result thereof,
such Opinion of Counsel may assume that the applicable law of the jurisdiction
of formation of such Restricted Subsidiary is substantially the same as that
of another jurisdiction named in such Opinion of Counsel. Thereafter, such
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Restricted Subsidiary shall be a Guarantor for all purposes of this Indenture.
Section 4.21. DESIGNATION OF SUBSIDIARIES.
The Board of Directors of the Company may designate (i) a Restricted
Subsidiary as an Unrestricted Subsidiary and (ii) an Unrestricted Subsidiary
as a Restricted Subsidiary, in each case, in accordance with and subject to
the conditions and limitations provided in the definition of "Unrestricted
Subsidiary." The Subsidiaries of the Company that are not designated by the
Board of Directors of the Company as Restricted or Unrestricted Subsidiaries
shall be deemed to be Restricted Subsidiaries of the Company.
ARTICLE V.
SUCCESSOR CORPORATION
Section 5.1. WHEN COMPANY MAY MERGE, ETC.
(a) The Company shall not, in a single transaction or series of related
transactions, consolidate or merge with or into any Person, or sell, assign,
transfer, lease, convey or otherwise dispose of (or cause or permit any
Subsidiary of the Company to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and the Company's
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless:
(i) either (1) the Company shall be the surviving or continuing
corporation or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and of the
Company's Subsidiaries substantially as an entirety (the "SURVIVING
ENTITY") (x) shall be a corporation organized and validly existing under
the laws of the United States or any State thereof or the District of
Columbia and (y) shall expressly assume, by supplemental indenture (in
form and substance satisfactory to the Trustee), executed and delivered
to the Trustee, the due and punctual payment of the principal of, and
premium, if any, and interest on all of the Notes and the performance of
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every covenant of the Notes, this Indenture and the Registration Rights
Agreement on the part of the Company to be performed or observed
(ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving
effect to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be,
(1) shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such
transaction and (2) shall be able to incur at least $1.00 of additional
Indebtedness (in addition to Permitted Indebtedness) pursuant to Section
4.14;
(iii) immediately before and immediately after giving effect to
such transaction and the assumption contemplated by clause (i)(2)(y)
above (including, without limitation, giving effect to any Indebtedness
and Acquired Indebtedness incurred or anticipated to be incurred and any
Lien granted in connection with or in respect of the transaction), no
Default or Event of Default shall have occurred or be continuing; and
(iv) each Guarantor confirms its Guarantee; and
(iv) the Company or the Surviving Entity shall have delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, sale, assignment, transfer,
lease, conveyance or other disposition and, if a supplemental indenture
is required in connection with such transaction, such supplemental
indenture, comply with the applicable provisions of this Indenture and
that all conditions precedent in this Indenture relating to such
transaction have been satisfied.
(b) For purposes of paragraph (a) above, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties and assets of one
or more Restricted Subsidiaries of the Company the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
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Company shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
Section 5.2. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation, combination or merger or any transfer of all or
substantially all of the assets of the Company in accordance with Section 5.1,
in which the Company is not the continuing corporation, the successor Person
formed by such consolidation or into which the Company is merged or to which
such conveyance, lease or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture and the Notes with the same effect as if such surviving entity
had been named as such.
Section 5.3. WHEN A GUARANTOR MAY MERGE, ETC.
(a) Each Guarantor (other than any Guarantor whose Guarantee is to be
released in accordance with the terms of the Guarantee and this Indenture in
connection with any transaction complying with Section 4.16 shall not, and the
Company shall not cause or permit any Guarantor to, consolidate with or merge
with or into any Person other than the Company or any other Guarantor unless:
(1) the entity formed by or surviving any such consolidation or merger (if
other than the Guarantor) or to which such sale, lease, conveyance or other
disposition shall have been made is a corporation organized and existing under
the laws of the United States or any State thereof or the District of
Columbia; (2) such entity assumes by supplemental indenture all of the
obligations of the Guarantor on the Guarantee; (3) immediately after giving
effect to such transaction, no Default or Event of Default shall have occurred
and be continuing; and (4) immediately after giving effect to such transaction
and the use of any net proceeds therefrom on a PRO FORMA basis, the Company
could incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 4.14.
(b) Any merger or consolidation of a Guarantor with and into the Company
(with the Company being the surviving entity) or another Guarantor that is a
Wholly Owned Restricted Subsidiary of the Company need only comply with clause
(4) of paragraph (a).
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ARTICLE VI.
DEFAULT AND REMEDIES
Section 6.1. EVENTS OF DEFAULT.
The following events are defined as "Events of Default":
(1) the failure to pay interest (including any Additional
Interest) on any Notes when the same becomes due and payable and the
default continues for a period of 30 days (whether or not such payment
shall be prohibited by Article X or XII);
(2) the failure to pay the principal of or premium on any Notes,
when such principal becomes due and payable, at maturity, upon
redemption or otherwise (including the failure to make a payment to
purchase Notes tendered pursuant to a Change of Control Offer or a Net
Proceeds Offer) (whether or not such payment shall be prohibited by
Article X or XII);
(3) a default in the observance or performance of any other
covenant or agreement contained in this Indenture which default
continues for a period of 30 days after the Company receives written
notice specifying the default (and demanding that such default be
remedied) from the Trustee or the Holders of at least 25% of the
outstanding principal amount of the Notes (except in the case of a
default with respect to Section 5.1, which will constitute an Event of
Default with such notice requirement but without such passage of time
requirement);
(4) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal
amount of any Indebtedness of the Company or any Restricted Subsidiary
of the Company, or the acceleration of the final stated maturity of any
such Indebtedness (which acceleration is not rescinded, annulled or
otherwise cured within 20 days of receipt by the Company or such
Restricted Subsidiary of notice of any such acceleration) if the
aggregate principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure
to pay principal at final maturity or which has been accelerated,
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aggregates $10.0 million or more at any time;
(5) one or more judgments in an aggregate amount in excess of
$10.0 million shall have been rendered against the Company or any of its
Restricted Subsidiaries and such judgments remain undischarged, unpaid
or unstayed for a period of 60 days after such judgment or judgments
become final and non-appealable;
(6) With respect to the Company, any Guarantor or any of their
Significant Subsidiaries, either:
(x) such entity (A) commences a voluntary case or proceeding
under any Bankruptcy Law with respect to itself, (B) consents to
the entry of a judgment, decree or order for relief against it in
an involuntary case or proceeding under any Bankruptcy Law, (C)
consents to the appointment of a Custodian of it or for
substantially all of its property, (D) consents to or acquiesces
in the institution of a bankruptcy or an insolvency proceeding
against it, (E) makes a general assignment for the benefit of its
creditors, or (F) takes any corporate action to authorize or
effect any of the foregoing; or
(y) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of such entity, which shall
(A) approve as properly filed a petition seeking reorganization,
arrangement, adjustment or composition in respect of such entity,
(B) appoint a Custodian of such entity or for substantially all of
its property or (C) order the winding-up or liquidation of its
affairs, and in any such case, such judgment, decree or order
shall remain unstayed and in effect for a period of 60 consecutive
days; or
(7) any Guarantee of a Significant Subsidiary ceases to be in full
force and effect or any Guarantee of a Significant Subsidiary is
declared to be null and void and unenforceable or any Guarantee of a
Significant Subsidiary is found to be invalid or any Guarantor that is a
Significant Subsidiary denies its liability under its Guarantee (other
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than by reason of release of such Guarantor in accordance with the terms
of the Indenture).
Section 6.2. ACCELERATION.
(a) If an Event of Default (other than an Event of Default specified in
clause (6) above with respect to the Company) shall occur and be continuing,
the Trustee or the Holders of at least 25% in principal amount of outstanding
Notes may declare the principal of and accrued interest on all the Notes to be
due and payable by notice in writing to the Company and the Trustee specifying
the respective Event of Default and that it is a "notice of acceleration" (the
"ACCELERATION NOTICE"), and the same (i) shall become immediately due and
payable or (ii) if there are any amounts outstanding under the Credit
Agreement, shall become immediately due and payable upon the first to occur of
an acceleration under the Credit Agreement or 5 Business Days after receipt by
the Company and the Representative under the Credit Agreement of such
Acceleration Notice but only if such Event of Default is then continuing. If
an Event of Default specified in clause (6) above with respect to the Company
occurs and is continuing, then all unpaid principal of, and premium, if any,
and accrued and unpaid interest on all of the outstanding Notes shall IPSO
FACTO become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder.
(b) The Holders of a majority in principal amount of the Notes may, at
any time after a declaration of acceleration with respect to the Notes as
described in paragraph (a), rescind and cancel such declaration and its
consequences (i) if the rescission would not conflict with any judgment or
decree, (ii) if all existing Events of Default have been cured or waived
except nonpayment of principal or interest that has become due solely because
of the acceleration, (iii) to the extent the payment of such interest is
lawful, interest on overdue amounts, which has become due otherwise than by
such declaration of acceleration, has been paid, (iv) if the Company has paid
the Trustee its reasonable compensation and reimbursed the Trustee for its
expenses, disbursements and advances and (v) in the event of the cure or
waiver of an Event of Default of the type described in clause (6) of Section
6.1, the Trustee shall have received an Officers' Certificate and an Opinion
of Counsel that such Event of Default has been cured or waived. No such
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rescission shall affect any subsequent Default or impair any right consequent
thereto.
(c) Holders of the Notes may not enforce the Indenture or the Notes
except as provided in the Indenture and under the TIA.
(d) In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding payment of the premium that the Company
would have had to pay if the Company then had elected to redeem the Notes
pursuant to the optional redemption provisions of this Indenture, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Notes. If an Event of
Default occurs by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to June 15, 2004, then the
premium specified herein for redemption as of such date shall also become
immediately due and payable to the extent permitted by law upon the
acceleration of the Notes.
Section 6.3. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy by proceeding at law or in equity to collect the payment
of principal of or interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
Section 6.4. WAIVER OF PAST DEFAULTS.
Subject to Sections 2.9, 6.7 and 9.2, the Holders of a majority in
principal amount of the outstanding Notes by notice to the Trustee may waive
any existing Default or Event of Default and its consequences, except a
Default in the payment of principal of or interest on any Note as specified in
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clauses (1) and (2) of Section 6.1. When a Default or Event of Default is
waived, it shall be deemed cured and shall cease to exist.
Section 6.5. CONTROL BY MAJORITY.
Subject to Section 2.9, the Holders of a majority in principal amount of
the outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it, including, without limitation, any remedies provided
for in Section 6.3. Subject to Section 7.1, however, the Trustee may refuse to
follow any direction that the Trustee reasonably believes conflicts with any
law or this Indenture, that the Trustee determines may be unduly prejudicial
to the rights of another Holder, or that may involve the Trustee in personal
liability; provided that the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction.
Section 6.6. LIMITATION ON SUITS.
A Holder may not pursue any remedy with respect to this Indenture or the
Notes unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer to the Trustee indemnity
reasonably satisfactory to the Trustee against any loss, liability or
expense to be incurred in compliance with such request;
(4) the Trustee does not comply with the request within 30 days
after receipt of the request and the offer of satisfactory indemnity;
and
(5) during such 30-day period the Holders of a majority in
principal amount of the outstanding Notes do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with the
request.
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The foregoing limitations shall not apply to a suit instituted by a
Holder for the enforcement of the payment of principal and premium, if any, or
interest on such Note on or after the respective due dates set forth in such
Note (including upon acceleration thereof); provided that upon institution of
any proceeding or exercise of any remedy, such Holders provide the Trustee
with prompt written notice thereof.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
Section 6.7. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of and interest on a Note, on or after
the respective due dates expressed in such Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of such Holder.
Section 6.8. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal or interest specified in
clause (1) or (2) of Section 6.1 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against
the Company, any Guarantor, or any other obligor on the Notes for the whole
amount of principal and accrued interest remaining unpaid, together with
interest on overdue principal and, to the extent that payment of such interest
is lawful, interest on overdue installments of interest, in each case at the
rate per annum borne by the Notes, and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
Section 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relating to the Company or any
other obligor upon the Notes, any of their respective creditors or any of
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their respective property and shall be entitled and empowered to collect and
receive any monies or other property payable or deliverable on any such claims
and to distribute the same, and any Custodian in any such judicial proceedings
is hereby authorized by each Holder to make such payments to the Trustee and,
in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, taxes, disbursements and advances of the
Trustee, its agent and counsel, and any other amounts due the Trustee under
Section 7.7. The Company's payment obligations under this Section 6.9 shall be
secured in accordance with the provisions of Section 7.7. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to
or accept or adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of
any Holder thereof, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
Section 6.10. PRIORITIES.
If the Trustee collects any money or property pursuant to this Article
VI, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.7;
Second: subject to Articles X and XII, to Holders for amounts due
and unpaid on the Notes for interest and premium, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for interest and premium, respectively;
Third: subject to Articles X and XII, to Holders for amounts due
and unpaid on the Notes for principal, ratably without preference or
priority of any kind, according to the amounts due and payable on the
Notes for principal; and
Fourth: subject to Articles X and XII, to the Company, the
Guarantors, or any other obligor on the Notes, as their interests may
appear, or as a court of competent jurisdiction may direct.
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The Trustee, upon prior notice to the Company, may fix a record date and
payment date for any payment to Holders pursuant to this Section 6.10.
Section 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as Trustee, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit, and
the court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by
a Holder pursuant to Section 6.7, or a suit by a Holder or Holders of more
than 10% in principal amount of the outstanding Notes.
Section 6.12. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Note and such proceeding has
been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such case the
Company, the Trustee and the Holders shall, subject to any determination in
such proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
ARTICLE VII.
TRUSTEE
Section 7.1. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture
and use the same degree of care and skill in its exercise thereof as a prudent
person would exercise or use under the circumstances in the conduct of his own
affairs.
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(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties as are specifically
set forth in this Indenture and the TIA and no others and no covenants
or obligations shall be implied in this Indenture against the Trustee.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture. However, in the case of any such certificate or opinion which
by any provision hereof is specifically required to be furnished to the
Trustee, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) This paragraph does not limit the effect of paragraph (b) of
this Section 7.1.
(ii) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.2, 6.4 or 6.5.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
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(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1.
(f) The Trustee shall not be liable for interest on any money or assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
Section 7.2. RIGHTS OF TRUSTEE.
Subject to Section 7.1:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any document reasonably believed by it to be
genuine and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult with
counsel and may require an Officers' Certificate or an Opinion of Counsel, or
both, which shall conform to Sections 13.4 and 13.5. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any attorney or agent
appointed with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, notice, request, direction, consent, order, bond, debenture, or other
paper or document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled, upon reasonable notice to the Company, to examine the
books, records, and premises of the Company and the Guarantors, personally or
by agent or attorney, and to consult with the officers and representatives of
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the Company and the Guarantors, including the accountants and attorneys of the
Company and the Guarantors.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee security or indemnity
reasonably satisfactory to the Trustee against the costs, expenses and
liabilities which may be incurred by it in compliance with such request, order
or direction.
(h) The Trustee shall not be charged with knowledge of any Defaults or
Events of Default unless either (1) a Trust Officer of the Trustee shall have
actual knowledge of such Default or Event of Default or (2) written notice of
such Default or Event of Default shall have been given to the Trustee by any
Holder or by the Company or any other obligor on the Notes or any holder of
Senior Debt or Guarantor Senior Debt or any representative thereof.
Section 7.3. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Company, any Subsidiary of
the Company, or their respective Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However,
the Trustee must comply with Sections 7.10 and 7.11.
Section 7.4. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Notes, and it shall not be accountable for the Company's
use of the proceeds from the Notes, and it shall not be responsible for any
statement of the Company in this Indenture or the Notes other than the
Trustee's certificate of authentication.
Section 7.5. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default becomes known to the Trustee. Except in the case of a Default or an
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Event of Default in payment of principal of or interest on, any Note,
including an accelerated payment, a Default in payment on the Change of
Control Payment Date pursuant to a Change of Control Offer or a Default in
compliance with Article V hereof, the Trustee may withhold the notice if and
so long as its Board of Directors, the executive committee of its Board of
Directors or a committee of its directors and/or Trust Officers in good faith
determines that withholding the notice is in the interest of the Holders.
Section 7.6. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after May 15 of each year beginning with 2000, the
Trustee shall, to the extent that any of the events described in TIA ss.
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Holder a brief report dated as of such date that complies with TIA ss.
313(a). The Trustee also shall comply with TIA ss.ss. 313(b) and (c).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the SEC and each stock exchange, if any,
on which the Notes are listed.
The Company shall promptly notify the Trustee in writing if the Notes
become listed on any stock exchange and the Trustee shall comply with TIA ss.
313(d).
Section 7.7. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable, documented
out-of-pocket expenses incurred or made by it in connection with the
performance of its duties under this Indenture. Such expenses shall include
the reasonable, documented fees and expenses of the Trustee's agents and
counsel.
The Company hereby agrees to indemnify the Trustee and its agents,
employees, officers, directors and shareholders for, and hold it harmless
against, any loss, liability or expense incurred by it (except for such
actions to the extent caused by any negligence, bad faith or willful
misconduct on its part), arising out of or in connection with the
administration of this trust including the reasonable, documented costs and
expenses of defending itself against any claim or liability in connection with
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the exercise or performance of any of its rights, powers or duties hereunder.
The Trustee shall notify the Company promptly of any claim asserted against
the Trustee for which it may seek indemnity. Failure by the Trustee to so
notify the Company shall not relieve the Company of its obligations hereunder
unless, and then only to the extent, such failure results in the forfeiture by
the Company of substantial rights and defenses. At the Trustee's sole
discretion, the Company shall defend the claim and the Trustee shall provide
reasonable cooperation and may participate at the Company's expense in the
defense. Alternatively, the Trustee may at its option have separate counsel of
its own choosing and the Company shall pay the reasonable, documented fees and
expenses of such counsel; provided that the Company shall not be required to
pay such fees and expenses if it assumes the Trustee's defense, there is no
conflict of interest between the Company and the Trustee in connection with
such defense as reasonably determined by the Trustee and no Default or Event
of Default has occurred and is continuing. The Company need not pay for any
settlement made without its written consent, which consent shall not be
unreasonably withheld. The Company need not reimburse any expense or indemnify
against any loss or liability to the extent incurred by the Trustee through
its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(6) occurs, such expenses and the compensation
for such services are intended to constitute expenses of administration under
any Bankruptcy Law.
The obligations of the Company under this Section 7.7 and any lien
arising hereunder shall survive the resignation or removal of the Trustee, the
discharge of the Company's Obligations pursuant to Article VIII or the
termination of this Indenture.
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Section 7.8. REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company in writing, such
resignation to be effective upon the appointment of a successor Trustee. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by so notifying the Company and the Trustee in writing and may
appoint a successor Trustee with the Company's consent which consent shall not
be unreasonably withheld. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after
the successor Trustee takes office, the Holders of a majority in principal
amount of the Notes may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after
that, the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, subject to the lien provided in Section 7.7, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession
to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a
successor Trustee.
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If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 7.8,
the Company's obligations under Section 7.7 shall continue for the benefit of
the retiring Trustee.
Section 7.9. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation without any further act shall, if such resulting,
surviving or transferee corporation is otherwise eligible hereunder, be the
successor Trustee; provided that such corporation shall be otherwise qualified
and eligible under this Article VII.
Section 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the requirement
of TIA ss.ss. 310(a)(1), (2) and (5). The Trustee (or, in the case of a
corporation included in a bank holding company system, the related bank
holding company) shall have a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual report of
condition. In addition, if the Trustee is a corporation included in a bank
holding company system, the Trustee, independently of such bank holding
company, shall meet the capital requirements of TIA ss. 310(a)(2). The Trustee
shall comply with TIA ss. 310(b); provided, however, that there shall be
excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures
under which other securities, or certificates of interest or participation in
other securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA ss. 310(b)(1) are met.
Section 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIAss.311(a), excluding any creditor
relationship listed in TIAss.311(b). A Trustee who has resigned or been
removed shall be subject to TIAss.311(a) to the extent indicated therein.
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ARTICLE VIII.
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.1. SATISFACTION AND DISCHARGE.
This Indenture shall be discharged and shall cease to be of further
effect (except as to surviving rights or registration of transfer or exchange
of the Notes, as expressly provided for in this Indenture) as to all
outstanding Notes when (i) either (a) all the Notes theretofore authenticated
and delivered (except lost, stolen or destroyed Notes which have been replaced
or paid and Notes for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust) have been delivered to the Trustee
for cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together
with irrevocable instructions from the Company directing the Trustee to apply
such funds to the payment thereof; (ii) the Company has paid all other sums
payable under this Indenture by the Company; and (iii) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel
stating that all conditions precedent under this Indenture relating to the
satisfaction and discharge of this Indenture have been complied with.
Section 8.2. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
(a) The Company may, at its option by Board Resolution of the Board of
Directors of the Company, at any time, elect to have either paragraph (b) or
(c) below be applied to all outstanding Notes upon compliance with the
conditions set forth in Section 8.3.
(b) Upon the Company's exercise under paragraph (a) hereof of the option
applicable to this paragraph (b), the Company and the Guarantors shall,
subject to the satisfaction of the conditions set forth in Section 8.3, be
deemed to have been discharged from its obligations with respect to all
outstanding Notes on the date the conditions set forth below are satisfied
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(hereinafter, "LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means
that the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Notes, which shall thereafter be
deemed to be "outstanding" only for the purposes of Section 8.4 hereof and the
other Sections of this Indenture referred to in (i) and (ii) below, and to
have satisfied all its other obligations under such Notes and this Indenture
(and the Trustee, on demand of and at the expense of the Company, shall
execute proper instruments acknowledging the same), and Holders of the Notes
and any amounts deposited under Section 8.3 hereof shall cease to be subject
to any obligations to, or the rights of, any holder of Senior Debt or
Guarantor Senior Debt under Article X or XII, as the case may be, or
otherwise, except for the following provisions, which shall survive until
otherwise terminated or discharged hereunder: (i) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.4 hereof, and as more fully set forth in such Section, payments in respect
of the principal of and interest on such Notes when such payments are due,
(ii) the Company's obligations with respect to such Notes under Article II and
Section 4.2 hereof, (iii) the rights, powers, trusts, duties and immunities of
the Trustee hereunder and the Company's obligations in connection therewith
and (iv) this Article VIII. Subject to compliance with this Article VIII, the
Company may exercise its option under this paragraph (b) notwithstanding the
prior exercise of its option under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of the option
applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.3 hereof, be released
from its obligations under Section 4.5, Sections 4.10 through 4.21 and Article
V hereof with respect to the outstanding Notes on and after the date the
conditions set forth below are satisfied (hereinafter, "COVENANT DEFEASANCE"),
and the Notes shall thereafter be deemed not "outstanding" for the purposes of
any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes) and Holders of the Notes and any amounts deposited under Section 8.3
hereof shall cease to be subject to any obligations to, or the rights of, any
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holder of Senior Debt or Guarantor Senior Debt under Article X or Article XII
or otherwise. For this purpose, such Covenant Defeasance means that, with
respect to the outstanding Notes, the Company may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference
in any such covenant to any other provision herein or in any other document
and such omission to comply shall not constitute a Default or an Event or
Default under Section 6.1(3) hereof, but, except as specified above, the
remainder of this Indenture and such Notes shall be unaffected thereby. In
addition, upon the Company's exercise under paragraph (a) hereof of the option
applicable to this paragraph (c), subject to the satisfaction of the
conditions set forth in Section 8.3 hereof, those events described in Section
6.1 (except those events described in Section 6.1(1), (2), and (6)) shall not
constitute Events of Default.
Section 8.3. CONDITIONS TO LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.2(b) or 8.2(c) hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, U.S. Legal Tender or U.S. Government Obligations,
or a combination thereof, in such amounts as will be sufficient (without
reinvestment), in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest on
the Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be;
(b) in the case of an election under Section 8.2(b) hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and
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based thereon such opinion of counsel shall confirm that, the Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.2(c) hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred;
(d) No Default or Event of Default shall have occurred and be continuing
on the date of the deposit specified in paragraph (a) or, in the case of a
Legal Defeasance, insofar as an Event of Default specified in Section 6.1(6)
is concerned, at any time in the period ending on the 91st day after the date
of the deposit specified in paragraph (a);
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of or constitute a default under this Indenture or any
other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with; and
(h) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (A) the trust funds will not be subject to any
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rights of holders of Senior Debt, including, without limitation, those arising
under the Indenture and (B) assuming no intervening bankruptcy of the Company
between the date of deposit and the 91st day following the date of deposit and
that no Holder is an insider of the Company, after the 91st day following the
date of deposit specified in paragraph (a), the trust funds will not be
subject to avoidance as a preference under any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally.
Notwithstanding the foregoing, the Opinion of Counsel required by
paragraph (b) of this Section 8.3 with respect to a Legal Defeasance need not
be delivered if all Notes not theretofore delivered to the Trustee for
cancellation (i) have become due and payable or (ii) will become due and
payable on the maturity date within one year under arrangements satisfactory
to the Trustee for the giving of notice of redemption by the Trustee in the
name, and at the expense, of the Company.
Section 8.4. APPLICATION OF TRUST MONEY.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to Article VIII, and
shall apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of principal of
and interest on the Notes. The Trustee shall be under no obligation to invest
said U.S. Legal Tender or U.S. Government Obligations except as it may agree
with the Company.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.3 hereof or the
principal and interest received in respect thereof other than any such tax,
fee or other charge which by law is for the account of the Holders of the
outstanding Notes.
Section 8.5. REPAYMENT TO THE COMPANY OR THE GUARANTORS.
(a) The Trustee shall deliver or pay to the Company, or if deposited
with the Trustee by any Guarantor, to such Guarantor, from time to time upon
request any U.S. Legal Tender or U.S. Government Obligations held by it as
provided in Section 8.3 hereof which, in the opinion of a nationally
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recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof that would then be required to be deposited to effect an equivalent
Legal Defeasance or Covenant Defeasance.
(b) The Trustee and the Paying Agent shall pay to the Company, or if
deposited with the Trustee by any Guarantor, to such Guarantor, upon request
any money held by them for the payment of principal or interest that remains
unclaimed for two years after the date due; provided that the Trustee or such
Paying Agent, before being required to make any payment may at the expense of
the Company cause to be published once in a newspaper of general circulation
in the City of New York or mail to each Holder entitled to such money notice
that such money remains unclaimed and that after a date specified therein
which shall be at least 30 days from the date of such publication or mailing
any unclaimed balance of such money then remaining will be repaid to the
Company or a Guarantor. After payment to the Company or a Guarantor, as the
case may be, Noteholders entitled to such money must look to the Company for
payment as general creditors unless an applicable law designates another
Person.
Section 8.6. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender
or U.S. Government Obligations in accordance with Article VIII by reason of
any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's and each Guarantor's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit
had occurred pursuant to Article VIII until such time as the Trustee or Paying
Agent is permitted to apply all such U.S. Legal Tender or U.S. Government
Obligations in accordance with Article VIII; provided that if the Company or
any Guarantor, as the case may be, has made any payment of principal of or
interest on any Notes because of the reinstatement of its obligations, the
Company or any Guarantor, as the case may be, shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the U.S.
Legal Tender or U.S. Government Obligations held by the Trustee or Paying
Agent.
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ARTICLE IX.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1. WITHOUT CONSENT OF HOLDERS.
The Company, when authorized by a Board Resolution, the Guarantors, and
the Trustee, together, may amend or supplement this Indenture, the Notes or
any Guarantee without notice to or consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency; provided that
such amendment or supplement does not adversely affect the rights of any
Holder in any material respect;
(2) to comply with Article V;
(3) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(4) to comply with any requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA;
(5) to add guarantees with respect to the Notes and the Indenture
or to secure the Notes or release Guarantees in accordance with the
terms of this Indenture;
(6) to make any change that would provide any additional benefit
or rights to the Holders or that does not adversely affect the rights of
any Holder in any material respect;
PROVIDED THAT the Company has delivered to the Trustee an Opinion of Counsel
and an Officers' Certificate stating that such amendment or supplement
complies with the provisions of this Section 9.1, and such amendment or
supplement does not in the opinion of the Trustee, adversely affect the rights
of any of the Holders in any material respect. In formulating its opinion on
such matters, the Trustee will be entitled to rely on such evidence as it
deems appropriate, including, without limitation, solely on an Opinion of
Counsel. Any amendment or supplement complying with the provisions of this
Section 9.1 that merely provides for the addition of a Guarantor or for the
release of a Guarantor of its Guarantee in accordance with the terms of this
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Indenture may be effected without the signature of any Guarantor other than
the Guarantor being so added or so released, as the case may be.
Section 9.2. WITH CONSENT OF HOLDERS.
Subject to Section 6.7, the Company, when authorized by a Board
Resolution, and the Trustee, together with the written consent of the Holder
or Holders of at least a majority in aggregate principal amount of the then
outstanding Notes, may amend or supplement this Indenture, the Notes or any
Guarantee. Subject to Section 6.7, the Holder or Holders of a majority in
aggregate principal amount of the outstanding Notes may waive compliance by
the Company with any provision of this Indenture or the Notes. No amendment,
supplement or waiver, including a waiver pursuant to Section 6.4, shall,
without the consent of each Holder of each Note affected thereby:
(1) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver of any provision of this
Indenture, the Notes or any Guarantee;
(2) reduce the rate of or change or have the effect of changing
the time for payment of interest, including defaulted interest, on any
Notes;
(3) reduce the principal of or change or have the effect of
changing the fixed maturity of any Notes, or change the date on which
any Notes may be subject to redemption, or reduce the redemption price
therefor;
(4) make any Notes payable in money other than that stated in the
Notes;
(5) make any change in the provisions of this Indenture protecting
the right of each Holder to receive payment of principal of and interest
on such Note on or after the due date thereof or to bring suit to
enforce such payment, or permitting Holders of a majority in principal
amount of Notes to waive Defaults or Events of Default;
(6) amend, change or modify in any material respect the obligation
of the Company to make and consummate a Change of Control Offer in the
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event of a Change of Control or make and consummate a Net Proceeds Offer
with respect to any Asset Sale or modify any of the provisions or
definitions with respect thereto;
(7) modify or change any provision of this Indenture or the
related definitions affecting the subordination or ranking of the Notes
or the Guarantees in a manner which adversely affects the Holders; or
(8) release any Guarantor from any of its obligations under its
Guarantee or this Indenture other than in accordance with the terms of
this Indenture.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.2 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
Section 9.3. COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect.
Section 9.4. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
written notice to the Trustee or the Company received before the date on which
the Trustee receives an Officers' Certificate certifying that the Holders of
the requisite principal amount of Notes have consented (and not theretofore
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revoked such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 90
days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (1)
through (8) of Section 9.2, in which case, the amendment, supplement or waiver
shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt
as the consenting Holder's Note; provided that any such waiver shall not
impair or affect the right of any Holder to receive payment of principal of
and interest on a Note, on or after the respective due dates expressed in such
Note, or to bring suit for the enforcement of any such payment on or after
such respective dates without the consent of such Holder.
Section 9.5. NOTATION ON OR EXCHANGE OF NOTES.
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder of the Note to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Note regarding the changed
terms and return it to the Holder. Alternatively, if the Company or the
Trustee so determines, the Company in exchange for the Note shall issue and
the Trustee shall authenticate a new Note that reflects the changed terms. Any
such notation or exchange shall be made at the sole cost and expense of the
Company. Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment, supplement or waiver.
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Section 9.6. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver authorized
pursuant to this Article IX; provided that the Trustee may, but shall not be
obligated to, execute any such amendment, supplement or waiver which affects
the Trustee's own rights, duties or immunities under this Indenture. The
Trustee shall be entitled to receive, if requested, an indemnity reasonably
satisfactory to it and to receive, and shall be fully protected in relying
upon, an Opinion of Counsel and an Officers' Certificate each stating that the
execution of any amendment, supplement or waiver authorized pursuant to this
Article IX is authorized or permitted by this Indenture.
ARTICLE X.
SUBORDINATION
Section 10.1. NOTES SUBORDINATED TO SENIOR DEBT.
The Company covenants and agrees and the Trustee and each Holder of the
Notes, by its acceptance thereof, likewise covenants and agrees, that all
Notes shall be issued subject to the provisions of this Article X; and the
Trustee and each person holding any Note, whether upon original issue or upon
transfer, assignment or exchange thereof, accepts and agrees that the payment
of all Obligations on the Notes by the Company shall, to the extent and in the
manner herein set forth, be subordinated and junior in right of payment to the
prior payment in full in cash or Cash Equivalents of all Obligations on Senior
Debt, whether outstanding on the Issue Date or thereafter incurred; that the
subordination is for the benefit of, and shall be enforceable directly by, the
holders of Senior Debt, and that each holder of Senior Debt whether now
outstanding or hereinafter created, incurred, assumed or guaranteed shall be
deemed to have acquired Senior Debt in reliance upon the covenants and
provisions contained in this Indenture and the Notes.
Section 10.2. NO PAYMENT ON NOTES IN CERTAIN CIRCUMSTANCES.
(a) If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, interest on, reimbursement for drawings under letters of credit
issued as part of, or regularly accruing fees with respect to, any Designated
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Senior Debt, no payment of any kind or character shall be made by the Company
or any of its Subsidiaries with respect to any Obligations on the Notes or to
acquire any of the Notes for cash or property. In addition, if any other event
of default occurs and is continuing with respect to any Designated Senior
Debt, as such event of default is defined in the instrument creating or
evidencing such Designated Senior Debt, permitting the holders of such
Designated Senior Debt then outstanding to accelerate the maturity thereof
(or, in the case of any Designated Senior Debt consisting of a guarantee, the
maturity of the Indebtedness so guaranteed) and if the Representative for the
respective issue of Designated Senior Debt gives written notice of the event
of default to the Trustee (a "PAYMENT BLOCKAGE NOTICE"), then, unless and
until all events of default have been cured or waived or have ceased to exist
or the Trustee receives notice from the Representative for the respective
issue of Designated Senior Debt terminating the Blockage Period (as defined
below), during the 180 days after the delivery of such Payment Blockage Notice
(the "BLOCKAGE PERIOD"), neither the Company nor any of its Subsidiaries
shall: (x) make any payment of any kind or character with respect to any
Obligations on the Notes or (y) acquire any of the Notes for cash or property.
Notwithstanding anything herein to the contrary, in no event shall a Blockage
Period extend beyond 180 days from the date of the commencement of the
Blockage Period and only one such Blockage Period may be commenced within any
360 consecutive days. No event of default which existed or was continuing on
the date of the commencement of any Blockage Period with respect to the
Designated Senior Debt shall be, or be made, the basis for commencement of a
second Blockage Period by the Representative of such Designated Senior Debt
whether or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such Blockage Period that, in either case, would give rise to
an event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default
for this purpose).
(b) In the event that, notwithstanding the foregoing, any payment shall
be received by the Trustee or any Holder when such payment is prohibited by
Section 10.2(a), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior Debt (pro rata to
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such holders on the basis of the respective amount of Senior Debt held by such
holders) or their respective Representatives, as their respective interests
may appear, for application to the payment of the Senior Debt remaining unpaid
until all such Senior Debt has been paid in full, after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders
of Senior Debt. The Trustee shall be entitled to rely on information regarding
amounts then due and owing on the Senior Debt, if any, received from the
holders of Senior Debt (or their Representatives) or, if such information is
not received from such holders or their Representatives, from the Company, and
only amounts included in the information provided to the Trustee shall be paid
to the holders of Senior Debt.
(c) Nothing contained in this Article X shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity
of the Notes pursuant to Section 6.2 or to pursue any rights or remedies
hereunder.
Section 10.3. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
(a) Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors in an
Insolvency or Liquidation Proceeding relating to the Company or its property,
whether voluntary or involuntary, all Obligations due upon all Senior Debt
shall first be paid in full in cash or Cash Equivalents, or such payment duly
provided for to the satisfaction of the holders of Senior Debt, by the Company
or any of its Subsidiaries, before any payment or distribution of any kind or
character is made on account of any Obligations on the Notes, or for the
acquisition, by the Company or any of its Subsidiaries, of any of the Notes
for cash or property. Upon any such Insolvency or Liquidation Proceeding, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the Holders of the Notes or
the Trustee would be entitled shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, or by the Holders of the Notes or by the Trustee if
received by them, directly to the holders of Senior Debt (pro rata to such
holders on the basis of the amounts of Senior Debt held by such holders) or
their Representatives, as their interests may appear, for application to the
payment of the Senior Debt remaining unpaid until all such Senior Debt has
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been paid in full, after giving effect to any concurrent payment, distribution
or provision therefor to or for the holders of Senior Debt.
(b) To the extent any payment of Senior Debt (whether by or on behalf of
the Company, as proceeds of security or enforcement of any right of setoff or
otherwise) is declared to be fraudulent or preferential, set aside or required
to be paid to any Custodian under any Bankruptcy Law, then, if such payment is
recovered by, or paid over to, such Custodian the Senior Debt or part thereof
originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in
cash, property or securities, shall be received by any Holder when such
payment or distribution is prohibited by Section 10.3(a), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Debt (pro rata to such holders on the
basis of the respective amount of Senior Debt held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of Senior Debt
remaining unpaid until all such Senior Debt has been paid in full in cash or
Cash Equivalents, after giving effect to any concurrent payment, distribution
or provision therefor to or for the holders of such Senior Debt.
(d) The consolidation of the Company with, or the merger of the Company
with or into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of all or substantially all of
its assets, to another corporation upon the terms and conditions provided in
Article V hereof shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section 10.3 if such other corporation
shall, as a part of such consolidation, merger, conveyance or transfer, comply
with the conditions stated in Article V hereof.
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Section 10.4. PAYMENTS MAY BE PAID PRIOR TO DISSOLUTION.
Nothing contained in this Article X or elsewhere in this Indenture shall
prevent (i) the Company, except under the conditions described in Sections
10.2 and 10.3, from making payments at any time for the purpose of making
payments of principal of and interest on the Notes, or from depositing with
the Trustee any moneys for such payments, or (ii) in the absence of actual
knowledge of the Trustee that a given payment would be prohibited by Section
10.2 or 10.3, the application by the Trustee of any moneys deposited with it
for the purpose of making such payments of principal of and interest on the
Notes to the Holders entitled thereto, unless at least one Business Day prior
to the date upon which such payment would otherwise become due and payable,
the Trustee shall have received the written notice provided for in Section
10.2(a) or in Section 10.7 (provided that, notwithstanding the foregoing, such
application shall otherwise be subject to the provisions of the first sentence
of Section 10.2(a) and Section 10.3). The Company shall give prompt written
notice to the Trustee of any dissolution, winding-up, liquidation or
reorganization of the Company.
Section 10.5. SUBROGATION.
Subject to the payment in full in cash or Cash Equivalents of all Senior
Debt, the Holders of the Notes shall be subrogated to the rights of the
holders of Senior Debt to receive payments or distributions of cash, property
or securities of the Company applicable to the Senior Debt until the Notes
shall be paid in full; and, for the purposes of such subrogation, no such
payments or distributions to the holders of the Senior Debt by or on behalf of
the Company or by or on behalf of the Holders by virtue of this Article X
which otherwise would have been made to the Holders shall, as between the
Company and the Holders of the Notes, be deemed to be a payment by the Company
to or on account of the Senior Debt, it being understood that the provisions
of this Article X are and are intended solely for the purpose of defining the
relative rights of the Holders of the Notes, on the one hand, and the holders
of the Senior Debt, on the other hand.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article X shall have been
applied, pursuant to the provisions of this Article X, to the payment of
amounts payable under the Senior Debt, then the Holders shall be entitled to
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receive from the holders of such Senior Debt any payments or distributions
received by such holders of Senior Debt in excess of the amount sufficient to
pay all amounts payable under or in respect of the Senior Debt in full in cash
or Cash Equivalents.
Section 10.6. OBLIGATIONS OF THE COMPANY UNCONDITIONAL.
Nothing any contained in this Article X or elsewhere in this Indenture
or in the Notes is intended to or shall impair, as among the Company and the
Holders of the Notes, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Notes the principal of and any
interest on the Notes as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders of the Notes and creditors of the Company other than the
holders of the Senior Debt, nor shall anything herein or therein prevent the
Holder of any Note or the Trustee on its behalf from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture,
subject to the rights, if any, in respect of cash, property or securities of
the Company received upon the exercise of any such remedy.
Section 10.7. NOTICE TO TRUSTEE.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by
the Trustee in respect of the Notes pursuant to the provisions of this Article
X. Regardless of anything to the contrary contained in this Article X or
elsewhere in this Indenture, the Trustee shall not be charged with knowledge
of the existence of any default or event of default with respect to any Senior
Debt or of any other facts which would prohibit the making of any payment to
or by the Trustee unless and until the Trustee shall have received notice in
writing from the Company, or from a holder of Senior Debt or a Representative
therefor, and, prior to the receipt of any such written notice, the Trustee
shall be entitled to assume (in the absence of actual knowledge to the
contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any evidence
is required with respect to the right of any person as a holder of Senior Debt
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to participate in any payment or distribution pursuant to this Article X, the
Trustee may request such person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amounts of Senior Debt held by such
person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
person under this Article X and, if such evidence is not furnished, the
Trustee may defer any payment to such person pending judicial determination as
to the right of such person to receive such payment.
Section 10.8. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company
referred to in this Article X, the Trustee, subject to the provisions of
Article VII hereof, and the Holders of the Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
Insolvency or Liquidation Proceedings are pending, or upon a certificate of
the Custodian or other person making such payment or distribution, delivered
to the Trustee or the holders of the Notes, for the purpose of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Senior Debt and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article X.
Section 10.9. TRUSTEE'S RELATION TO SENIOR DEBT.
The Trustee and any agent of the Company or the Trustee shall be
entitled to all the rights set forth in this Article X with respect to any
Senior Debt which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Debt and nothing in
this Indenture shall deprive the Trustee or any such agent of any of its
rights as such holder.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article X, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt and shall not be liable to any
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such holders if the Trustee shall pay over or distribute to or on behalf of
Holders or the Company or any other person money or assets to which any
holders of Senior Debt shall be entitled by virtue of this Article, except if
such payment is made as a result of willful misconduct or gross negligence of
the Trustee.
Whenever a distribution is to be made or a notice given to holders or
owners of Senior Debt, the distribution may be made and the notice given to
their Representatives, if any.
Section 10.10. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS
OF THE COMPANY OR HOLDERS OF SENIOR DEBT.
No right of any present or future holders of any Senior Debt to enforce
subordination as provided herein shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance
by the Company with the terms of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee, without incurring responsibility to the
Trustee or the Holders of the Notes and without impairing or releasing the
subordination provided in this Article X or the obligations hereunder of the
Holders of the Notes to the holders of the Senior Debt, do any one or more of
the following: (i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior Debt, or otherwise amend or
supplement in any manner Senior Debt, or any instrument evidencing the same or
any agreement under which Senior Debt is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Debt; (iii) release any Person liable in any manner for the
payment or collection of Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
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Section 10.11. NOTEHOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF NOTES.
Each Holder of Notes by its acceptance of them authorizes and expressly
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate, as between the holders of Senior Debt and the
Holders of Notes, the subordination provided in this Article X, and appoints
the Trustee its attorney-in-fact for such purposes, including, in the event of
any dissolution, winding-up, liquidation or reorganization of the Company
(whether in bankruptcy, insolvency, receivership, reorganization or similar
proceedings or upon an assignment for the benefit of creditors or otherwise)
tending towards liquidation of the business or assets of the Company, the
filing of a claim for the unpaid balance of its or his Notes and accrued
interest in the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the form
required in such proceeding prior to 30 days before the expiration of the time
to file such claim or claims, then the holders of the Senior Debt or their
Representative are or is hereby authorized to have the right to file and are
or is hereby authorized to file an appropriate claim for and on behalf of the
Holders of said Notes. Nothing herein contained shall be deemed to authorize
the Trustee or the holders of Senior Debt or their Representative to authorize
or consent to or accept or adopt on behalf of any Holders any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee or the holders
of Senior Debt or their Representative to vote in respect of the claim of any
Holder in any such proceeding.
Section 10.12. THIS ARTICLE X NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal of or interest on
the Notes by reason of any provision of this Article X shall not be construed
as preventing the occurrence of an Event of Default.
Section 10.13. TRUSTEE'S COMPENSATION NOT PREJUDICED.
Nothing in this Article X shall apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
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ARTICLE XI.
GUARANTEES
Section 11.1. UNCONDITIONAL GUARANTEE.
Each Guarantor fully and unconditionally, jointly and severally,
guarantees (such guarantee to be referred to herein as the "GUARANTEE") to
each Holder of a Note authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, the Notes or the obligations of the
Company hereunder or thereunder, that: (i) the principal of (and premium on,
if any) and interest on the Notes shall be promptly paid in full when due,
subject to any applicable grace period, whether at maturity, by acceleration
or otherwise and interest on the overdue principal, if any, and interest on
any interest, to the extent lawful, of the Notes and all other Obligations of
the Company to the Holders or the Trustee hereunder or thereunder will be
promptly paid in full or performed, all in accordance with the terms hereof
and thereof and (ii) in case of any extension of time of payment or renewal of
any Notes or of any such other obligations, the same shall be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, subject to any applicable grace period, whether at stated maturity,
by acceleration or otherwise, subject, however, in the case of clauses (i) and
(ii) above, to the limitations set forth in Section 11.4. Each Guarantor
agrees, to the extent permitted by applicable law, that its Obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with
respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstances
which might otherwise constitute a legal or equitable discharge or defense of
such Guarantor. Each Guarantor hereby waives, to the extent permitted by
applicable law, diligence, presentment, demand of payment, filing of claims
with a court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company, protest, notice and
all demands whatsoever and covenants that this Guarantee shall not be
discharged except by complete performance of the Obligations contained in the
Notes, this Indenture and in this Guarantee. If any Noteholder or the Trustee
is required by any court or otherwise to return to the Company, any Guarantor,
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or any Custodian acting in relation to the Company or any Guarantor, any
amount paid by the Company or any Guarantor to the Trustee or such Noteholder,
this Guarantee, to the extent theretofore discharged, shall be reinstated in
full force and effect. Each Guarantor further agrees that as between each
Guarantor, on the one hand, and the Holders and the Trustee, on the other
hand, (x) the maturity of the Obligations Guaranteed hereby may be accelerated
as provided in Article VI for the purposes of this Guarantee, notwithstanding
any stay, injunction or other prohibition preventing such acceleration in
respect of the Obligations Guaranteed hereby, and (y) in the event of any
acceleration of such obligations as provided in Article VI, such Obligations
(whether or not due and payable) shall forthwith become due and payable by
each Guarantor for the purpose of this Guarantee.
Section 11.2. SEVERABILITY.
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Section 11.3. RELEASE OF A GUARANTOR.
(a) In the event of either (i) a sale or other disposition of all of the
Capital Stock of any Guarantor or (ii) in the event that the Company
designates a Guarantor to be an Unrestricted Subsidiary, or such Guarantor
ceases to be a Subsidiary of the Company, then such Guarantor (in the event of
a sale or other disposition, by way of such a merger, consolidation or
otherwise, of all of the Capital Stock of such Guarantor to a Person other
than the Company or a Guarantor or any such designation) or the entity
acquiring the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) shall be released and
relieved of any obligations under its Guarantee; provided that the Net Cash
Proceeds of such sale or other disposition are applied in accordance with
Section 4.15 or 4.16, as applicable.
(b) In the case of a sale, assignment, lease, transfer, conveyance or
other disposition of all or substantially all of the assets of a Guarantor,
upon the assumption provided for in Section 11.5(a)(y), such Guarantor shall
be discharged from all further liability and obligation under the Indenture.
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(c) If a Guarantor's guarantee of the Obligations under the Credit
Agreement is unconditionally released, such Guarantor shall be automatically
and unconditionally released and relieved of any obligations under its
Guarantee.
(d) The Trustee shall deliver an appropriate instrument evidencing such
release upon receipt of a written request by the Company accompanied by an
Officers' Certificate certifying as to the compliance with this Section 11.3
and the other provisions of this Indenture.
(e) Any Guarantor not so released remains liable for the full amount of
principal of and interest on the Notes as provided in this Article XI.
Section 11.4. LIMITATION OF GUARANTOR'S LIABILITY.
Each Guarantor, and by its acceptance hereof each Holder, hereby
confirms that it is the intention of all such parties that the Guarantee by
such Guarantor pursuant to its Guarantee not constitute a fraudulent transfer
or conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal or
state law. To effectuate the foregoing intention, the Holders and each such
Guarantor hereby irrevocably agree that the Obligations of such Guarantor
under its Guarantee shall be limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities of such Guarantor
(including, without limitation, any Obligations under the Credit Facility) and
after giving effect to any collections from or payments made by or on behalf
of any other Guarantor in respect of the obligations of such other Guarantor
under its Guarantee or pursuant to Section 11.6, result in the Obligations of
such Guarantor under its Guarantee not constituting such fraudulent transfer
or conveyance.
Section 11.5. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
(a) No Guarantor may consolidate with or merge with or into (whether or
not such Guarantor is the surviving Person), another corporation, Person or
entity whether or not affiliated with such Guarantor unless, either:
(x) such consolidation or merger constitutes an Asset Sale in
compliance with Section 4.16 which is subject to the provisions of
Section 11.3(a); or
(y) (i) the Person formed by or surviving any such consolidation
or merger (if other than such Guarantor) assumes all the Obligations of
such Guarantor under the Notes, the Guarantee, the Indenture, and the
Registration Rights Agreement pursuant to a supplemental indenture in
form and substance satisfactory to the Trustee; (ii) immediately after
giving effect to such transaction, no Default or Event of Default
exists; (iii) immediately after giving effect to such transaction
(including giving effect to any Indebtedness and Acquired Indebtedness
incurred or anticipated to be incurred in connection with or in respect
of such transaction), (A) such Guarantor, or any Person formed by or
surviving any such consolidation or merger, would have Consolidated Net
Worth, equal to or greater than the Consolidated Net Worth of such
Guarantor immediately preceding the transaction and (B) the Company
would be permitted to incur at least $1.00 of additional Indebtedness
(in addition to Permitted Indebtedness) pursuant to Section 4.14.
(b) The requirements of Section 11.5(a)(y)(i), (iii)(A) and (iii)(B)
shall not apply in the case of a consolidation with or merger with or into the
Company or another Guarantor.
Section 11.6. CONTRIBUTION.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "FUNDING GUARANTOR") under this
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount based on the Adjusted Net Assets of each
Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging the Company's
obligations with respect to the Notes or any other Guarantor's Obligations
with respect to this Guarantee.
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Section 11.7. WAIVER OF SUBROGATION.
Each Guarantor hereby irrevocably waives any claim or other rights which
it may now or hereafter acquire against the Company that arise from the
existence, payment, performance or enforcement of such Guarantor's Obligations
under this Guarantee and this Indenture, including, without limitation, any
right of subrogation, reimbursement, exoneration, indemnification, and any
right to participate in any claim or remedy of any Holder of Notes against the
Company, whether or not such claim, remedy or right arises in equity, or under
contract, statute or common law, including, without limitation, the right to
take or receive from the Company, directly or indirectly, in cash or other
property or by setoff or in any other manner, payment or security on account
of such claim or other rights. If any amount shall be paid to any Guarantor in
violation of the preceding sentence, such amount shall have been deemed to
have been paid to such Guarantor for the benefit of, and held in trust for the
benefit of, the Holders of the Notes, and shall forthwith be paid to the
Trustee for the benefit of such Holders to be credited and applied upon the
Notes, whether matured or unmatured, in accordance with the terms of this
Indenture. Each Guarantor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by this
Indenture and that the waiver set forth in this Section 11.7 is knowingly made
in contemplation of such benefits.
ARTICLE XII.
SUBORDINATION OF GUARANTEES
Section 12.1. SUBORDINATION OF GUARANTEE.
Each Guarantor covenants and agrees and the Trustee and each Holder of
the Guarantees, by its acceptance thereof, likewise covenants and agrees, that
all Guarantees shall be issued subject to the provisions of this Article XII;
and the Trustee and each person holding any Guarantee, whether upon original
issue or upon transfer, assignment or exchange thereof, accepts and agrees
that the payment of all Obligations on the Guarantees by such Subsidiary
shall, to the extent and in the manner herein set forth, be subordinated and
junior in right of payment to the prior payment in full in cash or Cash
Equivalents of all Obligations on any Guarantor Senior Debt of such Guarantor,
whether outstanding on the Issue Date or thereafter incurred; that the
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subordination is for the benefit of, and shall be enforceable directly by, the
holders of Guarantor Senior Debt, and that each holder of Guarantor Senior
Debt whether now outstanding or hereinafter created, incurred, assumed or
guaranteed shall be deemed to have acquired Guarantor Senior Debt in reliance
upon the covenants and provisions contained in this Indenture and the Notes.
Section 12.2. NO PAYMENT ON GUARANTEES IN CERTAIN CIRCUMSTANCES.
(a) If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, interest on, reimbursement for drawings under letters of credit
issued as part of, or regularly accruing fees with respect to, any Guarantor
Designated Senior Debt, no payment of any kind or character shall be made by
such Guarantor or any of its Subsidiaries with respect to any Obligations on
its Guarantee or to acquire any of the Notes or the related Guarantee for cash
or property. In addition, if any other event of default occurs and is
continuing with respect to any Guarantor Designated Senior Debt, as such event
of default is defined in the instrument creating or evidencing such Guarantor
Designated Senior Debt, permitting the holders of such Guarantor Designated
Senior Debt then outstanding to accelerate the maturity thereof (or, in the
case of any Guarantor Designated Senior Debt consisting of a guarantee, the
maturity of the Indebtedness so guaranteed) and if the Representative for the
respective issue of Guarantor Designated Senior Debt gives written notice of
the event of default to the Trustee (a "GUARANTOR PAYMENT BLOCKAGE NOTICE"),
then, unless and until all events of default have been cured or waived or have
ceased to exist or the Trustee receives notice from the Representative for the
respective issue of Guarantor Designated Senior Debt terminating the Guarantor
Blockage Period (as defined below), during the 180 days after the delivery of
such Guarantor Payment Blockage Notice (the "GUARANTOR BLOCKAGE PERIOD"),
neither the Guarantor nor any of its Subsidiaries shall: (x) make any payment
of any kind or character with respect to any Obligations on the Notes or its
Guarantee or (y) acquire any of the Notes or the related Guarantee for cash or
property. Notwithstanding anything herein to the contrary, in no event shall a
Guarantor Blockage Period extend beyond 180 days from the date of the
commencement of the Guarantor Blockage Period and only one such Guarantor
Blockage Period may be commenced within any 360 consecutive days. No event of
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default which existed or was continuing on the date of the commencement of any
Guarantor Blockage Period with respect to the Guarantor Designated Senior Debt
shall be, or be made, the basis for commencement of a second Guarantor
Blockage Period by the Representative of such Guarantor Designated Senior Debt
whether or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such Guarantor Blockage Period that, in either case, would
give rise to an event of default pursuant to any provisions under which an
event of default previously existed or was continuing shall constitute a new
event of default for this purpose).
(b) In the event that, notwithstanding the foregoing, any payment shall
be received by the Trustee or any Holder when such payment is prohibited by
Section 12.2(a), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Guarantor Senior Debt (pro
rata to such holders on the basis of the respective amount of Guarantor Senior
Debt held by such holders) or their respective Representatives, as their
respective interests may appear, for application to the payment of the
Guarantor Senior Debt remaining unpaid until all such Guarantor Senior Debt
has been paid in full, after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of Guarantor Senior
Debt. The Trustee shall be entitled to rely on information regarding amounts
then due and owing on the Guarantor Senior Debt, if any, received from the
holders of Guarantor Senior Debt (or their Representatives) or, if such
information is not received from such holders or their Representatives, from
such Guarantor, and only amounts included in the information provided to the
Trustee shall be paid to the holders of Guarantor Senior Debt.
(c) Nothing contained in this Article XII shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity
of the Notes pursuant to Section 6.2 or to pursue any rights or remedies
hereunder.
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Section 12.3. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
(a) Upon any payment or distribution of assets of any Guarantor of any
kind or character, whether in cash, property or securities, to creditors in an
Insolvency or Liquidation Proceeding relating to such Guarantor or its
property, whether voluntary or involuntary, all Obligations due upon all
Guarantor Senior Debt shall first be paid in full in cash or Cash Equivalents,
or such payment duly provided for to the satisfaction of the holders of
Guarantor Senior Debt, by the Guarantor or any of its Subsidiaries, before any
payment or distribution of any kind or character is made on account of any
Obligations on the Notes or the related Guarantee, or for the acquisition, by
the Guarantor or any of its Subsidiaries, of any of the Notes or the related
Guarantees for cash or property. Upon any such Insolvency or Liquidation
Proceeding, any payment or distribution of assets of the Guarantor of any kind
or character, whether in cash, property or securities, to which the Holders of
the Notes or the Trustee would be entitled shall be paid by the Guarantor or
by any receiver, trustee in bankruptcy, liquidating trustee, agent or other
person making such payment or distribution, or by the Holders of the Notes or
by the Trustee if received by them, directly to the holders of Guarantor
Senior Debt (pro rata to such holders on the basis of the amounts of Guarantor
Senior Debt held by such holders) or their Representatives, as their interests
may appear, for application to the payment of the Guarantor Senior Debt
remaining unpaid until all such Guarantor Senior Debt has been paid in full,
after giving effect to any concurrent payment, distribution or provision
therefor to or for the holders of Guarantor Senior Debt.
(b) To the extent any payment of Guarantor Senior Debt (whether by or on
behalf of such Guarantor, as proceeds of security or enforcement of any right
of setoff or otherwise) is declared to be fraudulent or preferential, set
aside or required to be paid to any Custodian, under any Bankruptcy Law, then,
if such payment is recovered by, or paid over to such Custodian, the Guarantor
Senior Debt or part thereof originally intended to be satisfied shall be
deemed to be reinstated and outstanding as if such payment had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of a Guarantor of any kind or character, whether in
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cash, property or securities, shall be received by any Holder when such
payment or distribution is prohibited by Section 12.3(a), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Guarantor Senior Debt (pro rata to such
holders on the basis of the respective amount of Guarantor Senior Debt held by
such holders) or their respective Representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Guarantor Senior
Debt may have been issued, as their respective interests may appear, for
application to the payment of Guarantor Senior Debt remaining unpaid until all
such Guarantor Senior Debt has been paid in full in cash or Cash Equivalents,
after giving effect to any concurrent payment, distribution or provision
therefor to or for the holders of such Guarantor Senior Debt.
(d) The consolidation of a Guarantor with, or the merger of a Guarantor
with or into, another corporation or the liquidation or dissolution of a
Guarantor following the conveyance or transfer of all or substantially all of
its assets, to another corporation upon the terms and conditions provided in
Article V hereof shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section 12.3 if such other corporation
shall, as a part of such consolidation, merger, conveyance or transfer, comply
with the conditions stated in Article V hereof.
Section 12.4. Payments May Be Paid Prior TO DISSOLUTION.
Nothing contained in this Article XII or elsewhere in this Indenture
shall prevent (i) any Guarantor, except under the conditions described in
Sections 12.2 and 12.3, from making payments at any time for the purpose of
making payments of principal of and interest on the Notes, or from depositing
with the Trustee any moneys for such payments, or (ii) in the absence of
actual knowledge by the Trustee that a given payment would be prohibited by
Section 12.2 or 12.3, the application by the Trustee of any moneys deposited
with it for the purpose of making such payments of principal of and interest
on the Notes to the Holders entitled thereto, unless at least one Business Day
prior to the date upon which such payment would otherwise become due and
payable, the Trustee shall have received the written notice provided for in
Section 12.2(a) or in Section 12.7 (provided that, notwithstanding the
foregoing, such application shall otherwise be subject to the provisions of
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the first sentence of Section 12.2(a) and Section 12.3). Each Guarantor shall
give prompt written notice to the Trustee of any dissolution, winding-up,
liquidation or reorganization of such Guarantor.
Section 12.5. SUBROGATION.
Subject to the payment in full in cash or Cash Equivalents of all
Guarantor Senior Debt, the Holders of the Notes shall be subrogated to the
rights of the holders of Guarantor Senior Debt to receive payments or
distributions of cash, property or securities of such Guarantor applicable to
the Guarantor Senior Debt of such Guarantor until the Notes shall be paid in
full; and, for the purposes of such subrogation, no such payments or
distributions to the holders of the Guarantor Senior Debt by or on behalf of
such Guarantor or by or on behalf of the Holders by virtue of this Article XII
which otherwise would have been made to the Holders shall, as between the
Guarantor and the Holders of the Notes, be deemed to be a payment by such
Guarantor to or on account of the Guarantor Senior Debt, it being understood
that the provisions of this Article XII are and are intended solely for the
purpose of defining the relative rights of the Holders of the Notes, on the
one hand, and the holders of the Guarantor Senior Debt, on the other hand.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article XII shall have been
applied, pursuant to the provisions of this Article XII, to the payment of
amounts payable under the Guarantor Senior Debt, then the Holders shall be
entitled to receive from the holders of such Guarantor Senior Debt any
payments or distributions received by such holders of Guarantor Senior Debt in
excess of the amount sufficient to pay all amounts payable under or in respect
of the Guarantor Senior Debt in full in cash or Cash Equivalents.
Section 12.6. OBLIGATIONS OF EACH SUBSIDIARY GUARANTOR
UNCONDITIONAL.
Nothing contained in this Article XII or elsewhere in this Indenture or
in the Notes or the Guarantees is intended to or shall impair, as among any
Guarantor and the Holders of the Notes, the obligation of such Guarantor,
which is absolute and unconditional, to pay to the Holders of the Notes the
principal of and any interest on the Notes as and when the same shall become
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due and payable in accordance with the terms of the Guarantees, or is intended
to or shall affect the relative rights of the Holders of the Notes and
creditors of any Guarantor other than the holders of Guarantor Senior Debt,
nor shall anything herein or therein prevent the Holder of any Note or the
Trustee on its behalf from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if
any, in respect of cash, property or securities of any Guarantor received upon
the exercise of any such remedy.
Section 12.7. NOTICE TO TRUSTEE.
The Company or any Guarantor shall give prompt written notice to the
Trustee of any fact known to the Company or any such Guarantor which would
prohibit the making of any payment to or by the Trustee in respect of the
Guarantees pursuant to the provisions of this Article XII. Regardless of
anything to the contrary contained in this Article XII or elsewhere in this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any default or event of default with respect to any Guarantor Senior Debt or
of any other facts which would prohibit the making of any payment to or by the
Trustee unless and until the Trustee shall have received notice in writing
from the Company or a Guarantor, or from a holder of Guarantor Senior Debt or
a Representative therefor, and, prior to the receipt of any such written
notice, the Trustee shall be entitled to assume (in the absence of actual
knowledge to the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any evidence
is required with respect to the right of any person as a holder of Guarantor
Senior Debt to participate in any payment or distribution pursuant to this
Article XII, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amounts of Guarantor Senior
Debt held by such person, the extent to which such person is entitled to
participate in such payment or distribution and any other facts pertinent to
the rights of such person under this Article XII, and if such evidence is not
furnished the Trustee may defer any payment to such person pending judicial
determination as to the right of such person to receive such payment.
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Section 12.8. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT.
Upon any payment or distribution of assets of any Guarantor referred to
in this Article XII, the Trustee, subject to the provisions of Article VII
hereof, and the Holders of the Notes shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which Insolvency or
Liquidation Proceedings are pending, or upon certificate of the Custodian or
other person making such payment or distribution, delivered to the Trustee or
the holders of the Notes, for the purpose of ascertaining the persons entitled
to participate in such distribution, the holders of the Guarantor Senior Debt
and other Indebtedness of such Guarantor, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article XII.
Section 12.9. TRUSTEE'S RELATION TO GUARANTOR SENIOR DEBT.
The Trustee and any agent of any Guarantor or the Trustee shall be
entitled to all the rights set forth in this Article XII with respect to any
Guarantor Senior Debt which may at any time be held by it in its individual or
any other capacity to the same extent as any other holder of Guarantor Senior
Debt and nothing in this Indenture shall deprive the Trustee or any such agent
of any of its rights as such holder.
With respect to the holders of Guarantor Senior Debt, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article XII, and no implied covenants or
obligations with respect to the holders of Guarantor Senior Debt shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Guarantor Senior Debt and shall not
be liable to any such holders if the Trustee shall pay over or distribute to
or on behalf of Holders or any such Guarantor or any other person money or
assets to which any holders of Guarantor Senior Debt shall be entitled by
virtue of this Article, except if such payment is made as a result of willful
misconduct or gross negligence of the Trustee.
Whenever a distribution is to be made or a notice given to holders or
owners of Guarantor Senior Debt, the distribution may be made and the notice
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given to their Representatives, if any.
Section 12.10. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS
OF A GUARANTOR OR HOLDERS OF GUARANTOR SENIOR DEBT.
No right of any present or future holders of any Guarantor Senior Debt
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of any
Guarantor or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by such Guarantor with the terms of this Indenture,
regardless of any knowledge thereof which any such holder may have or
otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Guarantor Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without
impairing or releasing the subordination provided in this Article XII or the
obligations hereunder of the Holders of the Notes to the holders of the
Guarantor Senior Debt, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew
or alter, Guarantor Senior Debt, or otherwise amend or supplement in any
manner Guarantor Senior Debt, or any instrument evidencing the same or any
agreement under which Guarantor Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Guarantor Senior Debt; (iii) release any person liable in
any manner for the payment or collection of Guarantor Senior Debt; and (iv)
exercise or refrain from exercising any rights against such Guarantor and any
other person.
Section 12.11. NOTEHOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF GUARANTEES.
Each Holder of Notes by its acceptance of them authorizes and expressly
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate, as between the holders of Guarantor Senior Debt and
the Holders of Notes, the subordination provided in this Article XII, and
appoints the Trustee its attorney-in-fact for such purposes, including, in the
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event of any dissolution, winding-up, liquidation or reorganization of any
Guarantor (whether in bankruptcy, insolvency, receivership, reorganization or
similar proceedings or upon an assignment for the benefit of creditors or
otherwise) tending towards liquidation of the business or assets of such
Guarantor, the filing of a claim for the unpaid balance of its or his Notes
and accrued interest in the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the form
required in such proceeding prior to 30 days before the expiration of the time
to file such claim or claims, then the holders of the Guarantor Senior Debt or
their Representative are or is hereby authorized to have the right to file and
are or is hereby authorized to file an appropriate claim for and on behalf of
the Holders of said Notes. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Guarantor Senior Debt or their
Representative to authorize or consent to or accept or adopt on behalf of any
Holders any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee or the holders of Guarantor Senior Debt or their Representative to
vote in respect of the claim of any Holder in any such proceeding.
Section 12.12. THIS ARTICLE XII NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal of or interest on
the Guarantees by reason of any provision of this Article XII shall not be
construed as preventing the occurrence of an Event of Default.
Section 12.13. TRUSTEE'S COMPENSATION NOT PREJUDICED.
Nothing in this Article XII shall apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
ARTICLE XIII.
MISCELLANEOUS
Section 13.1. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts with
another provision which is required to be included in this Indenture by the
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TIA, the required provision shall control.
Section 13.2. NOTICES.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by private courier service guaranteeing next day delivery, by telex, by
telecopier or registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Company or the Guarantors, if any:
Hanger Orthopedic Group Inc.
7700 Old Georgetown Road
Bethesda, Maryland 20814
Attention: Ivan R. Sabel
Telecopy: (301) 652-8307
with a copy to:
Freedman, Levy, Kroll & Simonds
Washington Square
1050 Connecticut Avenue, N.W., Suite 825
Washington, D.C,. 20036-5366
Attention: Jay W. Freedman, Esq.
Telecopy: (202) 457-5151
if to the Trustee:
U.S. Bank Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Administration, Reference--
Hanger Orthopedic
Telecopy: (651) 244-0712
Each of the Company, the Guarantors, and the Trustee by written notice
to each other such Person may designate additional or different addresses for
notices to such Person. Any notice or communication to the Company, the
Guarantors, or the Trustee shall be deemed to have been given or made as of
the date so delivered if personally delivered or delivered by private courier
service guaranteeing next day delivery; when answered back, if telexed; when
receipt is acknowledged, if faxed; and five (5) calendar days after mailing if
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sent by registered or certified mail, postage prepaid (except that a notice of
change of address shall not be deemed to have been given until actually
received by the addressee).
Any notice or communication mailed to a Holder shall be mailed to such
Holder by first class mail or other equivalent means at such Holder's address
as it appears on the registration books of the Registrar and shall be
sufficiently given to such Holder if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
Section 13.3. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIAss.312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Guarantors, the Trustee, the Registrar and any other Person shall have the
protection of TIAss.312(c).
Section 13.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee upon
request:
(1) an Officers' Certificate, in form and substance reasonably
satisfactory to the Trustee, stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with;
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
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(3) where applicable, a certificate or opinion by an independent
certified public accountant reasonably satisfactory to the Trustee that
complies with TIA ss. 314(c).
Section 13.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.6, shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is reasonably necessary to enable
him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with.
Section 13.6. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Holders. The Paying Agent
or Registrar may make reasonable rules for its functions.
Section 13.7. LEGAL HOLIDAYS.
A "Legal Holiday" used with respect to a particular place of payment is
a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment
date is a Legal Holiday at such place, payment may be made at such place on
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the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
Section 13.8. GOVERNING LAW; WAIVER.
THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS TO THE EXTENT THAT THE APPLICATION OF THE LAW
OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. EACH OF THE PARTIES HERETO
AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
SITTING IN THE COUNTY OF NEW YORK, OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS INDENTURE. Each of the parties hereto hereby waives any
objection it may now or hereafter have to the courts referred to in the
immediately preceding sentence being nominated as the forum to hear and
determine any suit, action or proceeding arising out of or relating to this
Indenture and agrees not to claim that any such court is not a convenient or
appropriate forum. Each of the parties hereto hereby waives its right to a
jury trial in connection with any action or proceeding arising out of or
relating to this Indenture.
Section 13.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
Section 13.10. NO RECOURSE AGAINST OTHERS.
No director, officer, employee or stockholder, as such, of the Company
or any Subsidiary shall have any liability for any obligations of the Company
or any Subsidiary under the Notes, any Guarantee or this Indenture. Each
Holder by accepting a Note waives and releases all such liability. Such waiver
and release are part of the consideration for the issuance of the Notes. This
provision does not affect any possible claims under federal securities laws.
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Section 13.11. SUCCESSORS.
All agreements of the Company and the Guarantors in this Indenture, the
Notes and the Guarantees shall bind their successors. All agreements of the
Trustee in this Indenture shall bind its successors.
Section 13.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together shall represent the same
agreement.
Section 13.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture or in the
Notes or in the Guarantees shall be held invalid, illegal or unenforceable, in
any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions shall
not in any way be affected or impaired thereby, it being intended that all of
the provisions hereof shall be enforceable to the fullest extent permitted by
law.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
COMPANY:
HANGER ORTHOPEDIC GROUP, INC.
By: /s/IVAN R. SABEL
-------------------------------
Name: Ivan R. Sabel
Title: Chairman, President and Chief
Executive Officer
By: /s/RICHARD A. STEIN
-------------------------------
Name: Richard A. Stein
Title: Secretary and Chief Financial
Officer
GUARANTORS:
HANGER PROSTHETICS & ORTHOTICS, INC.
SOUTHERN PROSTHETIC SUPPLY, INC.
SEATTLE ORTHOPEDIC GROUP, INC.
OPNET, INC.
EUGENE TUEFEL & SON ORTHOTICS &
PROSTHETICS, INC.
HPO ACQUISITION CORP.
By: /s/IVAN R. SABEL
-------------------------------
Name: Ivan R. Sabel
Title: Chairman, President and Chief
Executive Officer
By: /s/RICHARD A. STEIN
-------------------------------
Name: Richard A. Stein
Title: Secretary and Chief Financial
Officer
TRUSTEE:
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
By: /s/RICHARD PROKOSCH
----------------------
Name: Richard Prokosch
Title: Authorized Signatory
EXHIBIT 10(d)
=============================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of June 16, 1999
By and Among
HANGER ORTHOPEDIC GROUP, INC.,
THE GUARANTORS SIGNATORY HERETO
and
DEUTSCHE BANK SECURITIES INC.,
CHASE SECURITIES INC. and
PARIBAS CORPORATION
as Initial Purchasers
11 1/4 % Senior Subordinated Notes due 2009
=============================================================================
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions.............................................................. 1
2. Exchange Offer........................................................... 4
3. Market-Making Registration Statement..................................... 8
4. Shelf Registration.......................................................13
5. Additional Interest......................................................14
6. Registration Procedures..................................................16
7. Registration Expenses....................................................22
8. Indemnification..........................................................23
9. Rules 144 and 144A.......................................................27
10. Underwritten Registrations..............................................27
11. Miscellaneous...........................................................28
(a) No Inconsistent Agreements........................................28
(b) Adjustments Affecting Registrable Notes...........................28
(c) Additional Amounts of Notes.......................................28
(d) Amendments and Waivers............................................28
(e) Notices...........................................................29
(f) Successors and Assigns............................................30
(g) Counterparts......................................................30
(h) Headings..........................................................31
(i) Governing Law.....................................................31
(j) Severability......................................................31
(k) Securities Held by the Issuers or their Affiliates................31
(l) Third Party Beneficiaries.........................................31
(m) Entire Agreement..................................................31
(i)
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "AGREEMENT") is dated as of June
16, 1999, by and among HANGER ORTHOPEDIC GROUP, INC., a Delaware corporation
(the "COMPANY"), the guarantors signatory hereto (the "GUARANTORS," and
together with the Company, the "ISSUERS"), and DEUTSCHE BANK SECURITIES INC.,
CHASE SECURITIES INC., and PARIBAS CORPORATION (collectively, the "INITIAL
PURCHASERS").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of June 9, 1999, by and among the Company and the Initial
Purchasers (the "PURCHASE AGREEMENT") relating to the sale by the Company to
the Initial Purchasers of $150,000,000 aggregate principal amount of its 11
1/4 % Senior Subordinated Notes due 2009 (thE "NOtes"). In order to induce the
Initial Purchasers to enter into the Purchase Agreement, the Company (on its
own behalf and on behalf of the Guarantors) has agreed to provide the
registration rights set forth in this Agreement for the benefit of the Initial
Purchasers and their direct and indirect transferees and the Market Maker (as
defined below). The execution and delivery of this Agreement by the Company
and the Guarantors is a condition to the Initial Purchasers' obligation to
purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
ADDITIONAL INTEREST: See Section 5(a) hereof.
ADDITIONAL NOTES: See Section 11(c) hereof.
ADVICE: See the last paragraph of Section 6 hereof.
AGREEMENT: See the introductory paragraphs hereto.
APPLICABLE PERIOD: See Section 2(b) hereof.
COMPANY: See the introductory paragraphs hereto.
EFFECTIVENESS DATE: With respect to (i) the Exchange Offer Registration
Statement, the 125th day after the Issue Date and (ii) any Shelf Registration
Statement, the 125th day after such Shelf Registration Statement is filed.
EFFECTIVENESS PERIOD: See Section 4(a) hereof.
EVENT DATE: See Section 5(b) hereof.
<PAGE>
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
EXCHANGE NOTES: See Section 2(a) hereof.
EXCHANGE OFFER: See Section 2(a) hereof.
EXCHANGE OFFER REGISTRATION STATEMENT: See Section 2(a) hereof.
FILING DATE: (A) If no Registration Statement has been filed by the
Issuers pursuant to this Agreement, the 60th day after the Issue Date; and (B)
in any other case (which may be applicable notwithstanding the consummation of
the Exchange Offer), the 60th day after the delivery of a Shelf Notice.
HOLDER: Any holder of a Registrable Note or Registrable Notes.
INDEMNIFIED PERSON: See Section 8(c) hereof.
INDEMNIFYING PERSON: See Section 8(c) hereof.
INDENTURE: means the Indenture, dated as of the Issue Date, by and among
the Issuers, and U.S. Bank Trust, National Association, as trustee, relating
to the Notes as it may be amended or supplemented from time to time.
INITIAL PURCHASERS: See the introductory paragraphs hereto.
INITIAL SHELF REGISTRATION: See Section 4(a) hereof.
INSPECTORS: See Section 6(n) hereof.
ISSUE DATE: June 16, 1999, the date of original issuance of the Notes.
MARKET MAKER: see Section 3(a) hereof.
MARKET-MAKING REGISTRATION STATEMENT: see Section 3(a) hereof.
NASD: See Section 6(t) hereof.
NOTES: See the introductory paragraphs hereto.
PARTICIPANT: See Section 8(a) hereof.
PARTICIPATING BROKER-DEALER: See Section 2(b) hereof.
PERSON: An individual, trustee, corporation, partnership, limited
liability company, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
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PRIVATE EXCHANGE: See Section 2(b) hereof.
PRIVATE EXCHANGE NOTES: See Section 2(b) hereof.
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule
430A under the Securities Act and any term sheet filed pursuant to Rule 434
under the Securities Act), as amended or supplemented by any prospectus
supplement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.
PURCHASE AGREEMENT: See the introductory paragraphs hereto.
RECORDS: See Section 6(n) hereof.
REGISTRABLE NOTES: Each Note upon its original issuance and at all times
subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof is
applicable upon original issuance and at all times subsequent thereto and each
Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until (i) a Registration Statement (other than, with
respect to any Exchange Note as to which Section 2(c)(iv) hereof is
applicable, the Exchange Offer Registration Statement) covering such Note,
Exchange Note or Private Exchange Note has been declared effective by the SEC
and such Note, Exchange Note or such Private Exchange Note, as the case may
be, has been disposed of in accordance with such effective Registration
Statement, (ii) such Note has been exchanged pursuant to the Exchange Offer
for an Exchange Note or Exchange Notes that may be resold without restriction
under federal securities laws, (iii) such Note, Exchange Note or Private
Exchange Note, as the case may be, ceases to be outstanding for purposes of
the Indenture or (iv) such Note, Exchange Note or Private Exchange Note, as
the case may be, may be resold without restriction pursuant to Rule 144 under
the Securities Act.
REGISTRATION STATEMENT: Any registration statement of the Issuers that
covers any of the Notes, the Exchange Notes or the Private Exchange Notes
filed with the SEC under the Securities Act (including, without limitation,
any Market-Making Registration Statement), including the Prospectus,
amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
"REOFFER CONDITION" shall be deemed to have occurred if either (1) a
Shelf Registration is filed pursuant to Section 4 hereof, or (2) a Prospectus
contained in the Exchange Offer Registration Statement filed pursuant to
Section 2 hereof is required to be delivered under the Securities Act by any
Participating Broker-Dealer that seeks to sell Exchange Notes during the
Applicable Period.
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RULE 144: Rule 144 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144A)
or regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of the Issuers of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
RULE 144A: Rule 144A promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
RULE 415: Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission and any successor agency.
SECURITIES ACT: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
SHELF NOTICE: See Section 2(c) hereof.
SHELF REGISTRATION: See Section 4(b) hereof.
SHELF REGISTRATION STATEMENT: Any Registration Statement relating to a
Shelf Registration.
SUBSEQUENT SHELF REGISTRATION: See Section 4(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
TRUSTEE: The trustee under the Indenture.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
which securities of the Issuers are sold to an underwriter for reoffering to
the public.
2. EXCHANGE OFFER
(a) The Issuers shall file with the SEC, no later than the Filing Date,
a Registration Statement (the "EXCHANGE OFFER REGISTRATION STATEMENT") on an
appropriate registration form with respect to a registered offer (the
"EXCHANGE OFFER") to exchange any and all of the Registrable Notes for a like
aggregate principal amount of notes (the "EXCHANGE NOTES") of the Issuers that
are identical in all material respects to the Notes except that the Exchange
Notes shall contain no restrictive legend thereon. The Exchange Offer shall
comply with all applicable tender offer rules and regulations under the
Exchange Act and other applicable laws, including state "Blue Sky" laws. The
Issuers shall use their best efforts (x) to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act on or
before the Effectiveness Date; (y) to keep the Exchange Offer open for at
least 30 days (or longer if required by applicable law) after the date that
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notice of the Exchange Offer is mailed to Holders; and (z) to consummate the
Exchange Offer on or prior to the 30th day following the date on which the
Exchange Offer Registration Statement is declared effective by the SEC. If,
after the Exchange Offer Registration Statement is initially declared
effective by the SEC, the Exchange Offer or the issuance of the Exchange Notes
thereunder is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, the Exchange
Offer Registration Statement shall be deemed not to have become effective for
purposes of this Agreement.
Each Holder that participates in the Exchange Offer will be required to
represent to the Company (i) that any Exchange Notes to be received by it will
be acquired in the ordinary course of its business, (ii) that at the time of
the consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any Person to participate in the distribution of the
Exchange Notes in violation of the provisions of the Securities Act, (iii)
that such Holder is not an affiliate of the Issuers within the meaning of the
Securities Act, (iv) if such Holder is not a broker-dealer, that it is not
engaged in, and does not intend to engage in, the distribution of Exchange
Notes and (v) if such Holder is a Participating Broker-Dealer (as defined
below), that such Holder will receive Exchange Notes for its own account in
exchange for Notes that were acquired as a result of market-making or other
trading activities and that it will deliver a prospectus in connection with
any resale of such Exchange Notes.
Upon consummation of the Exchange Offer in accordance with this Section
2, the provisions of this Agreement shall continue to apply, solely with
respect to Registrable Notes that are Private Exchange Notes, Exchange Notes
as to which Section 2(c)(iv) is applicable and Exchange Notes held by
Participating Broker-Dealers, and the Issuers shall have no further obligation
to register Registrable Notes (other than Private Exchange Notes and other
than in respect of any Exchange Notes as to which clause 2(c)(iv) hereof
applies) pursuant to Section 4 hereof. No securities other than the Exchange
Notes and the guarantees of the Guarantors with respect thereto shall be
included in the Exchange Offer Registration Statement.
(b) The Issuers shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchasers, which shall
contain a summary statement of the positions taken or policies made by the
staff of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange
Offer (a "PARTICIPATING BROKER-DEALER"), whether such positions or policies
have been publicly disseminated by the staff of the SEC or such positions or
policies represent the prevailing views of the staff of the SEC. Such "Plan of
Distribution" section shall include all information with respect to the sale
of Exchange Notes by Participating Broker-Dealers that the SEC may require in
order to permit such sales pursuant thereto, but such "Plan of Distribution"
shall not name any such Participating Broker-Dealer or disclose the amount of
Notes held by any such Participating Broker-Dealer except to the extent
required by the SEC. Such "Plan of Distribution" section shall also expressly
permit, to the extent permitted by applicable policies and regulations of the
SEC, the use of the Prospectus by all Persons subject to the prospectus
delivery requirements of the Securities Act, including, to the extent
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permitted by applicable policies and regulations of the SEC, all Participating
Broker-Dealers, and include a statement describing the means by which
Participating Broker-Dealers may resell the Exchange Notes in compliance with
the Securities Act.
The Issuers shall use their best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the Prospectus
contained therein in order to permit such Prospectus to be lawfully delivered
by all Persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as is necessary to comply with
applicable law in connection with any resale of the Exchange Notes covered
thereby; PROVIDED, HOWEVER, that such period shall not exceed 180 days after
such Exchange Offer Registration Statement is declared effective (or such
longer period if extended pursuant to the last paragraph of Section 6 hereof)
(the "APPLICABLE PERIOD").
If, prior to consummation of the Exchange Offer, any Initial Purchaser
holds any Notes acquired by it that have, or that are reasonably likely to be
determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Exchange
Offer, the Issuers upon the request of any such Holder shall simultaneously
with the delivery of the Exchange Notes in the Exchange Offer, issue and
deliver to any such Holder, in exchange (the " PRIVATE EXCHANGE") for such
Notes held by any such Holder, a like principal amount of notes (the "PRIVATE
EXCHANGE NOTES") of the Issuers that are identical in all material respects to
the Exchange Notes (except that they may bear a customary legend with respect
to restrictions on transfer). The Private Exchange Notes shall be issued
pursuant to the same indenture as the Exchange Notes and bear the same CUSIP
number as the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor or (ii) if the
Notes are surrendered for exchange on a date subsequent to the record date for
an interest payment date to occur on or after the date of such exchange and as
to which interest will be paid, the date of such interest payment or (B) if no
interest has been paid on the Notes, from the date of the original issuance of
the Notes.
In connection with the Exchange Offer, the Issuers shall:
(1) mail, or cause to be mailed, to each Holder entitled to
participate in the Exchange Offer a copy of the Prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(2) keep the Exchange Offer open for not less than 30 days after
the date that notice of the Exchange Offer is mailed to Holders (or
longer if required by applicable law);
(3) utilize the services of a depositary for the Exchange Offer
with an address in the Borough of Manhattan, The City of New York;
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(4) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which
the Exchange Offer shall remain open; and
(5) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer and the
Private Exchange, if any, the Issuers shall:
(1) accept for exchange all Registrable Notes validly tendered and
not validly withdrawn pursuant to the Exchange Offer and the Private
Exchange, if any;
(2) deliver to the Trustee for cancellation all Registrable Notes
so accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case
may be, equal in principal amount to the Notes of such Holder so
accepted for exchange.
The Exchange Offer and the Private Exchange shall not be subject to any
conditions, other than that (i) the Exchange Offer or Private Exchange, as the
case may be, does not violate applicable law or any applicable interpretation
of the staff of the SEC, (ii) no action or proceeding shall have been
instituted or threatened in any court or by any governmental agency which
might materially impair the ability of the Issuers to proceed with the
Exchange Offer or the Private Exchange, and no material adverse development
shall have occurred in any existing action or proceeding with respect to the
Issuers and (iii) all governmental approvals shall have been obtained, which
approvals the Issuers deem necessary for the consummation of the Exchange
Offer or Private Exchange.
The Exchange Notes and the Private Exchange Notes shall be issued under
(i) the Indenture or (ii) an indenture identical in all material respects to
the Indenture and which, in either case, has been qualified under the TIA or
is exempt from such qualification and shall provide that the Exchange Notes
shall not be subject to the transfer restrictions set forth in the Indenture.
The Indenture or such indenture shall provide that the Exchange Notes, the
Private Exchange Notes and the Notes shall vote and consent together on all
matters as one class and that none of the Exchange Notes, the Private Exchange
Notes or the Notes will have the right to vote or consent as a separate class
on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, the Issuers are not permitted to
effect the Exchange Offer, (ii) the Exchange Offer is not consummated within
155 days of the Issue Date, (iii) any Initial Purchaser or any holder of
Private Exchange Notes so requests in writing to the Issuers at any time after
the consummation of the Exchange Offer, or (iv) in the case of any Holder that
participates in the Exchange Offer, such Holder does not receive Exchange
Notes on the date of the exchange that may be sold without restriction under
federal securities laws (other than due solely to the status of such Holder as
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an affiliate any of the Issuers within the meaning of the Securities Act) and
so notifies the Issuers within 30 days after such Holder first becomes aware
of such restrictions, in the case of each of clauses (i) to and including (iv)
of this sentence, then the Issuers shall promptly deliver to the Holders and
the Trustee written notice thereof (the "SHELF NOTICE") and shall file a Shelf
Registration pursuant to Section 4 hereof.
3. MARKET-MAKING REGISTRATION STATEMENT
(a) For so long as any of the Notes or Exchange Notes are outstanding
and Chase Securities Inc. (the "MARKET MAKER") or any of its affiliates (as
defined in the rules and regulations of the SEC under the Securities Act) owns
any equity securities of any Issuer and proposes to make a market in the Notes
or Exchange Notes as part of its business in the ordinary course, the
following provisions shall apply for the sole benefit of the Market Maker:
(i) The Issuers shall (A) on the date that the Exchange Offer
Registration Statement is filed with the SEC, file a Registration
Statement (the "MARKET-MAKING REGISTRATION STATEMENT") (which may be the
same Registration Statement as the Exchange Offer Registration Statement
or the Initial Shelf Registration Statement, if permitted by the rules
and regulations of the SEC) and use its best efforts to cause such
Market-Making Registration Statement to be declared effective by the SEC
on or prior to the consummation of the Exchange Offer; (B) periodically
amend the Market-Making Registration Statement so that the information
contained therein complies with the requirements of Section 10(a) under
the Securities Act; (C) within 45 days following the end of each of the
Company's fiscal quarters, file a supplement to the prospectus contained
in the Market-Making Registration Statement which sets forth the
financial results of the Company for such quarter; (D) amend the
Market-Making Registration Statement or supplement the related
prospectus when necessary to reflect any material changes in the
information provided therein; and (E) amend the Market-Making
Registration Statement when required to do so in order to comply with
Section 10(a)(3) of the Securities Act; PROVIDED, HOWEVER, that (1)
prior to filing the Market-Making Registration Statement, any amendment
thereto or any supplement to the related prospectus, the Issuers will
furnish to the Market Maker copies of all such documents proposed to be
filed, which documents will be subject to the review of the Market Maker
and its counsel, (2) the Issuers will not file the Market-Making
Registration Statement, any amendment thereto any supplement to the
related prospectus to which the Market Maker and its counsel shall
reasonably object unless the Issuers are advised by counsel that such
Market-Making Registration Statement, amendment or supplement is
required to be filed and (3) the Issuers will provide the Market Maker
and its counsel with copies of the Market-Making Registration Statement
and each amendment and supplement filed.
(ii) If at any time the Company becomes no longer eligible to use
Form S-3 under the Securities Act with respect to sales of the Notes or
Exchange Notes, the Issuers shall file a post-effective amendment to the
Market-Making Registration Statement to convert it to a Form S-1
registration statement as soon as practicable.
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(iii) The Issuers shall notify the Market Maker and, if requested
by the Market Maker, confirm such advice in writing, (A) when the
Market-Making Registration Statement, any post-effective amendment
thereto and any amendment or supplement to the related prospectus has
been filed and, with respect to the Market-Making Registration Statement
any post-effective amendment, when the same has become effective; (B) of
any request by the SEC for any post-effective amendment to the
Market-Making Registration Statement, any amendment or supplement to the
related prospectus or for additional information; (C) of the issuance by
the SEC of any stop order suspending the effectiveness of the
Market-Making Registration Statement or the initiation of any
proceedings for that purpose; (D) of the receipt by the Issuers of any
notification with respect to the suspension of the qualification of the
Notes or Exchange Notes for sale in any jurisdiction or the initiation
or threatening of any proceedings for such purpose; (E) of the happening
of any event which makes any statement made in the Market-Making
Registration Statement, the related prospectus or any amendment or
supplement thereto untrue or which requires the making of any changes in
the Market-Making Registration Statement, such prospectus or any
amendment or supplement thereto in order to make the statements therein
not misleading; and (F) of any advice from a nationally recognized
statistical rating organization that such organization has placed the
Company under surveillance or review with negative implications or has
determined to downgrade the rating of the Notes, Exchange Notes or any
other debt obligation of the Company, whether or not such downgrade
shall have been publicly announced.
(iv) If any event contemplated by clauses (a)(iii)(B) through (E)
above occurs during the period for which the Issuers are required to
maintain an effective Market-Making Registration Statement, the Issuers
shall promptly prepare and file with the SEC a post-effective amendment
to the Market-Making Registration Statement or a supplement to the
related prospectus or file any other required document so that the
prospectus will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(v) In the event of the issuance of any stop order suspending the
effectiveness of the Market-Making Registration Statement or of any
order suspending the qualification of the Notes or Exchange Notes for
sale in any jurisdiction, the Issuers shall use promptly their best
efforts to obtain its withdrawal.
(vi) The Issuers shall furnish to the Market Maker, without
charge, (i) at least one conformed copy of the Market-Making
Registration Statement and any post-effective amendment thereto; and
(ii) as many copies of the related prospectus and any amendment or
supplement thereto as the Market Maker may reasonably request.
(vii) The Issuers shall consent to the use of the prospectus
contained in the Market-Making Registration Statement or any amendment
or supplement thereto by the Market Maker in connection with the
offering and sale of the Notes or Exchange Notes.
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(viii) For so long as the Notes or Exchange Notes are outstanding,
the Issuers shall furnish to the Market Maker (A) as soon as practicable
after the end of each of the Company's fiscal years, the number of
copies reasonably requested by the Market Maker of the Company's annual
report for such year, (B) as soon as available, the number of copies
reasonably requested by the Market Maker of each report (including,
without limitation, reports on Forms 10-K, 10-Q and 8-K) or definitive
proxy statements of the Company filed under the Exchange Act or mailed
to stockholders and (C) all public reports and all reports and financial
statements furnished by the Issuers to the NASDAQ National Market System
or any U.S. national securities exchange or quotation service upon which
the Notes or Exchange Notes may be listed pursuant to requirements of or
agreements with such exchange or quotation service or to the SEC
pursuant to the Exchange Act or any rule or regulation of the SEC
thereunder.
(b) Prior to the effective date of the Market-Making Registration
Statement, the Issuers will use their best efforts to register or qualify, or
cooperate with the Market Maker and its counsel in connection with the
registration or qualification of, the Notes or Exchange Notes for offer and
sale under the securities or blue sky laws of such jurisdictions as the Market
Maker reasonably requests, and do any and all other acts or things necessary
or advisable to enable the offer and sale in such jurisdictions of the Notes
or Exchange Notes covered by the Market-Making Registration Statement,
PROVIDED that the Company will not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take any
action which would subject it to general service of process or to taxation in
any such jurisdiction where it is not then so subject.
(c) Each Issuer represents that the Market-Making Registration
Statement, any post-effective amendments thereto, any amendments or
supplements to the related prospectus and any documents filed by it under the
Exchange Act will, when they become effective or are filed with the SEC, as
the case may be, conform in all respects to the requirements of the Securities
Act and the Exchange Act and the rules and regulations of the SEC thereunder
and will not, as of the effective date of the Market-Making Registration
Statement or such post-effective amendments and as of the filing date of
amendments or supplements to such prospectus or filings under the Exchange Act
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading; PROVIDED that no representation or warranty is made as to
information contained in or omitted from the Market-Making Registration
Statement or the related prospectus in reliance upon and in conformity with
written information furnished to the Issuers by the Market Maker specifically
for inclusion therein, which information the parties hereto agree will be
limited to the statements concerning the market-making activities of the
Marker Maker to be set forth on the cover page and in the "Plan of
Distribution" section of the prospectus.
(d) At the time of effectiveness of the Market-Making Registration
Statement and concurrently each time that the Market-Making Registration
Statement or the related prospectus shall be amended or such prospectus shall
be supplemented, the Company shall (if requested by the Market Maker) furnish
the Market Maker and its counsel with a certificate of its Chairman of the
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Board or President and its chief financial officer to the effect that:
(i) The Market-Making Registration Statement has been declared
effective by the SEC under the Securities Act;
(ii) In the case of an amendment to the Market-Making Registration
Statement, such amendment has become effective under the Securities Act
as of the date and time specified in such certificate;
(iii) In the case of an amendment or supplement to the prospectus
contained in the Market-Making Registration Statement, such supplement
was filed with the SEC pursuant to the subparagraph of Rule 424(b) under
the Securities Act specified in such certificate on the date specified
therein;
(iv) To the knowledge of such officers, no stop order suspending
the effectiveness of the Market-Making Registration Statement has been
issued and no proceeding for that purpose is pending or threatened by
the SEC; and
(v) Such officers have carefully examined the Market-Making
Registration Statement and the related prospectus (and, in the case of
an amendment or supplement, such amendment or supplement) and as of the
date of the Market-Making Registration Statement or such amendment or
supplement, as applicable, the Market-Making Registration Statement and
the related prospectus, as amended or supplemented, if applicable, did
not include any untrue statement of a material fact and did not omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading.
(e) At the time of effectiveness of the Market-Making Registration
Statement and concurrently each time that the Market-Making Registration
Statement or the related prospectus shall be amended or such prospectus shall
be supplemented, the Issuers shall (if requested by the Market Maker) furnish
the Market Maker and its counsel with the written opinion of counsel for the
Issuers satisfactory to the Market maker to the effect that:
(i) The Market-Making Registration Statement has been declared
effective by the SEC under the Securities Act;
(ii) In the case of an amendment to the Market-Making Registration
Statement, such amendment has become effective under the Securities Act
as of the date and time specified in such opinion;
(iii) In the case of an amendment or supplement to the prospectus
contained in the Market-Making Registration Statement, such supplement
was filed with the SEC pursuant to the subparagraph of Rule 424(b) under
the Securities Act specified in such opinion on the date specified
therein;
(iv) To the knowledge of such counsel, no stop order suspending
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the effectiveness of the Market-Making Registration Statement has been
issued and no proceeding for that purpose is pending or threatened by
the SEC; and
(v) Such counsel has reviewed the Market-Making Registration
Statement and the related prospectus (and, in the case of an amendment
or supplement, such amendment or supplement) and participated with
officers of the Company and its independent public accountants in the
preparation of the Market-Making Registration Statement and such
prospectus (and, in the case of an amendment or supplement, such
amendment or supplement) and has no reason to believe that as of the
date of the Market- Making Registration Statement or such amendment or
supplement, as applicable, the Market-Making Registration Statement, as
amended, if applicable, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
related prospectus, as amended or supplemented, if applicable, contains
any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(f) At the time of effectiveness of the Market-Making Registration
Statement and concurrently each time that the Market-Making Registration
Statement or the related prospectus shall be amended or such prospectus shall
be supplemented to include audited annual financial information, the Company
shall (if requested by the Market Maker) furnish the Market Maker and its
counsel with a letter of PriceWaterhouseCoopers LLP (or other independent
public accountants for the Company of nationally recognized standing), in form
satisfactory to the Market Maker, addressed to the Market Maker and dated the
date of delivery of such letter, (i) confirming that they are independent
public accountants within the meaning of the Securities Act and are in
compliance with the applicable requirements relating to the qualification of
accountants under Rule 2-01 of Regulation S-X of the SEC and (ii) in all other
respects, substantially in the form of the letter delivered to the Initial
Purchasers pursuant to Section 7(c) of the Purchase Agreement with, in the
case of an amendment or supplement to include audited financial information,
such changes as may be necessary to reflect the amended or supplemental
financial information.
(g) Each Issuer, jointly and severally, hereby agrees to indemnify the
Market Maker, and if applicable, contribute to the Market Maker, in accordance
with Section 8 hereof.
(h) The Issuers will comply with the provisions of this Section 3 at
their own expense and will reimburse the Market Maker for its expenses
associated with this Section 3 (including fees of counsel).
(i) The agreements contained in this Section 3 and the representations,
warranties and agreements contained in this Agreement shall survive all offers
and sales of the Notes or Exchange Notes and shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any indemnified party.
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(j) For purposes of this Section 3, any reference to the terms "amend",
"amendment" or "supplement" with respect to the Market-Making Registration
Statement or the Prospectus contained therein shall be deemed to refer to and
include the filing under the Exchange Act of any document deemed to be
incorporated therein by reference.
4. SHELF REGISTRATION
If at any time a Shelf Notice is delivered as contemplated by Section
2(c) hereof, then:
(a) SHELF REGISTRATION. The Issuers shall file with the SEC a
Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415 covering all of the Registrable Notes not permitted to be
exchanged in the Exchange Offer in accordance with the terms of this
Agreement, Private Exchange Notes and Exchange Notes as to which Section
2(c)(iv) is applicable (the "INITIAL SHELF REGISTRATION"). The Issuers shall
use their best efforts to file with the SEC the Initial Shelf Registration on
or before the applicable Filing Date. The Initial Shelf Registration shall be
on Form S-1 or another appropriate form permitting registration of such
Registrable Notes for resale by Holders in the manner or manners designated by
them (including, without limitation, one or more underwritten offerings). The
Issuers shall not permit any securities other than the Registrable Notes to be
included in the Initial Shelf Registration or any Subsequent Shelf
Registration.
The Issuers shall use their best efforts to cause the Initial Shelf
Registration to be declared effective under the Securities Act on or prior to
the Effectiveness Date and to keep the Initial Shelf Registration continuously
effective under the Securities Act until the date which is two years from the
Issue Date, subject to extension pursuant to the last paragraph of Section 6
hereof (the "EFFECTIVENESS PERIOD"), or such shorter period ending when all
Registrable Notes covered by the Shelf Registration have been sold in the
manner set forth and as contemplated in the Initial Shelf Registration or, if
applicable, a Subsequent Shelf Registration; PROVIDED, HOWEVER, that the
Effectiveness Period in respect of the Initial Shelf Registration shall be
extended to the extent required to permit dealers to comply with the
applicable prospectus delivery requirements of Rule 174 under the Securities
Act and as otherwise provided herein.
No holder of Registrable Notes may include any of its Registrable Notes
in any Shelf Registration Statement pursuant to this Agreement unless and
until such holder furnishes to the Issuers in writing, after receipt of a
request therefor, such information as the Issuers may reasonably request for
use in connection with any Shelf Registration Statement or Prospectus or
preliminary prospectus included therein. No Holder shall be entitled to
Additional Interest pursuant to Section 5 hereof unless and until such Holder
shall have provided all such reasonably requested information. Each Holder as
to which any Shelf Registration Statement is being effected will be required
to agree to furnish promptly to the Issuers all information required to be
disclosed in order to make information previously furnished to the Issuers by
such Holder not materially misleading.
(b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf Registration or
any Subsequent Shelf Registration ceases to be effective for any reason at any
time during the Effectiveness Period (other than because of the sale of all of
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the securities registered thereunder), the Issuers shall, in addition to
fulfilling their obligations under (d) below, within 30 days of such cessation
of effectiveness amend the Initial Shelf Registration in a manner to obtain
the withdrawal of the order suspending the effectiveness thereof, or file an
additional Shelf Registration Statement pursuant to Rule 415 covering all of
the Registrable Notes covered by and not sold under the Initial Shelf
Registration or an earlier Subsequent Shelf Registration (each, a "SUBSEQUENT
SHELF REGISTRATION"). If a Subsequent Shelf Registration is filed, the Issuers
shall use their best efforts to cause the Subsequent Shelf Registration to be
declared effective under the Securities Act as soon as practicable after such
filing and to keep such subsequent Shelf Registration continuously effective
for a period equal to the number of days in the Effectiveness Period less the
aggregate number of days during which the Initial Shelf Registration or any
Subsequent Shelf Registration was previously continuously effective. As used
herein the term "SHELF REGISTRATION" means the Initial Shelf Registration and
any Subsequent Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Issuers shall promptly supplement
and amend any Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably requested by
the Holders of a majority in aggregate principal amount of the Registrable
Notes covered by such Registration Statement or by any underwriter of such
Registrable Notes.
(d) WITHDRAWAL OF STOP ORDERS. If the Shelf Registration ceases to be
effective for any reason at any time during the Effectiveness Period (other
than because of the sale of all of the securities registered thereunder), the
Issuers shall use their best efforts to obtain the prompt withdrawal of any
order suspending the effectiveness thereof.
5. ADDITIONAL INTEREST
(a) The Issuers and the Initial Purchasers agree that the Holders will
suffer damages if the Issuers fail to fulfill their obligations under Section
2 or Section 4 hereof and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, the Issuers agree to pay,
as liquidated damages, additional interest on the Notes ("ADDITIONAL
INTEREST") under the circumstances and to the extent set forth below (each of
which shall be given independent effect):
(i) if (A) neither the Exchange Offer Registration Statement nor
the Initial Shelf Registration has been filed on or prior to the 60th
day after the Issue Date or (B) notwithstanding that the Issuers have
consummated or will consummate the Exchange Offer, the Issuers are
required to file a Shelf Registration and such Shelf Registration is not
filed on or prior to the Filing Date applicable thereto, then,
commencing on the day after any such Filing Date, Additional Interest
shall accrue on the principal amount of the Notes at a rate of 0.50% per
annum for the first 90 days immediately following such applicable Filing
Date, and such Additional Interest rate shall increase by an additional
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0.50% per annum at the beginning of each subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor
the Initial Shelf Registration is declared effective by the SEC on or
prior to 125 days after the Issue Date or (B) notwithstanding that the
Issuers have consummated or will consummate the Exchange Offer, the
Issuers are required to file a Shelf Registration and such Shelf
Registration is not declared effective by the SEC on or prior to the
Effectiveness Date applicable to such Shelf Registration, then,
commencing on the day after such 125th day or such Effectiveness Date,
as applicable, Additional Interest shall accrue on the principal amount
of the Notes at a rate of 0.50% per annum for the first 90 days
immediately following the day after such 125th day or such Effectiveness
Date, as applicable, and such Additional Interest rate shall increase by
an additional 0.50% per annum at the beginning of each subsequent 90-day
period; or
(iii) if (A) the Issuers have not exchanged Exchange Notes for all
Notes validly tendered in accordance with the terms of the Exchange
Offer on or prior to the 30th day after the date on which the Exchange
Offer Registration Statement relating thereto was declared effective or
(B) if applicable, a Shelf Registration has been declared effective and
such Shelf Registration ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall accrue on the
principal amount of the Notes at a rate of 0.50% per annum for the first
90 days commencing on the (x) 31st day after such effective date, in the
case of (A) above, or (y) the day such Shelf Registration ceases to be
effective in the case of (B) above, and such Additional Interest rate
shall increase by an additional 0.50% per annum at the beginning of each
such subsequent 90-day period;
PROVIDED, HOWEVER, that the Additional Interest rate on the Notes may
not accrue under more than one of the foregoing clauses (i) - (iii) at any one
time and at no time shall the aggregate amount of Additional Interest accruing
exceed in the aggregate 1.0% per annum; PROVIDED, FURTHER, HOWEVER, that (1)
upon the filing of the applicable Exchange Offer Registration Statement or the
applicable Shelf Registration as required hereunder (in the case of clause (i)
above of this Section 5), (2) upon the effectiveness of the Exchange Offer
Registration Statement or the applicable Shelf Registration Statement as
required hereunder (in the case of clause (ii) of this Section 5), or (3) upon
the exchange of the Exchange Notes for all Notes tendered (in the case of
clause (iii)(A) of this Section 5), or upon the effectiveness of the
applicable Shelf Registration Statement which had ceased to remain effective
(in the case of (iii)(B) of this Section 5), Additional Interest on the Notes
in respect of which such events relate as a result of such clause (or the
relevant subclause thereof), as the case may be, shall cease to accrue.
(b) The Issuers shall notify the Trustee within one business day after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "EVENT DATE"). Any amounts of Additional
Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 5 shall
be payable in cash semi-annually on each interest payment date with respect to
the Notes (to the Holders of record on the record date with respect thereto),
commencing with the first such date occurring after any such Additional
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Interest commences to accrue. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by the
principal amount of the Registrable Notes, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed), and the denominator of which is 360.
6. REGISTRATION PROCEDURES
In connection with the filing of any Registration Statement pursuant to
Sections 2 or 4 hereof, the Issuers shall effect such registrations to permit
the sale of the securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Issuers hereunder, the
Issuers shall:
(a) Prepare and file with the SEC prior to the applicable Filing Date, a
Registration Statement or Registration Statements as prescribed by Sections 2
or 4 hereof, and use their best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein;
PROVIDED, HOWEVER, that, if (1) such filing is pursuant to Section 4 hereof or
(2) a Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period relating thereto, before filing any Registration
Statement or Prospectus or any amendments or supplements thereto, the Issuers
shall furnish to and afford the Holders of the Registrable Notes covered by
such Registration Statement or each such Participating Broker-Dealer, as the
case may be, their counsel and the managing underwriters, if any, a reasonable
opportunity to review copies of all such documents (including copies of any
documents to be incorporated by reference therein and all exhibits thereto)
proposed to be filed (in each case at least five business days prior to such
filing, or such later date as is reasonable under the circumstances). The
Issuers shall not file any Registration Statement or Prospectus or any
amendments or supplements thereto if the Holders of a majority in aggregate
principal amount of the Registrable Notes covered by such Registration
Statement, their counsel, or the managing underwriters, if any, shall
reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the
Applicable Period or until consummation of the Exchange Offer, as the case may
be; cause the related Prospectus to be supplemented by any Prospectus
supplement required by applicable law, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) promulgated
under the Securities Act; and comply with the provisions of the Securities Act
and the Exchange Act applicable to it with respect to the disposition of all
securities covered by such Registration Statement as so amended or in such
Prospectus as so supplemented and with respect to the subsequent resale of any
securities being sold by a Participating Broker-Dealer covered by any such
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Prospectus. The Issuers shall be deemed not to have used their best efforts to
keep a Registration Statement effective during the Effective Period or the
Applicable Period, as the case may be, relating thereto if the Issuers
voluntarily take any action that would result in selling Holders of the
Registrable Notes covered thereby or Participating Broker-Dealers seeking to
sell Exchange Notes not being able to sell such Registrable Notes or such
Exchange Notes during that period unless (i) such action is required by
applicable law or (ii) the Issuers comply with this Agreement, including
without limitation, the provisions of Section 6(k) or the last paragraph of
this Section 6.
(c) If the Reoffer Condition has occurred, notify the selling Holders of
Registrable Notes, or each Participating Broker-Dealer from whom the Issuers
have received written notice that it will be a Participating Broker-Dealer in
the Exchange Offer, as the case may be, their counsel and the managing
underwriters, if any, promptly (but in any event within two business days),
and confirm such notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has
become effective under the Securities Act (including in such notice a written
statement that any Holder may, upon request, obtain, at the sole expense of
the Issuers, one conformed copy of such Registration Statement or
post-effective amendment including financial statements and schedules,
documents incorporated or deemed to be incorporated by reference therein and
exhibits), (ii) of the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus or the initiation of any
proceedings for that purpose, (iii) if at any time when a prospectus is
required by the Securities Act to be delivered in connection with sales of the
Registrable Notes or resales of Exchange Notes by Participating Broker-Dealers
the representations and warranties of the Issuers contained in any agreement
(including any underwriting agreement) contemplated by Section 6(m) hereof
cease to be true and correct in all material respects, (iv) of the receipt by
the Issuers of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement or
any of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event, the existence of any condition or any information
becoming known that makes any statement made in such Registration Statement or
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the
making of any changes in or amendments or supplements to such Registration
Statement, Prospectus or documents so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and that in the case of the Prospectus,
it will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (vi) of the determination by any of the Issuers that a
post-effectiv amendment to a Registration Statement would be appropriate.
(d) If the Reoffer Condition has occurred, use its best efforts to
prevent the issuance of any order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of a
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Prospectus or suspending the qualification (or exemption from qualification)
of any of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction, and, if any such
order is issued, to use its best efforts to obtain the withdrawal of any such
order at the earliest possible date.
(e) If the Reoffer Condition has occurred, and if requested by the
managing underwriter or underwriters (if any), the Holders of a majority in
aggregate principal amount of the Registrable Notes being sold in connection
with an underwritten offering or any Participating Broker-Dealer, (i) promptly
as practicable incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or underwriters (if
any), such Holders, any Participating Broker-Dealer or counsel for any of them
reasonably request to be included therein, (ii) make all required filings of
such prospectus supplement or such post-effective amendment as soon as
practicable after the Issuers have received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment, and
(iii) supplement or make amendments to such Registration Statement.
(f) If the Reoffer Condition has occurred, furnish to each selling
Holder of Registrable Notes and to each such Participating Broker-Dealer who
so requests and to counsel and each managing underwriter, if any, at the sole
expense of the Issuers, one conformed copy of the Registration Statement or
Registration Statements and each post-effective amendment thereto, including
financial statements and schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by reference and all
exhibits.
(g) If the Reoffer Condition has occurred, deliver to each selling
Holder of Registrable Notes, or each such Participating Broker-Dealer, as the
case may be, their respective counsel, and the underwriters, if any, at the
sole expense of the Issuers, as many copies of the Prospectus or Prospectuses
(including each form of preliminary prospectus) and each amendment or
supplement thereto and any documents incorporated by reference therein as such
Persons may reasonably request; and, subject to the last paragraph of this
Section 6, the Issuers hereby consent to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Holders of Registrable
Notes or each such Participating Broker-Dealer, as the case may be, and the
underwriters or agents, if any, and dealers (if any), in connection with the
offering and sale of the Registrable Notes covered by, or the sale by
Participating Broker-Dealers of the Exchange Notes pursuant to, such
Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery of
a Prospectus contained in the Exchange Offer Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use its best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the managing underwriter or
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any selling Holder, Participating Broker-Dealer, or the managing underwriter
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or underwriters reasonably request in writing; PROVIDED, HOWEVER, that where
Exchange Notes held by Participating Broker-Dealers or Registrable Notes are
offered other than through an underwritten offering, the Issuers agree to
cause their counsel to perform Blue Sky investigations and file registrations
and qualifications required to be filed pursuant to this Section 6(h); keep
each such registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept effective
and do any and all other acts or things reasonably necessary or advisable to
enable the disposition in such jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the Registrable Notes covered by the
applicable Registration Statement; PROVIDED, HOWEVER, that the Company shall
not be required to (A) qualify generally to do business in any jurisdiction
where it is not then so qualified, (B) take any action that would subject it
to general service of process in any such jurisdiction where it is not then so
subject or (C) subject itself to taxation in excess of a nominal dollar amount
in any such jurisdiction where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 4 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Notes to be in such denominations and registered in such names as
the managing underwriter or underwriters, if any, or Holders may request.
(j) Use its best efforts to cause the Registrable Notes covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be reasonably necessary to enable
the seller or sellers thereof or the underwriter or underwriters, if any, to
consummate the disposition of such Registrable Notes, except as may be
required solely as a consequence of the nature of such selling Holder's
business, in which case the Issuers will cooperate in all reasonable respects
with the filing of such Registration Statement and the granting of such
approvals.
(k) If the Reoffer Condition has occurred, upon the occurrence of any
event contemplated by paragraph 6(c)(iii), 6(c)(v) or 6(c)(vi) hereof, as
promptly as practicable prepare and (subject to Section 6(a) hereof) file with
the SEC, at the sole expense of the Issuers, a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein
by reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Notes being sold thereunder or
to the purchasers of the Exchange Notes to whom such Prospectus will be
delivered by a Participating Broker-Dealer, any such Prospectus will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(l) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with certificates
for the Registrable Notes or Exchange Notes, as the case may be, in a form
eligible for deposit with The Depository Trust Company and (ii) provide a
CUSIP number for the Registrable Notes or Exchange Notes, as the case may be.
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(m) In connection with any underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as is
customary in underwritten offerings of debt securities similar to the Notes in
form and substance reasonably satisfactory to the Issuers and take all such
other actions as are reasonably requested by the managing underwriter or
underwriters in order to expedite or facilitate the registration or the
disposition of such Registrable Notes and, in such connection, (i) make such
representations and warranties to, and covenants with, the underwriters with
respect to the business of the Issuers and their subsidiaries (including any
acquired business, property or entity, if applicable) and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily made by
issuers to underwriters in underwritten offerings of debt securities similar
to the Notes, and confirm the same in writing if and when requested in form
and substance reasonably satisfactory to the Issuers; (ii) obtain the written
opinions of counsel to the Issuers and written updates thereof in form, scope
and substance reasonably satisfactory to the managing underwriter or
underwriters, addressed to the underwriters covering the matters customarily
covered in opinions reasonably requested in underwritten offerings and such
other matters as may be reasonably requested by the managing underwriter or
underwriters; (iii) use its best efforts to obtain "cold comfort" letters and
updates thereof in form, scope and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent certified public
accountants of the Issuers (and, if necessary, any other independent certified
public accountants of any subsidiary of the Issuers or of any business
acquired by the Issuers for which financial statements and financial data are,
or are required to be, included or incorporated by reference in the
Registration Statement), addressed to the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings of debt securities
similar to the Notes and such other matters as reasonably requested by the
managing underwriter or underwriters as permitted by the Statement on Auditing
Standards No. 72; and (iv) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and procedures no less favorable
to the sellers and underwriters, if any, than those set forth in Section 8
hereof (or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Registrable Notes covered by such
Registration Statement and the managing underwriter or underwriters or agents,
if any). The above shall be done at each closing under such underwriting
agreement, or as and to the extent required thereunder.
(n) If the Reoffer Condition has occurred, make available for inspection
by any selling Holder of such Registrable Notes being sold, or each such
Participating Broker-Dealer, as the case may be, any underwriter participating
in any such disposition of Registrable Notes, if any, and any attorney,
accountant or other agent retained by any such selling Holder or each such
Participating Broker-Dealer, as the case may be, or underwriter (collectively,
the "INSPECTORS"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate documents
and instruments of the Issuers and their subsidiaries (collectively, the
"RECORDS") as shall be reasonably necessary to enable them to exercise any
applicable due diligence responsibilities, and cause the officers, directors
and employees of the Issuers and their subsidiaries to supply all information
reasonably requested by any such Inspector in connection with such
Registration Statement and Prospectus. Each Inspector shall agree in writing
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that it will keep the Records confidential and that it will not disclose any
of the Records unless (i) the disclosure of such Records is necessary to avoid
or correct a misstatement or omission in such Registration Statement or
Prospectus, (ii) the release of such Records is ordered pursuant to a subpoena
or other order from a court of competent jurisdiction, (iii) disclosure of
such information is necessary or advisable, in the opinion of counsel for any
Inspector, in connection with any action, claim, suit or proceeding, directly
or indirectly, involving or potentially involving such Inspector and arising
out of, based upon, relating to, or involving this Agreement or the Purchase
Agreement, or any transactions contemplated hereby or thereby or arising
hereunder or thereunder, or (iv) the information in such Records has been made
generally available to the public. Each selling Holder of such Registrable
Notes and each such Participating Broker-Deale will be required to agree that
it will provide prior written notice to the Issuers of the disclosure of any
information by such Inspector pursuant to Section 6(n)(i), (ii) or (iii) and
allow the Issuers to undertake appropriate action to prevent disclosure of the
Records deemed confidential at the Issuers' expense, including, without
limitation, obtaining a protective order from a court of competent
jurisdiction.
(o) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(b) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the first
Registration Statement relating to the Registrable Notes; and in connection
therewith, cooperate with the trustee under any such indenture and the Holders
of the Registrable Notes, to effect such changes to such indenture as may be
required for such indenture to be so qualified in accordance with the terms of
the TIA; and execute, and use its best efforts to cause such trustee to
execute, all documents as may be required to effect such changes, and all
other forms and documents required to be filed with the SEC to enable such
indenture to be so qualified in a timely manner.
(p) Comply with all applicable rules and regulations of the SEC and make
generally available to their respective securityholders a consolidated
earnings statement satisfying the provisions of Section 12(a) of the
Securities Act and Rule 158 thereunder (or any similar rule promulgated under
the Securities Act) no later than 45 days after the end of any 12-month period
(or 90 days after the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which Registrable
Notes are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Issuers after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(q) Upon consummation of the Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Issuers, in a form customary for
underwritten transactions, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the
Private Exchange, as the case may be, that the Exchange Notes or Private
Exchange Notes, as the case may be, the related Guarantees and the related
indenture constitute legal, valid and binding obligations of the Issuers,
enforceable against them in accordance with their respective terms, subject to
customary exceptions and qualifications.
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(r) If the Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Issuers (or to such
other Person as directed by the Issuers) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Issuers shall mark, or
cause to be marked, on such Registrable Notes that such Registrable Notes are
being cancelled in exchange for the Exchange Notes or the Private Exchange
Notes, as the case may be; in no event shall such Registrable Notes be marked
as paid or otherwise satisfied.
(s) If not then rated, use its best efforts to cause the Registrable
Notes covered by a Registration Statement or the Exchange Notes, as the case
may be, to be rated with the appropriate rating agencies, if so requested by
the Holders of a majority in aggregate principal amount of Registrable Notes
covered by such Registration Statement or the Exchange Notes, as the case may
be, or the managing underwriter or underwriters, if any.
(t) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in
connection with any filings required to be made with the National Association
of Securities Dealers, Inc. (the "NASD"). ----
(u) Use its best efforts to take all other steps reasonably necessary to
effect the registration of the Exchange Notes and/or Registrable Notes covered
by a Registration Statement contemplated hereby.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by its acquisition of such Registrable Notes or Exchange Notes to be
sold by such Participating Broker-Dealer, as the case may be, that, upon
actual receipt of any notice from the Issuers of the happening of any event of
the kind described in Section 6(c)(ii), 6(c)(iv), 6(c)(v), or 6(c)(vi) hereof,
such Holder shall forthwith discontinue disposition of such Registrable Notes
covered by such Registration Statement or Prospectus or Exchange Notes to be
sold by such Holder or Participating Broker-Dealer, as the case may be, until
such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 6(k) hereof, or
until it is advised in writing (the "ADVICE") by the Issuers that the use of
the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the event that the Issuers shall give
any such notice, each of the Effectiveness Period and the Applicable Period
shall be extended by the number of days during such periods from and including
the date of the giving of such notice to and including the date when each
seller of Registrable Notes covered by such Registration Statement or Exchange
Notes to be sold by such Participating Broker-Dealer, as the case may be,
shall have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 6(k) hereof or (y) the Advice.
7. REGISTRATION EXPENSES
All fees and expenses incident to the performance of or compliance with
this Agreement by the Issuers (except for any underwriting commissions or
discounts) shall be borne by the Issuers whether or not the Exchange Offer
Registration Statement, any Market-Making Registration Statement or any Shelf
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Registration Statement is filed or becomes effective or the Exchange Offer is
consummated, including, without limitation, (i) all registration and filing
fees (including, without limitation, (A) fees with respect to filings required
to be made with the NASD in connection with an underwritten offering and (B)
fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, reasonable fees and disbursements of counsel
in connection with Blue Sky qualifications of the Registrable Notes or
Exchange Notes and determination of the eligibility of the Registrable Notes
or Exchange Notes for investment under the laws of such jurisdictions (x)
where the holders of Registrable Notes are located, in the case of the
Exchange Notes, or (y) as provided in Section 6(h) hereof, in the case of
Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses,
including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriter or underwriters, if any,
by the Holders of a majority in aggregate principal amount of the Registrable
Notes included in any Registration Statement or in respect of Exchange Notes
to be sold by any Participating Broker-Dealer during the Applicable Period, as
the case may be, (iii) messenger, telephone and delivery expenses, (iv) fees
and disbursements of counsel for the Issuers and, in the case of a Shelf
Registration, reasonable fees and disbursements of one special counsel for all
of the sellers of Registrable Notes (exclusive of any counsel retained
pursuant to Section 8 hereof), (v) fees and disbursements of all independent
certified public accountants referred to in Section 6(m)(iii) hereof
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (vi) Securities
Act liability insurance, if the Issuers desire such insurance, (vii) fees and
expenses of all other Persons retained by the Issuers, (viii internal expenses
of the Issuers (including, without limitation, all salaries and expenses of
officers and employees of the Issuers performing legal or accounting duties),
(ix) the expense of any annual audit, (x) the fees and expenses incurred in
connection with the listing of the securities to be registered on any
securities exchange, and the obtaining of a rating of the securities, in each
case, if applicable, and (xi) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements, indentures and any other documents necessary in order to comply
with this Agreement.
8. INDEMNIFICATION
(a) The Issuers jointly and severally agree to indemnify and hold
harmless each Holder of Registrable Notes, each Market Maker, and each
Participating Broker-Dealer selling Exchange Notes during the Applicable
Period, the affiliates, officers, directors, representatives, employees and
agents of each such Person, and each Person, if any, who controls any such
Person within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act (each, a "PARTICIPANT") from and against any
and all losses, claims, damages, judgments, liabilities and expenses
(including, without limitation, the reasonable legal fees and other expenses
actually incurred in connection with any suit, action or proceeding or any
claim asserted) caused by, arising out of or based upon any untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) or Prospectus (as amended or supplemented
if the Issuers shall have furnished any amendments or supplements thereto) or
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any preliminary prospectus, including, without limitation, any document
incorporated by reference therein, or caused by, arising out of or based upon
any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the case of
the Prospectus in the light of the circumstances under which they were made,
not misleading, EXCEPT insofar as such losses, claims, damages or liabilities
are caused by, arise out of or are based upon any untrue statement or omission
or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant furnished to the
Issuers in writing by such Participant expressly for use therein; provided,
however, that the Issuers will not be liable if such untrue statement or
omission or alleged untrue statement or omission was contained or made in any
preliminary prospectus and corrected in the final Prospectus or any amendment
or supplement thereto and any such loss, liability, claim, or damage or
expense suffered or incurred by the Participant resulted from any action,
claim or suit by any Person who purchased Registrable Notes or Exchange Notes
which are the subject thereof from such Participant and it is established in
the related proceeding that such Participant failed to deliver or provide a
copy of the final Prospectus (as amended or supplemented) to such Person with
or prior to the confirmation of the sale of such Registrable Notes or Exchange
Notes sold to such Person if required by applicable law, unless such failure
to deliver or provide a copy of the Prospectus (as amended or supplemented)
was a result of noncompliance by the Issuers with Section 6 of this Agreement.
In addition, the Issuers jointly and severally agree to indemnify and hold
harmless the Market Maker and each of its affiliates, officers, directors,
representatives, employees and agents, and each Person, if any, who controls
any such Person within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act, from and against any and all losses,
claims, damages, judgments, liabilities and expenses (including, without
limitation, the reasonable legal fees and other expenses actually incurred in
connection with any suit, action or proceeding or any claim asserted) caused
by, arising out of or based upon any material breach by any Issuer of its
obligations contained in Section 3 hereof.
(b) Each Participant will, as a condition to the inclusion of its Notes
in any Shelf Registration, be required to and shall be deemed to agree,
severally and not jointly, to indemnify and hold harmless the Issuers, their
respective directors, officers, employees and agents who sign the Registration
Statement and each Person who controls the Issuers within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Issuers to each Participant, but
only with reference to information relating to such Participant furnished to
the Issuers in writing by such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary prospectus. The liability of any Participant under this
paragraph shall in no event exceed the proceeds received by such Participant
from sales of Registrable Notes or Exchange Notes giving rise to such
obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted
against any Person in respect of which indemnity may be sought pursuant to
either of the two preceding paragraphs, such Person (the "INDEMNIFIED PERSON")
shall promptly notify the Persons against whom such indemnity may be sought
(the "INDEMNIFYING PERSONS") in writing, and the Indemnifying Persons, upon
request of the Indemnified Person, shall retain counsel reasonably
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satisfactory to the Indemnified Person to represent the Indemnified Person and
any others the Indemnifying Persons may reasonably designate in such
proceeding and shall pay the reasonable fees and expenses actually incurred by
such counsel related to such proceeding; PROVIDED, HOWEVER, that the failure
to so notify the Indemnifying Persons shall not relieve any of them of any
obligation or liability which any of them may have hereunder or otherwise
except to the extent it is materially prejudiced by such failure. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless (i) the Indemnifying Persons and the
Indemnified Person shall have mutually agreed to the contrary, (ii) the
Indemnifying Persons shall have failed within a reasonable period of time to
retain counsel reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both any Indemnifying Person and the Indemnified Person or any affiliate
thereof and representation of both parties by the same counsel would be
inappropriate due to actual or potential conflicting interests between them.
It is understood that, unless there exists a conflict among Indemnified
Persons, the Indemnifying Persons shall not, in connection with such
proceeding or separate but substantially similar related proceeding in the
same jurisdiction arising out of the same general allegations, be liable for
the fees and expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and expenses
shall be reimbursed promptly as they are incurred. Any such separate firm for
the Participants and such control Persons of Participants shall be designated
in writing by Participants who sold a majority in interest of Registrable
Notes and Exchange Notes sold by all such Participants and any such separate
firm for the Issuers, their respective directors, officers, employees and
agents and such control Persons of the Issuers shall be designated in writing
by the Company and shall be reasonably acceptable to the Holders. The
Indemnifying Persons shall not be liable for any settlement of any proceeding
effected without its prior written consent (which consent shall not be
unreasonably withheld or delayed), but if settled with such consent or if
there be a final non-appealable judgment for the plaintiff for which the
Indemnified Person is entitled to indemnification pursuant to this Agreement,
each of the Indemnifying Persons agrees to indemnify and hold harmless each
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if either (x)
the Indemnifying Persons shall have failed within a reasonable period of time
to retain counsel reasonably satisfactory to the Indemnified Person, or (y) an
Indemnified Person is entitled to retain separate counsel at the expense of
the Indemnifying Person pursuant to this paragraph 8(c) and at any time such
Indemnified Person shall have requested an Indemnifying Person to reimburse
the Indemnified Person for reasonable fees and expenses actually incurred by
counsel as contemplated by the third sentence of this paragraph, the
Indemnifying Persons agree that they shall be liable for any settlement of any
proceeding effected without their written consent if (i) such settlement is
entered into more than 30 days after receipt by such Indemnifying Person of
the aforesaid request and (ii) such Indemnifying Person shall not have
reimbursed the Indemnified Person in accordance with such request prior to the
date of such settlement; PROVIDED, HOWEVER, that the Indemnifying Person shall
not be liable for any settlement effected without its consent pursuant to this
sentence if the Indemnifying Person is contesting, in good faith, the request
for reimbursement. No Indemnifying Person shall, without the prior written
consent of the Indemnified Persons (which consent shall not be unreasonably
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withheld or delayed), effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party, or indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement (A) includes an unconditional
written release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement
as to an admission of fault, culpability or failure to act by or on behalf of
such Indemnified Person.
(d) If the indemnification provided for in clauses (a) and (b) of this
Section 8 is for any reason unavailable to, or insufficient to hold harmless,
an Indemnified Person in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Person under such paragraphs, in
lieu of indemnifying such Indemnified Person thereunder and in order to
provide for just and equitable contribution, shall contribute to the amount
paid or payable by such Indemnified Person as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect (i) the
relative benefits received by the Indemnifying Person or Persons on the one
hand and the Indemnified Person or Persons on the other from the offering of
the Notes or (ii) if the allocation provided by the foregoing clause (i) is
not permitted by applicable law, not only such relative benefits but also the
relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements
or omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative benefits received by the
Issuers on the one hand and the Participants on the other shall be deemed to
be in the same proportion as the total proceeds from the offering (net of
discounts and commissions but before deducting expenses) of the Notes received
by the Issuers, as provided on the cover page of the Offering Memorandum dated
June 9, 1999, bears to total proceeds received by such Participant from the
sale of Registrable Notes or Exchange Notes, as the case may be. The relative
fault of the parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuers on the one hand or such Participant or such other
Indemnified Person, as the case may be, on the other, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission, and any other equitable considerations appropriate
in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 8 were determined by PRO RATA allocation
(even if the Participants were treated as one entity for such purpose) or by
any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages, judgments, liabilities and expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, in no event
shall a Participant be required to contribute any amount in excess of the
amount by which proceeds received by such Participant from sales of
Registrable Notes or Exchange Notes, as the case may be, exceeds the amount of
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any damages that such Participant has otherwise been required to pay or has
paid by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the Indemnifying Party to the Indemnified Party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Issuers set forth in this Agreement
shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Holder or any person who controls a
Holder, the Issuers and their respective directors, officers, employees or
agents or any person controlling the Issuers, and (ii) any termination of this
Agreement.
(g) The indemnity and contribution agreements contained in this Section
8 will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
9. RULES 144 AND 144A
The Issuers covenant and agree that they will file the reports required
to be filed by them under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder in a timely manner in
accordance with the requirements of the Securities Act and the Exchange Act
and, if at any time an Issuer is not required to file such reports, such
Issuer will, upon the request of any Holder or beneficial owner of Registrable
Notes, make publicly available annual reports and such information, documents
and other reports of the type specified in Sections 13 and 15(d) of the
Exchange Act. The Issuers further covenant, for so long as any Registrable
Notes remain outstanding, to make available to any Holder or beneficial owner
of Registrable Notes in connection with any sale thereof and any prospective
purchaser of such Registrable Notes from such Holder or beneficial owner the
information required by Rule 144A(d)(4) under the Securities Act in order to
permit resales of such Registrable Notes pursuant to Rule 144A.
10. UNDERWRITTEN REGISTRATIONS
If any of the Registrable Notes covered by any Shelf Registration are to
be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Notes included in such offering and shall be reasonably acceptable to the
Issuers.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and
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(b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements.
11. MISCELLANEOUS
(a) NO INCONSISTENT AGREEMENTS. The Issuers have not entered into, as of
the date of this Agreement and the Issuers shall not enter into, from and
after the date of this Agreement, any agreement with respect to any of their
securities that is inconsistent with the rights granted to the Holders of
Registrable Notes in this Agreement or otherwise conflicts with the provisions
hereof. The rights granted to the Holders hereunder do not in any way conflict
with and are not inconsistent with the rights granted to the holders of any of
the Issuers' other issued and outstanding securities. The Issuers have not
entered into, as of the date of this Agreement and the Issuers shall not enter
into, from and after the date of this Agreement, any agreement with respect to
any of their securities which will grant to any Person piggy-back registration
rights with respect to any Registration Statement required to be filed by the
Issuers pursuant to this Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Issuers shall not,
directly or indirectly, take any action with respect to the Registrable Notes
as a class that would adversely affect the ability of the Holders of
Registrable Notes to include such Registrable Notes in a registration
undertaken pursuant to this Agreement.
(c) ADDITIONAL AMOUNTS OF NOTES. The Notes are limited in aggregate
principal amount to $300,000,000, of which $150,000,000 will be issued on the
date hereof. Additional amounts of Notes may be issued in one or more series
from time to time under the Indenture (collectively "Additional Notes") prior
to the filing of any Registration Statement. The Issuers shall provide the
registration rights set forth under this Agreement to the Initial Purchasers
and any subsequent holder or holders of such Additional Notes and
notwithstanding anything contained herein may include such Additional Notes in
any Registration Statement filed hereunder.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (I) the Issuers, (II)(A) the Holders of not less than a majority in
aggregate principal amount of the then outstanding Registrable Notes, (B) in
circumstances that would adversely affect the Participating Broker-Dealers,
the Participating Broker- Dealers holding not less than a majority in
aggregate principal amount of the Exchange Notes held by all Participating
Broker-Dealers and (C) the Market Maker, with respect to any proposed
amendment, modification, supplement or waiver to Section 3; PROVIDED, HOWEVER,
that Section 8 and this Section 11(d) may not be amended, modified,
supplemented or waived without the prior written consent of (i) each Holder,
(ii) each Participating Broker-Dealer (including any person who was a Holder
or Participating Broker-Dealer of Registrable Notes or Exchange Notes, as the
case may be, disposed of pursuant to any Registration Statement) affected by
any such amendment, modification, supplement or waiver, and (iii) the Market
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Maker, if the Market Maker would be affected by any such amendment,
modification, supplement or waiver. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof (other than Sections 8 and 11(d))
with respect to a matter that relates exclusively to the rights of Holders of
Registrable Notes whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect, impair, limit or
compromise the rights of other Holders of Registrable Notes may be given by
Holders of at least a majority in aggregate principal amount of the
Registrable Notes being sold pursuant to such Registration Statement.
(e) NOTICES. All notices and other communications (including, without
limitation, any notices or other communications to the Trustee) provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(i) if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or
Participating Broker-Dealer, as the case may be, set forth on the
records of the registrar under the Indenture, with a copy in like manner
to the Initial Purchasers as specified in Section 11(e)(ii);
(ii) if to the Initial Purchasers, as follows:
Deutsche Bank Securities Inc.
One Bankers Trust Plaza
130 Liberty Street
New York, NY 10006
Facsimile No: (212) 250-7200
Attention: Corporate Finance
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
Facsimile No: (212) 728-8111
Attention: William J. Grant, Jr.
(iii) if to the Issuers, at the address as follows:
Hanger Orthopedic Group, Inc.
7700 Old Georgetown Road, 2nd Floor
Bethesda, MD 20814
Facsimile No: (301) 652-8307
Attention: Richard A. Stein
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with a copy to:
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Suite 825
Washington, D.C. 20036-5366
Facsimile No: (202) 457-5151
Attention: Arthur H. Bill
(iv) if to the Market Maker, as follows:
Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Facsimile: (212) 270-0994
Attention: High Yield Capital Markets
with a copy to:
The Chase Manhattan Bank
Legal Department
270 Park Avenue, 40th floor
New York, New York 10017
Facsimile: (212) 270-7487
Attention: Stephen B. Grant
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier; and upon receiving
confirmation receipt by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties hereto,
the Holders and the Participating Broker-Dealers, PROVIDED that nothing herein
shall be deemed to permit any assignment, transfer or other disposition of
Registrable Notes in violation of the terms of the Purchase Agreement or the
Indenture.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
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(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(j) SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would
have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
(k) SECURITIES HELD BY THE ISSUERS OR THEIR AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes
is required hereunder, Registrable Notes held by the Issuers or any of their
affiliates (as such term is defined in Rule 405 under the Securities Act)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.
(l) THIRD PARTY BENEFICIARIES. Holders of Registrable Notes and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement, and this Agreement may be enforced by such Persons.
(m) ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement, the Indenture and the Notes, is intended by the parties as a final
and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein and therein and any
and all prior oral or written agreements, representations, or warranties,
contracts, understandings, correspondence, conversations and memoranda between
the Holders on the one hand and the Issuers on the other, or between or among
any agents, representatives, parents, subsidiaries, affiliates, predecessors
in interest or successors in interest with respect to the subject matter
hereof and thereof are merged herein and replaced hereby.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
HANGER ORTHOPEDIC GROUP, INC.
HANGER PROSTHETICS & ORTHOTICS,
INC.
SOUTHERN PROSTHETIC SUPPLY, INC.
SEATTLE ORTHOPEDIC GROUP, INC.
OPNET, INC.
EUGENE TUEFEL & SON ORTHOTICS &
PROSTHETICS, INC.
HPO ACQUISITION CORP.
By: /s/IVAN R. SABEL
------------------------------------
Name: Ivan R. Sabel
Title: Chairman, President and Chief
Executive Officer
DEUTSCHE BANK SECURITIES INC.
By: /s/JULIE PERSILY
------------------------
Name: Julie Persily
Title: Managing Director
CHASE SECURITIES INC.
By: /s/IRA GINSBERG
---------------------
Name: Ira Ginsburg
Title: Vice President
PARIBAS CORPORATION
By: /s/ROBERT E. HOWARD
------------------------
Name: Robert E. Howard
Title: Managing Director
EXHIBIT 10(e)
SECURITIES PURCHASE AGREEMENT
DATED AS OF JUNE 16, 1999
AMONG
HANGER ORTHOPEDIC GROUP, INC.
AND
THE PURCHASERS NAMED HEREIN
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Article I DEFINED TERMS; RULES OF CONSTRUCTION........................................... 1
1.1 Defined Terms.................................................................. 1
1.2 Rules of Construction.......................................................... 5
Article II PURCHASE AND SALE OF SHARES; CLOSING.......................................... 6
2.1 Certificate of Amendment....................................................... 6
2.2 Authorization of Issuance of Preferred Shares.................................. 6
2.3 Sale of Securities............................................................. 6
2.4 Closing........................................................................ 6
2.5 Closing Deliveries............................................................. 7
2.6 Use of Proceeds................................................................ 7
Article III REPRESENTATIONS AND WARRANTIES ABOUT THE COMPANY............................. 7
3.1 Offering Memorandum............................................................ 7
3.2 Capitalization................................................................. 8
3.3 Organization, Power and Authority and Good Standing............................ 9
3.4 Authorization, Execution, Enforceability and Consents.......................... 9
3.5 Reports and Financial Information..............................................11
3.6 Compliance with Laws...........................................................11
3.7 Absence of Changes.............................................................12
3.8 Taxes..........................................................................12
3.9 Title to Assets................................................................12
3.10 Proceedings....................................................................12
3.11 Contracts......................................................................13
3.12 Insurance......................................................................13
3.13 ERISA..........................................................................13
3.14 Accounting.....................................................................14
3.15 Investment Company.............................................................14
3.16 Solvency.......................................................................14
3.17 Private Sale...................................................................14
3.18 Brokers........................................................................14
3.19 Regulatory Matters.............................................................15
3.20 Y2K............................................................................15
3.21 Incorporation of NovaCare Purchase Agreement...................................16
3.22 Certificates of Officers.......................................................16
Article IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS..............................16
4.1 Authorization of the Documents.................................................16
4.2 Investment Representations.....................................................16
Article V CONDITIONS TO CLOSING..........................................................17
5.1 Conditions to Purchasers' Obligations..........................................17
5.2 Conditions to the Company's Obligations........................................19
<PAGE>
Article VI INDEMNIFICATION...............................................................19
6.1 Survival of Representations, Warranties, Agreements and Covenants, Etc.........19
6.2 Indemnification................................................................19
Article VII TRANSFER OF SECURITIES.......................................................21
7.1 Restriction on Transfer........................................................21
7.2 Restrictive Legends............................................................22
7.3 Notice of Transfer.............................................................22
7.4 Transfer Pursuant to Rule 144..................................................23
Article VIII ADDITIONAL AGREEMENTS OF THE COMPANY........................................23
8.1 Escrow of Proceeds of Senior Subordinated Notes................................23
8.2 Conduct Pending Closing........................................................23
8.3 Existing Warrants and Common Stock.............................................24
8.4 Amendment of By-laws...........................................................25
Article IX MISCELLANEOUS.................................................................25
9.1 Fees...........................................................................25
9.2 Further Assurances.............................................................26
9.3 Remedies.......................................................................26
9.4 Successors and Assigns.......................................................26
9.5 Entire Agreement..............................................................26
9.6 Notices........................................................................27
9.7 Amendments, Modifications and Waivers..........................................28
9.8 Governing Law; Waiver of Jury Trial...........................................28
9.9 No Third Party Reliance........................................................28
9.10 Submission to Jurisdiction.....................................................29
9.11 Severability...................................................................29
9.12 Independence of Agreements, Covenants, Representations and Warranties .........29
9.13 Counterparts; Facsimile Signatures.............................................30
</TABLE>
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SCHEDULES AND EXHIBITS
SCHEDULES
Schedule I - Purchasers, Purchase Price and Fees
Schedule 3.2(d) - Options and Warrants
Schedule 3.2(e) - Preemptive rights and Rights of First Refusal
Schedule 3.2(f) - Liens
Schedule 3.2(g) - Redemption Rights
Schedule 3.2(h) - Registration Rights
Schedule 3.6 - Orders
Schedule 3.10 - Proceedings
Schedule 3.20 - Y2K
EXHIBITS
Exhibit A - Certificate of Designations for Redeemable Preferred Stock
Exhibit B - Form of Charter Amendment
Exhibit C - Investor Rights Agreement
Exhibit D - Regulation Y Letter
<PAGE>
SECURITIES PURCHASE AGREEMENT
dated as of June 16, 1999 among HANGER
ORTHOPEDIC GROUP, INC., a Delaware
corporation (the "COMPANY"), and the
Purchasers listed on SCHEDULE I
(collectively, the "PURCHASERS").
The Company is in the business of developing, acquiring and operating
orthotic and prosthetic patient-care centers in the United States (the
"BUSINESS"). The Company desires to raise $60,000,000 in preferred equity
financing, and the Purchasers are willing to purchase certain shares of the
Company's preferred stock in connection therewith, all on the terms and
subject to the conditions set forth herein.
ACCORDINGLY, in consideration of the foregoing and the covenants,
agreements, representations and warranties contained in this Agreement, and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the parties, the parties hereto hereby agree
as follows:
ARTICLE I
DEFINED TERMS; RULES OF CONSTRUCTION
1.1 DEFINED TERMS.
Capitalized terms used and not otherwise defined in this Agreement have
the meanings given to them below or in the other locations of this Agreement
specified below (or, if not defined herein, have the meanings ascribed to them
in the Certificate of Designations):
"AGREEMENT" shall have the meaning given to such term in SECTION 1.2.
"AMENDED CHARTER" means, at any time prior to the effectiveness of the
Charter Amendment, the Certificate of Incorporation of the Company as in
effect on the date hereof and, thereafter, as amended by the Charter
Amendment.
"APPLICABLE SECURITIES" means the shares of Redeemable Preferred Stock,
the Warrants and the Reserved Common Shares.
"BOARD" means the Board of Directors of the Company.
"BUSINESS" has the meaning given to it in the Preamble to this
Agreement.
"BUSINESS DAY" means any day other than a Saturday, Sunday or a day on
which all United States securities exchanges on which Securities issued by the
Company are listed, are authorized or required to be closed.
"CERTIFICATE OF DESIGNATIONS" means the certificate of designations,
powers, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions of the Redeemable
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Preferred Stock, in substantially the form set forth in EXHIBIT A.
"CERTIFICATE OF INCORPORATION" means the Certificate of Incorporation of
the Company as amended and restated and in effect from time to time prior to
the effectiveness of the Charter Amendment.
"CHARTER AMENDMENT" means the amendment to the Company's Certificate of
Incorporation, in substantially the form attached as EXHIBIT B
"CLAIM" means any claim, demand, assessment, judgment, order, decree,
action, cause of action, litigation, suit, investigation or other Proceeding.
"CLOSING" has the meaning given to it in SECTION 2.4.
"CLOSING DATE" has the meaning given to it in SECTION 2.4.
"CLOSING CERTIFICATE" has the meaning given to it in SECTION 6.1.
"CODE" means the Internal Revenue Code of 1986, as amended, or any
similar Federal law then in force, and the rules and regulations promulgated
thereunder, all as the same may from time to time be in effect.
"COMMISSION" means the Securities and Exchange Commission or any
successor or replacement thereto.
"COMPANY" has the meaning given to it in the caption to this Agreement.
"COMPANY INDEMNIFIED PERSONS" has the meaning given to it in SECTION
6.2(B).
"CHASE" shall mean Chase Equity Associates, L.P., a California limited
partnership.
"CREDIT AGREEMENT" shall mean the Credit Agreement dated as of the date
hereof, among the Company, The Chase Manhattan Bank, as Administrative Agent,
Collateral Agent and Issuing Bank, Bankers Trust Company, as Syndication
Agent, Paribas (f/k/a Banque Paribas), as Documentation Agent, and the Lenders
party thereto.
"DOCUMENTS" means this Agreement, the Certificate of Designations, the
Investor Rights Agreement and the Regulation Y Letters.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, or any similar Federal law in force, and the rules and regulations
promulgated thereunder, all as the same may be amended.
"EQUITY INCENTIVE PLANS" has the meaning given to it in the Certificate
of Designations.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any similar Federal Statute then in force, and the rules and regulations
promulgated thereunder, all as the same may from time to time be in effect.
"FINAL MEMORANDUM" means the final offering memorandum dated June 9,
1999, to be used in connection with the sale of the Senior Subordinated Notes.
"FUNDAMENTAL DOCUMENTS" means the documents by which any Person (other
than an individual) establishes its legal existence or which govern its
internal affairs. The Fundamental Documents of the Company are the Certificate
of Incorporation (prior to the effectiveness under Delaware Law of the Charter
Amendment), the Amended Charter (after the effectiveness under Delaware Law of
the Charter Amendment) and the By-laws of the Company.
"GAAP" means United States generally accepted accounting principles.
"INDEMNIFIED PERSONS" means any of the Company Indemnified Persons or
any of the Purchaser Indemnified Persons, as the context may require.
"INDEMNIFYING PERSONS" means any of the Purchasers or the Company, as
the context may require.
"INSURANCE POLICIES" has the meaning given to it in SECTION 3.12.
"INTELLECTUAL PROPERTY RIGHTS" means all industrial and intellectual
property rights, including, without limitation, patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
service mark applications, copyrights, copyright applications, know-how, trade
secrets, proprietary processes and formulae, confidential information,
franchises, licenses, inventions, instructions, marketing materials, trade
dress, logos and designs and all documentation and media constituting,
describing or relating to the foregoing, including manuals, memoranda and
records.
"INVESTOR RIGHTS AGREEMENT" means the Investor Rights Agreement among
the Company and the Purchasers, in substantially the form set forth in EXHIBIT
C.
"KNOWLEDGE" has the meaning given to it in SECTION 1.2.
"LIABILITY" means any liability or obligation, whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due, regardless of
when asserted.
"LOSS" means any loss (including diminution in value of Securities),
Liability, Claim, cost, damage, deficiency, Tax (including any Taxes imposed
with respect to any indemnity payments for any such Loss), penalty, fine or
expense, whether or not arising out of any Claims by or on behalf of any party
to this Agreement or any third party, including interest, penalties,
reasonable attorneys' fees and expenses and all amounts paid in investigation,
defense or settlement of any of the foregoing which any such party may suffer,
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sustain or become subject to, as a result of, in connection with, relating or
incidental to or by virtue of any indemnifiable event or condition.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person, a material
adverse effect on the business, condition (financial and otherwise),
operations, results of operations, assets (including levels of working capital
and components thereof), Liabilities, and prospects of such Person.
"MATERIAL AGREEMENTS" has the meaning given to it in SECTION 3.10.
"NOVACARE PURCHASE AGREEMENT" means the Stock Purchase Agreement dated
as of April 2, 1999 by and among NovaCare, Inc., NC Resources, Inc., the
Company and HPO Acquisition Corp., as in effect on the date hereof (after
giving effect to Amendment No. 1 dated May 19, 1999).
"PARIBAS" means Paribas North America, Inc.
"PERMITS" has the meaning given to it in SECTION 3.6(B)
"PERSON" has the meaning given to it in the Certificate of Designations.
"PRELIMINARY MEMORANDUM" means the preliminary offering memorandum dated
May 21, 1999 used in connection with the offering of the Senior Subordinated
Notes.
"PROCEEDING" means any legal, administrative or arbitration action,
suit, complaint, charge, hearing, inquiry, investigation or proceeding.
"PURCHASER" has the meaning given to it in the caption to this Agreement
and any Person succeeding to the rights of a Purchaser pursuant to the terms
hereof.
"PURCHASER INDEMNIFIED PERSON" has the meaning given to it in SECTION
6.2(A).
"REDEEMABLE PREFERRED STOCK" means the Corporation's 7% Redeemable
Preferred Stock, par value $.01 per share.
"REGULATION Y LETTER" means letters from the Company to Chase and
Paribas, in substantially the form attached as EXHIBIT D.
"RESERVED COMMON SHARES" means shares of Common Stock that will be
reserved from and after the Convertibility Effective Date for issuance upon
the conversion of the Redeemable Preferred Stock or the exercise of the
Warrants, as the case may be.
"SECURITIES" has the meaning given to it in the Certificate of
Designations.
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<PAGE>
"SENIOR SUBORDINATED NOTES" means the Company's 11 1/4% Senior
Subordinated Notes due 2009 issued on the date hereof.
"SENIOR SUBORDINATED NOTES PURCHASE AGREEMENT" means the Purchase
Agreement dated as of June 9, 1999, among the Company and the Initial
Purchasers signatory thereto.
"SUBSIDIARY" has the meaning given to it in the Certificate of
Designations.
"TAX" means any Taxes and the term "TAXES" means, with respect to any
Person, (A) all income taxes (including any tax on or based upon net income,
or gross income, or income as specially defined, or earnings, or profits, or
selected items of income, earnings or profits) and all gross receipts, sales,
use, ad valorem, transfer, franchise, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property or
windfall profits taxes, alternative or add-on minimum taxes, customs duties or
other taxes, fees, assessments or charges of any kind whatsoever, together
with any interest and any penalties, additions to tax or additional amounts
imposed by any taxing authority (domestic or foreign) on such Person and (B)
any Liability for the payment of any amount of the type described in the
immediately preceding clause (A) as a result of (i) being a "transferee"
(within the meaning of Section 6901 of the Code or any other Applicable Law)
of another Person, (ii) being a member of an affiliated, combined or
consolidated group or (iii) a contractual arrangement or otherwise.
"TRUSTEE" has the meaning given to it in the Indenture.
"WARRANTS" means the warrants to purchase shares of Common Stock that
may be issuable upon the redemption of the Redeemable Preferred Stock in
accordance with the Certificate of Designations.
1.2 RULES OF CONSTRUCTION.
The term this "AGREEMENT" means this agreement together with all
schedules and exhibits hereto, as the same may from time to time be amended,
modified, supplemented or restated in accordance with the terms hereof. In
this Agreement, the term "KNOWLEDGE" of any Person means (i) actual knowledge
of such Person (including the actual knowledge of the executive officers, key
employees and directors of such Person) and (ii) that knowledge which could
have been acquired by such Person after making such due inquiry and exercising
such due diligence as a prudent businessperson would have made or exercised in
the management of his or her business affairs, including due inquiry of those
key employees and professionals of such Person who could reasonably be
expected to have actual knowledge of the matters in question. The use in this
Agreement of the term "including" means "including, without limitation." The
words "HEREIN," "HEREOF," "HEREUNDER" and other words of similar import refer
to this Agreement as a whole, including the schedules and exhibits, as the
same may from time to time be amended, modified, supplemented or restated, and
not to any particular section, subsection, paragraph, subparagraph or clause
contained in this Agreement. All references to sections, schedules and
5
<PAGE>
exhibits mean the sections of this Agreement and the schedules and exhibits
attached to this Agreement, except where otherwise stated. The title of and
the section and paragraph headings in this Agreement are for convenience of
reference only and shall not govern or affect the interpretation of any of the
terms or provisions of this Agreement. The use herein of the masculine,
feminine or neuter forms shall also denote the other forms, as in each case
the context may require or permit. Where specific language is used to clarify
by example a general statement contained herein, such specific language shall
not be deemed to modify, limit or restrict in any manner the construction of
the general statement to which it relates. The language used in this Agreement
has been chosen by the parties to express their mutual intent, and no rule of
strict construction shall be applied against any party. Unless expressly
provided otherwise, the measure of a period of one month or year for purposes
of this Agreement shall be that date of the following month or year
corresponding to the starting date, provided that if no corresponding date
exists, the measure shall be that date of the following month or year
corresponding to the next day following the starting date. For example, one
month following February 18 is March 18, and one month following March 31 is
May 1.
ARTICLE II
PURCHASE AND SALE OF SHARES; CLOSING
2.1 CERTIFICATE OF AMENDMENT.
Prior to the Closing, the Company shall file with the Secretary of State
of the State of Delaware the Certificate of Designations. The Certificate of
Designations designates 60,000 shares of Redeemable Preferred Stock and sets
forth the powers, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions thereof.
2.2 AUTHORIZATION OF ISSUANCE OF PREFERRED SHARES.
The Company has authorized the issuance at the Closing of an aggregate
of 60,000 shares of Redeemable Preferred Stock.
2.3 SALE OF SECURITIES.
At the Closing, subject to the satisfaction or waiver of the conditions
set forth in ARTICLE V, the Company shall issue and sell to each Purchaser,
and each Purchaser shall severally purchase from the Company, that number of
shares of Redeemable Preferred Stock set forth opposite its name on SCHEDULE I
for the aggregate purchase price set forth opposite its name.
2.4 CLOSING.
The closing (the "CLOSING") hereunder with respect to the issuance and
sale of the Preferred Shares being purchased by each Purchaser at the Closing
and the consummation of the related transactions contemplated hereby shall,
subject to the satisfaction or waiver of the applicable conditions set forth
in SECTION 5.1, take place at the offices of Haythe & Curley, 237 Park Avenue,
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<PAGE>
New York, New York 10017 at 10:00 a.m., local time, on the date of the closing
of the transactions contemplated by the NovaCare Purchase Agreement, or at
such other time, date or place as agreed to by the parties.
2.5 CLOSING DELIVERIES.
At the Closing, the Company shall deliver to each Purchaser purchasing
shares of Redeemable Preferred Stock a certificate, registered in such
Purchaser's name, representing the shares of Redeemable Preferred Stock
purchased by such Purchaser at the Closing, against receipt by the Company of
a wire transfer, of immediately available funds to an account or accounts
designated by the Company, of an aggregate amount equal to the purchase price
for the shares of Redeemable Preferred Stock being purchased by such Purchaser
at the Closing (such date, the "CLOSING DATE").
2.6 USE OF PROCEEDS.
The proceeds received by the Company from the sale of all shares of
Redeemable Preferred Stock shall be used by the Company solely as set forth
under "Sources and Uses of Funds" in the Final Memorandum.
ARTICLE III
REPRESENTATIONS AND WARRANTIES ABOUT THE COMPANY
The Company represents and warrants to each Purchaser as follows:
3.1 OFFERING MEMORANDUM.
(a) Neither the Preliminary Memorandum as of the date thereof nor the
Final Memorandum nor any amendment or supplement thereto as of the date
thereof and at all times subsequent thereto up to the Closing Date contained
or contains any untrue statement of a material fact or omitted or omits to
state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except that
the representations and warranties set forth in this SECTION 3.1 do not apply
to statements or omissions made in reliance upon and in conformity with
information relating to either of the Purchasers furnished to the Company in
writing by the Purchasers expressly for use in the Preliminary Memorandum, the
Final Memorandum or any amendment or supplement thereto.
(b) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Company and the
Subsidiaries believe to be reliable and accurate.
7
<PAGE>
3.2 CAPITALIZATION.
The authorized capital stock of the Company immediately after the
Closing shall consist of:
(a) 25,000,000 duly authorized shares of Common Stock, of which (i)
18,852,824 shares shall be duly and validly issued and outstanding, fully paid
and nonassessable, with no personal Liability attached to the ownership
thereof, (ii) 133,495 shares shall be held by the Company as treasury shares,
(iii) 1,893,914 shares shall be duly and validly reserved for issuance
pursuant to outstanding options, (iv) 468,099 shares shall be duly and validly
reserved for issuance pursuant to options that may be granted after the date
hereof to employees of the Company pursuant to the Company's Equity Incentive
Plans and (v) 830,650 shares shall be duly and validly reserved for issuance
pursuant to outstanding warrants.
(b) 10,000,000 duly authorized shares of Preferred Stock, 60,000 of
which shall be duly and validly issued and outstanding, fully paid and
nonassessable, with no personal Liability attached to the ownership thereof,
all of which shall be held of record and beneficially by the Purchasers and in
the amounts set forth on SCHEDULE I, free and clear of all Liens. All of the
outstanding shares of Preferred Stock shall be designated Redeemable Preferred
Stock.
(c) All Reserved Common Shares, if and when issued, will be duly and
validly issued and outstanding, fully paid and nonassessable, with no personal
Liability attached to the ownership thereof.
(d) SCHEDULE 3.2(D) contains a list of all outstanding warrants,
options, agreements, convertible securities and other commitments pursuant to
which the Company is or may become obligated to issue, sell or otherwise
transfer any Securities of the Company, which list names all Persons entitled
to receive such Securities, indicates whether or not such Securities are
entitled to any anti-dilution or similar adjustments upon the issuance of
additional Securities of the Company or otherwise, sets forth the shares of
capital stock and other Securities required to be issued thereunder
(calculated after giving effect to all such anti-dilution and other similar
adjustments resulting from the issuance of the shares of Redeemable Preferred
Stock and, if applicable, the other Applicable Securities) and the exercise or
conversion price thereof, as applicable.
(e) Except as set forth on SCHEDULE 3.2(E) there are no preemptive
rights, rights of first refusal or other similar rights to purchase or
otherwise acquire shares of capital stock or other Securities of the Company
pursuant to any Applicable Law, any Fundamental Document of the Company or any
agreement to which the Company is a party or may be bound.
(f) Except as set forth on SCHEDULE 3.2(F) or as contemplated by the
Documents and the Fundamental Documents of the Company, there is no Lien (such
as a right of first refusal, right of first offer, proxy, voting trust or
voting agreement) with respect to the sale or voting of any Securities of the
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Company (whether outstanding or issuable upon the conversion, exchange or
exercise of outstanding Securities).
(g) Except as set forth on SCHEDULE 3.2(G), other than as required by
the Certificate of Designations, there are no obligations to redeem,
repurchase or otherwise acquire shares of capital stock or other Securities of
the Company pursuant to any Applicable Law, any Fundamental Document of the
Company or any agreement to which the Company is a party or may be bound.
(h) Except as contemplated by the Investor Rights Agreement or as set
forth on SCHEDULE 3.2(H), no Person has any right to cause the Company to
effect the registration under the Securities Act of any shares of Common Stock
or any other Securities of the Company.
(i) Except as set forth on SCHEDULE 2 to the Senior Subordinated Notes
Purchase Agreement, the Company does not have any Subsidiaries. Except for the
Subsidiaries or as disclosed in the Final Memorandum, the Company does not
own, directly or indirectly, any shares of capital stock or any other equity
or long-term debt Securities or have any equity interest in any Person.
(j) All Securities issued by the Company have been either issued in
transactions in accordance with or exempt from registration under the
Securities Act and the rules and regulations promulgated thereunder and all
applicable state securities or "blue sky" laws, and the Company has not
violated the Securities Act or any applicable state securities or "blue sky"
laws in connection with the issuance of any such Securities. There are no
restrictions upon the voting rights associated with, or the transfer of, any
of the capital stock of the Company, except as provided by (i) United States
or state securities laws or (ii) the terms and provisions of the Documents.
3.3 ORGANIZATION, POWER AND AUTHORITY AND GOOD STANDING.
(a) Each of the Company and the Subsidiaries is duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
organization and has all requisite corporate (or partnership or limited
liability company) power and authority to own its properties and conduct its
business as now conducted and as described in the Final Memorandum.
(b) Each of the Company and the Subsidiaries is duly qualified to do
business as a foreign entity in good standing in all other jurisdictions where
the ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect.
3.4 AUTHORIZATION, EXECUTION, ENFORCEABILITY AND CONSENTS.
(a) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under this Agreement and
each other Document. This Agreement and each other Document has been duly and
validly authorized by the Company. This Agreement has been duly executed and
9
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delivered by the Company and this Agreement constitutes and, when executed and
delivered by the Company (assuming the due authorization, execution and
delivery by the other parties thereto), each other Document to which it is a
party, will constitute, a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought.
(b) The authorization, reservation, issuance, sale and delivery, as
applicable, of the shares of Redeemable Preferred Stock and, subject to the
effectiveness of the Charter Amendment, the other Applicable Securities, have
been duly and validly authorized by all requisite action on the part of the
Company. The shares of Redeemable Preferred Stock and the other Applicable
Securities (if issued), will be duly and validly issued and outstanding, fully
paid and nonassessable, with no personal Liability attaching to the ownership
thereof and not subject to any preemptive rights, rights of first refusal or
other similar rights of the stockholders of the Company.
(c) No consent, approval, authorization, Permit or Order of any
Governmental Authority or third party is required for the issuance and sale by
the Company of the Applicable Securities to the Purchasers or the consummation
by the Company of the other transactions contemplated hereby or by any other
Document, except in the case of the Reserved Shares, for the approval of the
shareholders of the Company. None of the Company or the Subsidiaries is (i) in
violation of its Fundamental Documents, (ii) in breach or violation of any
Applicable Law, or (iii) in breach of or default under (nor has any event
occurred which, with notice or passage of time or both, would constitute a
default under) or in violation of any of the terms or provisions of any Permit
or Material Agreement to which the Company or any of its Subsidiaries is a
party or to which any of their respective properties or assets is subject.
(d) The execution, delivery and performance by the Company of this
Agreement and each other Document, and the consummation of the transactions
contemplated hereby and thereby, including the authorization, reservation,
issuance, sale and delivery, as the case may be, of the shares of Redeemable
Preferred Stock and, subject to the effectiveness of the Charter Amendment,
the other Applicable Securities, will not (a) violate any Applicable Law or
(b) conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute (with due notice or lapse of time, or both) a
default or give rise to any right of termination, cancellation or
acceleration, or result in the creation of any Lien upon any of the properties
or assets of the Company or any of its Subsidiaries, under, any provision of
the Fundamental Documents of the Company or any of its Subsidiaries or any
Material Agreement or Permit to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries or their assets
or properties are or may be bound.
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3.5 REPORTS AND FINANCIAL INFORMATION.
(a) The audited consolidated financial statements of the Company and the
Subsidiaries included in the Final Memorandum present fairly in all material
respects the financial position, results of operations and cash flows of the
Company and the Subsidiaries at the dates and for the periods to which they
relate and have been prepared in accordance with GAAP applied on a consistent
basis, except as otherwise stated therein. The summary and selected financial
and statistical data in the Final Memorandum present fairly in all material
respects the information shown therein and have been prepared and compiled on
a basis consistent with the audited financial statements included therein,
except as otherwise stated therein. PricewaterhouseCoopers LLP (the
"INDEPENDENT ACCOUNTANTS") is an independent public accounting firm within the
meaning of Rule 2-01 of Regulation S-X.
(b) The pro forma financial statements (including the notes thereto) and
the other pro forma financial information included in the Final Memorandum (i)
comply as to form in all material respects with the applicable requirements of
Regulation S-X promulgated under the Exchange Act, (ii) have been prepared in
accordance with the Commission's rules and guidelines with respect to pro
forma financial statements, and (iii) have been properly computed on the bases
described therein; the assumptions used in the preparation of the pro forma
financial data and other pro forma financial information included in the Final
Memorandum are reasonable and the adjustments used therein are appropriate to
give effect to the transactions or circumstances referred to therein.
3.6 COMPLIANCE WITH LAWS.
(a) SCHEDULE 3.6 sets forth a list of all Orders to which the Company or
any of its Subsidiaries or any of their respective assets or properties is
bound.
(b) The Company and each of the Subsidiaries holds all material
licenses, certificates and permits from Governmental Authorities ("PERMITS")
which are necessary to the conduct of their businesses.
(c) To the Knowledge of the Company, there is no proposed change in any
Applicable Law which would require the Company or any of the Subsidiaries to
obtain any material Permits in order to conduct the business of the Company
and the Subsidiaries as each is presently conducted and as presently proposed
to be conducted which the Company or such Subsidiary does not currently
possess.
(d) To the Company's knowledge, there is no Applicable Law which would
prohibit or restrict the Company or any of the Subsidiaries from, or otherwise
materially adversely affect the Company or any of the Subsidiaries in,
conducting each of their businesses in any jurisdiction in which each is now
conducting business or which it proposes to conduct business.
(e) Neither the Company nor any of the Subsidiaries has infringed any
Intellectual Property Rights of any Person. To the Knowledge of the Company,
no Person has infringed any owned or licensed Intellectual Property Rights of
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the Company or any of its Subsidiaries.
3.7 ABSENCE OF CHANGES.
Since the date of the most recent financial statements appearing in the
Final Memorandum, except as described therein, (i) none of the Company or the
Subsidiaries has incurred any Liabilities or obligations, direct or
contingent, or entered into or agreed to enter into any transactions or
contracts (written or oral) not in the ordinary course of business, (ii) none
of the Company or the Subsidiaries has purchased any of its outstanding
capital stock, nor declared, paid or otherwise made any dividend or
distribution of any kind on its capital stock (other than with respect to any
of such Subsidiaries, the purchase of, or dividend or distribution on, capital
stock owned by the Company) and (iii) there has not been any material change
in the capital stock or long-term indebtedness of the Company or its
Subsidiaries.
3.8 TAXES.
Each of the Company and the Subsidiaries has filed all necessary
federal, state and foreign income and franchise Tax returns, and has paid all
Taxes required to be paid by it prior to or as of the Closing; and other than
tax deficiencies which the Company or any Subsidiary is contesting in good
faith and for which the Company or such Subsidiary has provided adequate
reserves, there is no material Tax deficiency that has been proposed, asserted
or assessed against the Company or any of the Subsidiaries.
3.9 TITLE TO ASSETS.
(a) Each of the Company and the Subsidiaries has good and marketable
title to all real property and good title to all personal property described
in the Final Memorandum as being owned by it and good and marketable title to
a leasehold estate in the real and personal property described in the Final
Memorandum as being leased by it free and clear of all Liens or restrictions,
except as described in the Final Memorandum.
(b) All leases, contracts and agreements to which the Company or any of
the Subsidiaries is a party or by which any of them is bound are valid and
enforceable against the Company or such Subsidiary, and are valid and
enforceable against the other party or parties thereto and are in full force
and effect.
(c) The Company and the Subsidiaries own or possess adequate licenses or
other rights to use all Intellectual Property Rights necessary to conduct the
businesses now or proposed to be operated by them as described in the Final
Memorandum.
3.10 PROCEEDINGS.
Except as set forth on SCHEDULE 3.10, there is not pending or, to the
Knowledge of the Company, threatened any Proceeding to which the Company or
any of the Subsidiaries is a party, or to which the property or assets of the
Company or any of the Subsidiaries are subject, before or brought by any
Governmental Authority.
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3.11 CONTRACTS.
(a) Neither the Company nor any of its Subsidiaries is a party to (a)
notes, bonds, mortgages, indentures, or material Permits or (b) other material
written or oral contracts, agreements, instruments and other understandings,
(i) involving annual amounts in excess of $10 million, (ii) that are material
to the Company or any of its Subsidiaries, (iii) that are material to the
financial condition or results of the operations of the Company and its
Subsidiaries or (iv) that would have been required to be described in a
prospectus pursuant to the Securities Act (collectively, the "MATERIAL
AGREEMENTS"), except for those Material Agreements that are described in the
Final Memorandum.
(b) Each Material Agreement constitutes a valid and binding obligation
of the Company and/or Subsidiary party thereto and to the Knowledge of the
Company is enforceable against such other party in accordance with its terms.
Each of the Company and the Subsidiaries have in all material respects
performed all of the obligations required to be performed by each of them to
date pursuant to the Material Agreements, and there exists no default, or any
event which upon the giving of notice or the passage of time, or both, would
give rise to a claim of a default in the performance by the Company and the
Subsidiaries or, to the Knowledge of the Company, any other party to any of
the Material Agreements, except where such default or event, individually or
in the aggregate, has not had nor could it reasonably be expected to have a
Material Adverse Effect.
3.12 INSURANCE.
Each of the Company and the Subsidiaries carries insurance in such
amounts and covering such risks as is adequate for the conduct of its business
and the value of its properties. The Company has not received any notice that
(i) any of such policies has been or will be canceled or terminated or will
not be renewed on substantially the same terms as are now in effect or (ii)
the premium on any of such policies will be materially increased on the
renewal thereof.
3.13 ERISA.
The Company is in compliance in all material respects with all presently
applicable provisions of the Employee Retirement Income Security Act of 1974,
as amended, including the regulations and published interpretations thereunder
("ERISA"); no "reportable event" (as defined in ERISA) has occurred with
respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder (the "Code"); and each "pension plan" for
which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would
cause the loss of such qualification.
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3.14 ACCOUNTING.
The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
3.15 INVESTMENT COMPANY.
Neither the Company nor any Subsidiary is an "investment company" within
the meaning of such term under the Investment Company Act of 1940 and the
rules and regulations of the Commission thereunder.
3.16 SOLVENCY.
Immediately after the consummation of the transactions contemplated by
this Agreement, the fair value and present fair saleable value of the assets
of each of the Company and the Subsidiaries (each on a consolidated basis)
will exceed the sum of its stated liabilities and identified contingent
liabilities; none of the Company or the Subsidiaries (each on a consolidated
basis) is, nor will any of the Company or the Subsidiaries (each on a
consolidated basis) be, after giving effect to the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, (i) left with unreasonably small capital with which to
carry on its business as it is proposed to be conducted, (ii) unable to pay
its debts (contingent or otherwise) as they mature or (iii) otherwise
insolvent.
3.17 PRIVATE SALE.
Assuming the accuracy of the representations of the Purchasers in
SECTION 4.2, the offering, sale, and issuance of the Applicable Securities, as
the case may be, will be, exempt from registration under the Securities Act
and applicable state securities laws and the rules and regulations promulgated
thereunder. Neither the Company nor any Person authorized or employed by the
Company as agent, broker, dealer or otherwise in connection with the offering,
sale or issuance of the Applicable ----------- Securities has offered the same
for sale to, or solicited any offers to buy the same from, or otherwise
approached or negotiated with respect thereto, any Person or Persons other
than the Purchasers.
3.18 BROKERS.
In connection with this transaction, and the closing fee payable to the
Purchasers in an amount equal to the amount set forth on SCHEDULE I, none of
the Company, any of the Company's Subsidiaries or any of their respective
officers, directors, stockholders or employees (or any affiliate of the
foregoing) has employed any broker or finder or incurred any actual or
potential Liability or obligation, whether direct or indirect, for any
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brokerage fees, commissions or finders' fees in connection with the
transactions contemplated by this Agreement.
3.19 REGULATORY MATTERS.
Neither the Company nor any Subsidiary has engaged in any activities
which are prohibited, or are cause for civil penalties of mandatory or
permissive exclusion from Medicare or Medicaid, under Section 1320a-7,
1320a-7a, 1320a-7b, or 1395nn of Title 42 of the United States Code, the
federal CHAMPUS statute, or the regulations promulgated pursuant to such
statutes or regulations or related state or local statutes or which are
prohibited by any private accrediting organization from which the Company or
any of its Subsidiaries seeks accreditation or by generally recognized
professional standards of care or conduct. Neither the Company nor to the
Knowledge of the Company any other Person who has a direct or indirect control
interest in the Company or any Subsidiary or who is an officer, director,
[agent or managing employee] of the Company or any Subsidiary: (1) has had a
civil monetary penalty assessed against it under Section 1128A of the Social
Security Act ("SSA"); (2) has been excluded from participation under the
Medicare program or a Federal Health Care Program (as that term is defined in
SSA Section 1128(B)(f)); or (3) has been convicted (as that term is defined in
42 C.F.R. (S) 1001.2) of any of the categories of offenses described in SSA
Section 1128(a) and (b)(1), (2) and (3).
3.20 Y2K.
(a) Except as set forth on SCHEDULE 3.20(A), all computer hardware and
software owned, licensed or used by the Company (collectively, the "COMPUTER
PRODUCTS") has been designed to be used prior to, during and after the
calendar year 2000 AD, and will operate during each such time period without
error relating to date data and date-dependent data, specifically including
any error relating to, or the product of, date data which represents or
references different centuries or more than one century.
(b) Without limiting the generality of the foregoing, and at no
additional cost to the Company, except as set forth on SCHEDULE 3.20(B):
(i) each Computer Product will not abnormally end or provide
invalid or incorrect results as a result of date data, specifically
including date data which represents or references different centuries
or more than one century;
(ii) each Computer Product has been designed to ensure year 2000
compatibility, including, but not limited to, date data century
recognition, calculations which accommodate same century and
multi-century formulas and date values and date data interface values
that reflect the century; and
(iii) each Computer Product (A) manages and manipulates data
involving dates, including single century formulas and multi-century
formulas, and will not cause an abnormally ending scenario within the
application or generate incorrect values or invalid results involving
such dates, (B) provides that all date-related user interface
functionalities and data fields include the indication of century and
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(C) provides that all date-related data interface functionalities
include the indication of century.
(c) At Purchaser's request and upon reasonable notice, the Company will
provide written evidence sufficient to demonstrate adequate testing and
conversion of each Computer Product to meet the foregoing requirements.
3.21 INCORPORATION OF NOVACARE PURCHASE AGREEMENT.
The Company hereby makes to the Purchasers each of the representations
and warranties contained in SECTION II of the NovaCare Purchase Agreement, and
such representations and warranties, as so made by the Company, shall be
incorporated into this Agreement by reference as if set forth in full herein.
3.22 CERTIFICATES OF OFFICERS.
Any certificate signed by any officer of the Company or any Subsidiary
and delivered to any Purchaser or to counsel for the Purchasers shall be
deemed a joint and several representation and warranty by the Company and each
of the Subsidiaries to each Purchaser as to the matters covered thereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser represents and warrants to the Company as to itself
severally, and not jointly as to any other Purchaser, as of the date hereof,
as follows:
4.1 AUTHORIZATION OF THE DOCUMENTS.
Such Purchaser has all requisite power and authority to execute, deliver
and perform the Documents to which it is a party and the transactions
contemplated thereby, and the execution, delivery and performance by such
Purchaser of the Documents to which it is a party have been duly authorized by
all requisite action by such Purchaser. This Agreement has been duly executed
and delivered by such Purchaser and this Agreement constitutes and, when
executed and delivered by such Purchaser (assuming the due authorization,
execution and delivery by the other parties thereto), each other Document to
which such Purchaser is a party will constitute, a valid and binding
obligation of such Purchaser, enforceable against such Purchaser in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws and subject to general
principles of equity.
4.2 INVESTMENT REPRESENTATIONS.
Solely for establishing that the sale or issuance of the Redeemable
Preferred Stock and, if applicable, the other Applicable Securities (if any),
to such Purchaser, is exempt from the registration requirements of the
Securities Act and comparable provisions of state blue-sky laws and not in any
way to mitigate the responsibility or Liability of the Company for any breach
of the representations and warranties made by it in this Agreement, on which
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such Purchaser is relying in full in connection with its decision to invest in
the Company:
(a) Such Purchaser is acquiring the shares of Redeemable Preferred Stock
for its own account, for investment and not with a view to the distribution
thereof in violation of the Securities Act or applicable state securities
laws.
(b) Such Purchaser understands that (i) the Applicable Securities have
not been registered under the Securities Act or applicable state securities
laws by reason of their issuance by the Company in a transaction exempt from
the registration requirements of the Securities Act and applicable state
securities laws and (ii) the Applicable Securities must be held by such
Purchaser indefinitely unless a subsequent disposition thereof is registered
under the Securities Act and applicable state securities laws or is exempt
from such registration.
(c) Such Purchaser further understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to such
Purchaser) promulgated under the Securities Act depends on the satisfaction of
various conditions, and that, if applicable, Rule 144 may afford the basis for
sales of Securities acquired hereunder in limited amounts.
(d) Such Purchaser has not employed any broker or finder in connection
with the transactions contemplated by this Agreement.
(e) Such Purchaser is an "accredited investor" (as defined in Rule
501(a) of Regulation D promulgated under the Securities Act). Such Purchaser
has such knowledge and experience in financial and business matters that it is
capable of evaluating the risks and merits of this investment. Such
Purchaser's representations in this subsection shall in no way limit the
enforceability of any representations made by the Company in any of the
Documents to which it is a party.
(f) Such Purchaser was not formed for the purpose of consummating the
transactions contemplated hereby.
ARTICLE V
CONDITIONS TO CLOSING
5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS.
The obligation of each Purchaser to purchase and pay for the Securities
to be purchased hereunder at the Closing is subject to the satisfaction of the
following conditions precedent (unless waived by such Purchaser):
(a) The Company shall have filed the Certificate of Designations with
and such filing shall have been accepted by the Secretary of State of the
State of Delaware.
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(b) The Company shall have duly issued and delivered to each Purchaser a
certificate for the number of shares of Redeemable Preferred Stock purchased
by such Purchaser.
(c) The Company shall have duly executed and delivered to each Purchaser
the Investor Rights Agreement.
(d) The Company shall have executed and delivered to Chase and Paribas a
Regulation Y Letter.
(e) The Company shall have performed its obligations under, and shall
have complied with, all the covenants and agreements set forth in this
Agreement and all representations and warranties contained in ARTICLE III
shall be true and correct in all material respects (except those
representations and warranties that are qualified as to materiality, which
shall be true and correct in all respects) as of the date hereof and at and as
of the Closing Date with the same effect as if such representations and
warranties had been made at and as of the Closing Date, and each Purchaser
shall have received a certificate to that effect signed by an officer of the
Company.
(f) Each Purchaser shall have received an opinion from Freedman, Levy,
Kroll & Simonds, counsel to the Company, in a form acceptable to the
Purchasers.
(g) Each Purchaser shall have received a certificate from the Secretary
or an Assistant Secretary of the Company, dated as of the Closing Date,
certifying (i) that true and complete copies of the Fundamental Documents of
the Company as in effect on the Closing Date are attached thereto, (ii) as to
the incumbency and genuineness of the signatures of each Person executing this
Agreement and the other Documents on behalf of the Company and (iii) the
genuineness of the resolutions (attached thereto) of the board of directors or
similar governing body of the Company authorizing the execution, delivery and
performance of this Agreement and the other Documents to which the Company is
a party and the consummation of the transactions contemplated hereby and
thereby.
(h) The Company shall have filed with the Secretary of State of the
State of Delaware a certificate of cancellation canceling all series of
preferred stock other than the Redeemable Preferred Stock.
(i) The Company shall have paid to each Purchaser a closing fee equal to
the amount set forth opposite such Purchaser's name on SCHEDULE I and shall
have paid all fees and expenses of O'Sullivan Graev & Karabell, LLP, counsel
to Chase, and White & Case, counsel to Paribas.
(j) Each of the conditions to the obligations of the Company under the
NovaCare Purchase Agreement shall have been satisfied, the Company shall not
have delivered a notice of mandatory redemption to the holders of the Senior
Subordinated Notes, each of the conditions to the Lenders' obligations set
forth in the Credit Agreement shall have been satisfied or waived and each
Purchaser shall have received a certificate from an officer of the Company
certifying to the foregoing.
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5.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The obligation of the Company to issue the shares of Redeemable
Preferred Stock to the Purchasers at the Closing is subject to the
satisfaction of the following conditions precedent (unless waived by the
Company).
(a) Each Purchaser shall have delivered to the Company by wire transfer,
of immediately available funds to an account or accounts designated by the
Company, an aggregate amount equal to the purchase price for the shares of
Redeemable Preferred Stock being purchased by such Purchaser.
(b) Each of the conditions to the obligations of the Company under the
NovaCare Purchase Agreement shall have been satisfied, the Company shall not
have delivered a notice of mandatory redemption to the holders of the Senior
Subordinated Notes and each of the conditions to the Lenders' obligations set
forth in the Credit Agreement shall have been satisfied or waived.
ARTICLE VI
INDEMNIFICATION
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS,
ETC.
All statements contained in this Agreement or any other Document or any
closing certificate delivered by the Company or the Purchasers, pursuant to
this Agreement or in connection with the transactions contemplated by this
Agreement (each, a "CLOSING CERTIFICATE"), shall constitute representations
and warranties by the Company, or the Purchasers, as applicable, under this
Agreement. Notwithstanding any investigation made at any time by or on behalf
of any party hereto, all representations and warranties contained in this
Agreement or made in writing by or on behalf of the Company, or an Purchaser,
in connection with the transactions contemplated by this Agreement shall
survive the Closing until the third anniversary of the Closing Date, PROVIDED
HOWEVER, that the representations and warranties contained in SECTIONS 3.2,
3.3 and 3.4 shall survive the Closing indefinitely, the representation and
warranties contained in 3.8 shall survive the Closing and continue in full
force and effect until the sixtieth day after the expiration of the statute of
limitations applicable to the matters covered thereby and the representations
and warranties contained in SECTION 3.20 shall survive the Closing until such
time as they survive under the NovaCare Purchase Agreement.
6.2 INDEMNIFICATION.
(a) In addition to all other rights and remedies available to the
Purchasers, the Company shall indemnify, defend and hold harmless each
Purchaser and its affiliates and their respective partners, officers,
directors, employees, agents and representatives (collectively, the "PURCHASER
REPRESENTATIVES"; and together with such Purchaser, the "PURCHASER INDEMNIFIED
PERSONS") against all Losses (without giving effect to any qualification as to
materiality), and none of the Purchaser Indemnified Persons shall be liable to
the Company or any other stockholder of the Company for or with respect to any
and all Losses, together with all costs and expenses (including legal and
accounting fees and expenses) related thereto or incurred in enforcing this
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ARTICLE VI, (i) arising from the untruth, inaccuracy or breach of any of the
representations or warranties of the Company contained in any Document or
Closing Certificate or any facts or circumstances constituting any such
untruth, inaccuracy or breach, (ii) arising from the breach of any covenant or
agreement of the Company contained in any Document or Closing Certificate or
any facts or circumstances constituting such breach, or (iii) arising from any
Claim, except for any Claim made by the Company against such Purchaser
pursuant to SECTION 6.2(B) (whenever made), resulting from or caused by any
transaction, status, event, condition, occurrence or situation relating to,
arising out of or in connection with (A) the status of, or conduct of the
business and affairs of, the Company or (B) the execution, delivery and
performance of this Agreement and the other Documents and the related
documents and agreements contemplated hereby and thereby. Notwithstanding the
foregoing, and subject to the following part of this sentence, upon judicial
determination, which is final and no longer appealable, that the act or
omission giving rise to the indemnification pursuant to SECTION 6.2(A)(III)
resulted primarily out of or was based primarily upon the indemnified party's
gross negligence, fraud or willful misconduct, (unless such action was based
upon the indemnified party's reliance in good faith upon any of the
representations, warranties, covenants or promises made by the Company herein,
or in the Documents), the Company shall not be responsible for any Losses
sought to be indemnified in connection therewith, and the Company shall be
entitled to recover from the indemnified party all amounts previously paid in
full or partial satisfaction of such indemnity, together with all costs and
expenses of the Company reasonably incurred in effecting such recovery, if
any.
(b) In addition to all other rights and remedies available to the
Company, each Purchaser severally as to itself only and not as to any other
Purchaser, shall indemnify, defend and hold harmless the Company and its
officers, directors, employees, agents and representatives (collectively, the
"COMPANY INDEMNIFIED PERSONS,") against all Losses, together with all
reasonable out-of-pocket costs and expenses (including legal and accounting
fees and expenses) related thereto or incurred in enforcing this ARTICLE VI,
(i) arising from the untruth, inaccuracy or breach of any of the
representations or warranties of such Purchaser contained in any Document or
Closing Certificate or any facts or circumstances constituting such untruth,
inaccuracy or breach or (ii) arising from the breach of any covenant or
agreement of such Purchaser contained in any Document or Closing Certificate
or any facts or circumstances constituting such breach.
(c) If for any reason the indemnity provided for in this Section is
unavailable to any Indemnified Person or is insufficient to hold each such
Indemnified Person harmless from all such Losses arising with respect to the
transactions contemplated by this Agreement, then the Indemnifying Persons
shall contribute to the amount paid or payable for such Losses in such
proportion as is appropriate to reflect not only the relative benefits
received by the Indemnifying Persons on the one hand and such Indemnified
Person on the other but also the relative fault of the Indemnifying Persons
and the Indemnified Person as well as any relevant equitable considerations.
In addition, the Indemnifying Persons shall reimburse any Indemnified Person
upon demand for all reasonable expenses (including reasonable fees of legal
counsel) incurred by such Indemnified Person in connection with investigating,
preparing for or defending any such action or claim. The indemnity,
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contribution and expenses reimbursement obligations that the Indemnifying
Persons have under this ARTICLE VI shall be in addition to any Liability that
the Indemnifying Persons may otherwise have. The Indemnifying Persons further
agree that the indemnification and reimbursement commitments set forth in this
Agreement shall apply whether or not the Indemnified Person is a formal party
to any such Claim.
(d) Any indemnification of an Indemnified Person by Indemnifying Persons
pursuant to this Section shall be effected by wire transfer of immediately
available funds from the Indemnifying Persons to an account designated by the
Indemnified Person within 15 days after the determination thereof.
(e) All indemnification rights hereunder shall survive the execution and
delivery of the Documents and the consummation of the transactions
contemplated herein and therein indefinitely, regardless of any investigation,
inquiry or examination made for or on behalf of, or any knowledge of the
Purchaser and/or any of the other Indemnified Parties or the acceptance by the
Purchaser of any certificate or opinion.
(f) By executing this Agreement, the Company (i) agrees that no
Purchaser Indemnified Person shall have any Liability to the Company or its
Subsidiaries pursuant to this Agreement, the other Documents or the
transactions contemplated hereby or thereby (the "COVERED CONDUCT") except (A)
as provided in SECTION 6.2(B), and (B) to the extent that a court of competent
jurisdiction shall have determined by final judgment, no longer subject to
appeal, that the losses resulting from such Covered Conduct primarily resulted
from or were based primarily upon such Purchaser Indemnified Person's willful
misconduct or gross negligence, (ii) agrees that it will not make under any
circumstances, and it will cause it Subsidiaries not to make under any
circumstances, any claim against any Purchaser Indemnified Person, with
respect to a Claim or Loss with respect to which such Person is entitled to
indemnification hereunder, for any special, indirect or consequential damages
in respect of any breach or wrongful conduct (whether the claim therefore is
based on contract, tort or duty imposed by law) in connection with, arising
out of or in any way related to, the transactions contemplated by and the
relationship established by this Agreement, the other Documents or the
transactions contemplated hereby or thereby, or any act, omission or event
occurring in connection therewith, and (iii) waives, releases and agrees not
to sue upon, and it agrees to cause its Subsidiaries not to sue upon any such
Claim, for any such damages, whether or not accrued and whether or not known
or suspected to exist in any such party's favor.
ARTICLE VII
TRANSFER OF SECURITIES
7.1 RESTRICTION ON TRANSFER.
The Applicable Securities shall not be transferable except upon the
conditions specified in this ARTICLE VII, which conditions are intended to
insure compliance with the provisions of the Securities Act in respect of the
transfer thereof.
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7.2 RESTRICTIVE LEGENDS.
Each certificate evidencing the Applicable Securities and each
certificate for any such securities issued to subsequent transferees of any
such certificate shall (unless otherwise permitted by the provisions of
SECTION 7.3 hereof) be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT OR APPLICABLE STATE BLUE SKY LAWS. ADDITIONALLY, THE
TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS
SPECIFIED IN THE SECURITIES PURCHASE AGREEMENT DATED AS OF JUNE
16, 1999, AMONG THE ISSUER HEREOF AND CERTAIN OTHER SIGNATORIES
THERETO, AND NO TRANSFER OF THESE SECURITIES SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. COPIES OF
SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE
BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF
THE ISSUER HEREOF."
7.3 NOTICE OF TRANSFER.
(a) The holder of any Applicable Securities, by acceptance thereof
agrees, prior to any transfer of any Applicable Securities, to give written
notice to the Company of such holder's intention to effect such transfer and
to comply in all other respects with the provisions of this SECTION 7.3. Each
such notice shall describe the manner and circumstances of the proposed
transfer and shall be accompanied by the written opinion, addressed to the
Company, of counsel for the holder of Applicable Securities, as to whether in
the opinion of such counsel (which opinion and counsel shall be reasonably
satisfactory to the Company) such proposed transfer involves a transaction
requiring registration of such Applicable Securities under the Securities Act;
PROVIDED, HOWEVER, that (i) in the case of a holder of Applicable Securities
which is a partnership, no such opinion of counsel shall be necessary for a
transfer by such holder of Applicable Securities to a partner of such holder
of Applicable Securities, or a retired partner of such holder who retires
after the date hereof, or the estate of any such partner or retired partner,
if in each case the transferee agrees in writing to be subject to the terms of
this ARTICLE VII to the same extent as if such transferee were originally a
signatory to this Agreement, (ii) in the case of a holder of Applicable
Securities which is a corporation, no such opinion of counsel shall be
necessary for a transfer by such holder of Applicable Securities to an
Affiliate, officer or director of such corporation and (iii) no such opinion
shall be required in connection with a transfer pursuant to Rule 144 (as
amended from time to time) promulgated under the Securities Act (or successor
rule thereto), provided, that the Company, shall be provided with customary
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written representations relating to such transaction.
(b) If in the opinion of such counsel (if such opinion is required
hereunder) the proposed transfer of Applicable Securities may be effected
without registration under the Securities Act, the holder of Applicable
Securities shall thereupon be entitled to transfer Applicable Securities in
accordance with the terms of the notice delivered by it to the Company.
(c) Each certificate or other instrument evidencing the securities
issued upon the transfer of any Applicable Securities (and each certificate or
other instrument evidencing any untransferred balance of such securities)
shall bear the legend set forth in SECTION 7.2 hereof unless (i) in the
opinion of such counsel registration of future transfer is not required by the
applicable provisions of the Securities Act or (ii) the Company shall have
waived the requirement of such legends; PROVIDED, HOWEVER, that such legend
shall not be required on any certificate or other instrument evidencing the
securities issued upon such transfer in the event such transfer shall be made
in compliance with the requirements of Rule 144 (as amended from time to time)
promulgated under the Securities Act (or successor rule thereto).
7.4 TRANSFER PURSUANT TO RULE 144.
The Company agrees to make publicly available the current information
with respect to the Company that is required by Rule 144(c) under the
Securities Act and otherwise to take any other action or to execute any
certificates necessary to permit a transfer by any holder of Applicable
Securities to qualify for the exemption set forth in Rule 144. Without
limiting the foregoing, if such information is not publicly available, then,
upon a holder's request, the Company will provide such information to such
holder or any prospective purchaser designated by such holder.
ARTICLE VIII
ADDITIONAL AGREEMENTS OF THE COMPANY
8.1 ESCROW OF PROCEEDS OF SENIOR SUBORDINATED NOTES.
The Company will deposit the net proceeds from the sale of the Senior
Subordinated Notes with the Trustee in a special account established under the
Indenture, pending the closing of the transactions contemplated by the
NovaCare Purchase Agreement. Upon the Closing, the Company will apply the net
proceeds from the sale of the Senior Subordinated Notes as set forth under
"Sources and Uses of Funds" in the Final Memorandum.
8.2 CONDUCT PENDING CLOSING.
(a) From the date hereof to the Closing Date, the Company shall, and
shall cause each Subsidiary to, carry on its business in the ordinary course
consistent with past practice and use reasonable efforts to preserve intact
its current business organization, keep available the services of its current
officers and employees and preserve its relationships with customers,
23
<PAGE>
suppliers, licensors, licensees and others having significant business
dealings with it. Without limiting the generality of the foregoing, from the
date hereof to the Closing Date, the Company shall not and shall cause each
Subsidiary not to (except as expressly permitted by this Agreement or with the
Purchaser's consent) (i) take any action or omit to take any action which
would or reasonably could be expected to cause any of the representations and
warranties contained in ARTICLE III to be untrue as of the Closing Date as if
made as of the Closing Date or (ii) take any action which is not expressly
permitted under SECTION 3.3 of the Certificate of Designations.
(b) The Company shall use its best efforts to ensure that all conditions
to the Closing set forth in SECTION 5.1 are satisfied on or prior to the
Closing Date, including executing and delivering all documents required to be
delivered by the Company at the Closing and taking any and all actions which
may be necessary on its part to cause each other party to the Documents to so
execute and deliver each Document.
8.3 EXISTING WARRANTS AND COMMON STOCK.
(a) The Company acknowledges and consents to any transfer by Chase
Venture Capital Associates, L.P. ("CVCA") of any and all shares of Common
Stock of the Company and/or any and all warrants to purchase shares of Common
Stock of the Company held by CVCA to Chase or any of Chase's affiliates. ----
(b) Simultaneously with the effectiveness of the Charter Amendment, the
Company shall amend each outstanding warrant to purchase shares of Common
Stock held by Chase or any of its affiliates to cause such warrant to be
exercisable for (i) shares of Non-Voting Common Stock or (ii) shares of Voting
Common Stock (to the extent that shares of Non-Voting Common Stock could be
converted by such holder into shares of Voting Common Stock). Each such
amendment shall contain such other terms and conditions as shall be reasonably
satisfactory to Chase and the Company.
(c) If the Convertibility Effective Date has not occurred prior to
December 31, 1999, the Company shall create a new series of non-voting
preferred stock (the "JUNIOR PREFERRED STOCK"). The Junior Preferred Stock
shall be substantially similar to the Non-Voting Common Stock, except that
upon any Liquidation of the Company, (i) the holders thereof shall be entitled
to a receive before any payment shall be made to the holders of any shares of
Common Stock the greater of (A) $1.00 per share and (B) the amount that such
holders would have received assuming that the Charter Amendment had been
approved prior to such Liquidation and such holders had exercised their
warrants to purchase shares of Non-Voting Common Stock) and (ii) the shares of
Junior Preferred Stock shall rank junior to the Redeemable Preferred Stock.
Without limiting the foregoing, the Junior Preferred Stock shall not be
redeemable, the holders of Junior Preferred Stock shall be entitled to receive
dividends to the same extent as the holders of shares of Voting Common Stock
are entitled to receive dividends, the holders of shares of Junior Preferred
Stock shall not have any preference over shares of Common Stock with respect
to the payment of dividends and the Junior Preferred Stock shall contain such
other terms and conditions as are reasonably satisfactory to the Purchasers
and the Company. If the Charter Amendment shall not have become effective on
or prior to December 31, 1999, the Company shall amend each outstanding
24
<PAGE>
warrant to purchase shares of Common Stock held by Chase or any of its
affiliates to cause such warrant to be exercisable from and after such date
for shares of either (x) Junior Preferred Stock or (y) shares of Voting Common
Stock to the extent that shares of Non-Voting Common Stock, if issued, could
have been converted by such holder into shares of Voting Common Stock.
(d) Prior to the Convertibility Effective Date, Chase will not exercise
any warrant held by it if after giving effect to such conversion, Chase would
own in excess of the maximum amount of Voting Common Stock as is permissible
under Applicable Law.
8.4 AMENDMENT OF BY-LAWS.
The Company shall amend the by-laws of the Company to provide for the
rights granted to the Investors pursuant to the Certificate of Designations
and the Investor Rights Agreement. Without limiting the foregoing, the by-laws
of the Company shall provide (a) for the directors elected by the Investors
pursuant to the Certificate of Designations to be included on the Board's
committees from and after the occurrence of an Event of Non-Compliance, (b)
for the board observation rights in accordance with the terms and conditions
set forth in the Investor Rights Agreement and (c) that meetings of the Board
or any committee thereof may be held by telephone conference call.
ARTICLE IX
MISCELLANEOUS
9.1 FEES.
(a) The Company will pay, and save the Purchasers harmless against all
Liability, whether or not the Closing hereunder occurs, for the payment of,
(i) all costs and other expenses incurred from time to time by the Company in
connection with the Company's performance of and compliance with all
agreements and conditions contained herein on its part to be performed or
complied with (including the reasonable costs and expenses of counsel incurred
in connection with the review and preparation of the Documents), (ii) the
actual and reasonable out-of-pocket costs and expenses incurred by the
Purchasers in connection with the transactions contemplated hereby, including
reasonable fees, expenses and charges of O'Sullivan Graev & Karabell, LLP
(counsel to Chase) and White & Case (counsel to Paribas), (iii) the reasonable
costs and expenses (including fees, expenses and charges of counsel) incurred
by the Purchasers in connection with any amendment or waiver of, or
enforcement of, any Document relating to the transactions contemplated hereby
and (iv) the reasonable costs and expenses incurred by each Purchaser in any
filing with any Governmental Authority with respect to its investment in the
Company or in any other filing with any Governmental Authority with respect to
the Company that mentions such Purchaser.
(b) The Company further agrees that it will pay, and will save the
Purchasers harmless from, any and all Liability with respect to any stamp or
similar taxes which may be determined to be payable in connection with the
execution and delivery and performance of the Documents or any modification,
25
<PAGE>
amendment or alteration of the terms or provisions of the Documents, and that
it will similarly pay and hold the Purchasers harmless from all issue taxes in
respect of the issuance of any Applicable Securities to the Purchasers.
(c) The Company further agrees to pay to each Purchaser the fees set
forth in SCHEDULE I opposite such Purchaser's name.
(d) Notwithstanding anything to the contrary set forth in this
Agreement, any fees, expenses, costs or charges which are payable by the
Company pursuant to this SECTION 9.1 may be paid by the applicable Purchaser
by set-off by reducing the consideration to be paid at the Closing in respect
of the shares of Redeemable Preferred Stock to be purchased by such Purchaser.
Notwithstanding any such set-off, such shares shall be fully paid and
non-assessable.
9.2 FURTHER ASSURANCES.
The Company shall duly execute and deliver, or cause to be duly executed
and delivered, at its own cost and expense, such further instruments and
documents and to take all such action, in each case as may be necessary or
proper in the reasonable judgment of the Purchasers to carry out the
provisions and purposes of the Agreement and the other Documents.
9.3 REMEDIES.
In case any one or more of the representations, warranties, covenants
and/or agreements set forth in this Agreement shall have been breached by the
Company, the Purchasers (or any Purchaser) may proceed to protect and enforce
its or their rights either by suit in equity and/or by action at law,
including an action for damages as a result of any such breach and/or an
action for specific performance of any such covenant or agreement contained in
this Agreement.
9.4 SUCCESSORS AND ASSIGNS.
This Agreement shall bind and inure to the benefit of the Company and
the Purchasers and their respective successors, assigns, heirs and personal
representatives. Upon any transfer of any Applicable Securities, the
transferee shall be bound by, and entitled to the benefits of, this Agreement
with respect to such transferred Securities in the same manner as the
transferring Purchaser.
9.5 ENTIRE AGREEMENT.
This Agreement and the other writings referred to herein or delivered
pursuant hereto which form a part hereof contain the entire agreement among
the parties with respect to the subject matter hereof and thereof and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
26
<PAGE>
9.6 NOTICES.
All notices and other communications delivered hereunder (whether or not
required to be delivered hereunder) shall be deemed to be sufficient and duly
given if contained in a written instrument (a) personally delivered, (b) sent
by telecopier, (c) sent by nationally-recognized overnight courier
guaranteeing next Business Day delivery or (d) sent by first class registered
or certified mail, postage prepaid, return receipt requested, in each case
addressed as follows:
if to the Company, to:
Hanger Orthopedic Group, Inc.
7700 Old Georgetown Road
Bethesda, MD 20814
Telephone: (301) 986-0701
Telecopier: (301) 652-8307
Attention: Mr. Richard Stein, Secretary
with a copy to:
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, NW, Suite 825
Washington, DC 20036-5366
Telephone: (202) 457-5102
Telecopier: (202) 457-5151
Attention: Jay W. Freedman, Esq.
if to any Purchaser, to him, her or it at his, her or its address set forth on
SCHEDULE I attached hereto;
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, NY 10112
Telephone: (212) 408-2400
Telecopier: (212) 728-5950
Attention: Harvey M. Eisenberg, Esq.
or to such other address as the party to whom such notice or other
communication is to be given may have furnished to each other party in writing
in accordance herewith. Any such notice or communication shall be deemed to
have been received (i) when delivered, if personally delivered, (ii) when
sent, if sent by telecopy on a Business Day (or, if not sent on a Business
Day, on the next Business Day after the date sent by telecopy), (iii) on the
next Business Day after dispatch, if sent by nationally recognized, overnight
courier guaranteeing next Business Day delivery, and (iv) on the fifth
Business Day following the date on which the piece of mail containing such
27
<PAGE>
communication is posted, if sent by mail.
9.7 AMENDMENTS, MODIFICATIONS AND WAIVERS.
The terms and provisions of this Agreement may not be modified or
amended, nor may any of the provisions hereof be waived, temporarily or
permanently, except pursuant to a written instrument executed by the Company
and the Requisite Senior Holders; PROVIDED HOWEVER that any such amendment,
modification or waiver that would adversely affect the rights hereunder of any
Purchaser, in its capacity as a Purchaser, without similarly affecting the
rights hereunder of all Purchasers, in their capacities as Purchasers, shall
not be effective as to such Purchaser without its prior written consent. No
waiver by any party shall operate or be construed as a waiver of any
subsequent breach by any other party.
9.8 GOVERNING LAW; WAIVER OF JURY TRIAL.
All questions concerning the construction, interpretation and validity
of the Documents shall be governed by and construed and enforced in accordance
with the domestic laws of the State of Delaware, without giving effect to any
choice or conflict of law provision or rule (whether in the State of Delaware
or any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware. In furtherance of the
foregoing, the internal law of the State of Delaware will control the
interpretation and construction of the Documents, even if under such
jurisdiction's choice of law or conflict of law analysis, the substantive law
of some other jurisdiction would ordinarily or necessarily apply.
BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS
AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
9.9 NO THIRD PARTY RELIANCE.
Anything contained herein to the contrary notwithstanding, the
representations and warranties of the Company contained in this Agreement (a)
are being given by the Company as an inducement to the Purchasers to enter
into this Agreement and the other Documents (and the Company acknowledges that
the Purchasers have expressly relied thereon) and (b) are solely for the
benefit of the Purchasers. Accordingly, no third party (including, without
limitation, any holder of capital stock of the Company) or anyone acting on
28
<PAGE>
behalf of any thereof other than the Purchasers, and each of them, shall be a
third party or other beneficiary of such representations and warranties and no
such third party shall have any rights of contribution against the Purchasers
or the Company with respect to such representations or warranties or any
matter subject to or resulting in indemnification under this Agreement or
otherwise.
9.10 SUBMISSION TO JURISDICTION.
Any legal action or proceeding with respect to this Agreement or the
other Documents may be brought in the courts of the State of New York and the
United States of America for the Southern District of New York and, by
execution and delivery of this Agreement, the Company hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The Company hereby irrevocably waives,
in connection with any such action or proceeding, any objection, including,
without limitation, any objection to the venue or based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of
any such action or proceeding in such respective jurisdictions. The Company
hereby irrevocably consents to the service of process of any of the
aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to it at its
address as set forth herein. Nothing herein shall affect the right of the
Purchasers to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the Company in any
other jurisdiction.
9.11 SEVERABILITY.
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the law and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held
in any jurisdiction to be invalid, prohibited or unenforceable for any reason,
such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn
so as not be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
9.12 INDEPENDENCE OF AGREEMENTS, COVENANTS, REPRESENTATIONS AND WARRANTIES.
All agreements and covenants hereunder shall be given independent effect
so that if a certain action or condition constitutes a default under a certain
agreement or covenant, the fact that such action or condition is permitted by
another agreement or covenant shall not affect the occurrence of such default,
unless expressly permitted under an exception to such initial covenant. In
addition, all representations and warranties hereunder shall be given
independent effect so that if a particular representation or warranty proves
to be incorrect or is breached, the fact that another representation or
29
<PAGE>
warranty concerning the same or similar subject matter is correct or is not
breached will not affect the incorrectness of or a breach of a representation
and warranty hereunder.
9.13 COUNTERPARTS; FACSIMILE SIGNATURES.
This Agreement may be executed in any number of counterparts, and each
such counterpart hereof shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement. Facsimile
counterpart signatures to this Agreement shall be acceptable an binding.
* * * *
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
HANGER ORTHOPEDIC GROUP, INC.
By: /s/IVAN R. SABEL
------------------------------------
Name: Ivan R. Sabel
Title: Chairman, President and Chief
Executive Officer
PURCHASERS
CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capital Partners,
its General Partner
By: /s/MITCHELL J. BLUTT, M.D.
------------------------------------
Name: Mitchell J. Blutt, M.D.
Title: Executive Partner
PARIBAS NORTH AMERICA, INC.
By: /s/JOHN G. MARTINEZ
------------------------------------
Name: John G. Martinez
Title: Financial Controller
31
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
AGGREGATE
NAME AND ADDRESS NUMBER OF SHARES PRICE OF SHARES CLOSING FEE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CHASE EQUITY ASSOCIATES, L.P. 50,000 $50,000,000 $500,000
c/o Chase Capital Partners
380 Madison Avenue,
12th Floor
New York, NY 10017
Attention: Eric Green
Tel: (212) 622-3100
Fax: (212) 622-3101
------------------------------------------------------------------------------------------------------------------
PARIBAS NORTH AMERICA, INC. 10,000 $10,000,000 $100,000
787 7th Avenue, 32nd Floor
New York, NY 10019
Attention: Donald Ercole
Tel: (212) 841-2540
Fax: (212) 841-2363
------------------------------------------------------------------------------------------------------------------
TOTAL 60,000 $60,000,000 $600,000
------------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT 10(f)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
INVESTOR RIGHTS AGREEMENT
DATED JULY 1, 1999
AMONG
HANGER ORTHOPEDIC GROUP, INC.
AND
CERTAIN OF ITS INVESTORS
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1 DEFINITIONS..................................................... 1
SECTION 2 RIGHTS TO SUBSCRIBE FOR SECURITIES.............................. 2
SECTION 3 BOARD OF DIRECTORS.............................................. 3
SECTION 4 INFORMATION RIGHTS; COVENANTS................................... 4
SECTION 5 SHELF REGISTRATION.............................................. 6
SECTION 6 DEMAND REGISTRATION............................................. 7
SECTION 7 PIGGYBACK REGISTRATION.......................................... 9
SECTION 8 SHORT FORM REGISTRATIONS........................................ 9
SECTION 9 EXPENSES........................................................ 10
SECTION 10 PREPARATION AND FILING.......................................... 10
SECTION 11 INDEMNIFICATION................................................. 13
SECTION 12 UNDERWRITING AGREEMENT.......................................... 15
SECTION 13 INFORMATION BY INVESTOR......................................... 15
SECTION 14 EXCHANGE ACT COMPLIANCE......................................... 16
SECTION 15 NO CONFLICT OF RIGHTS........................................... 16
SECTION 16 MISCELLANEOUS................................................... 16
<PAGE>
INVESTOR RIGHTS AGREEMENT dated
as of July 1, 1999, among HANGER
ORTHOPEDIC GROUP, INC., a Delaware
corporation (the "COMPANY"), and the
investors of the Company listed on
SCHEDULE I (together with their
successors, assigns and transferees,
the "INVESTORS").
Each Investor currently holds shares of the Company's 7% Redeemable
Preferred Stock. The parties hereto deem it to be in their best interests to
set forth their rights and obligations in connection with public offerings,
sales of shares of Common Stock and certain other duties of the Company to the
Investors. Accordingly, the parties agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings (capitalized terms used in this Agreement and not defined herein
shall have the meanings given to them in the Certificate of Designations):
"BOARD" means the Board of Directors of the Company.
"CERTIFICATE OF DESIGNATIONS" has the meaning given to it in the
Securities Purchase Agreement.
"CLOSING" has the meaning given to it in the Securities Purchase
Agreement.
"COMMISSION" has the meaning given to it in the Securities
Purchase Agreement.
"COMMON STOCK PERCENTAGE" means, with respect to any Investor, the
fraction, expressed as a percentage, the numerator of which is the total
number of Common Stock Equivalents held by such Investor and the denominator
of which is the total number of outstanding shares of Common Stock.
"INVESTORS" has the meaning given to it in the preamble to this
Agreement.
"NOTICE OF ACCEPTANCE" has the meaning given to it in Section
2(b).
"NYSE" means the New York Stock Exchange.
"OFFER" has the meaning given to it in Section 2(a).
"OFFER PERIOD" has the meaning given to it in Section 2(a).
"OFFERED SECURITIES" means (A) shares of Common Stock, (B) any
other equity security of the Company, (C) any debt security of the Company
which by its terms is convertible into or exchangeable for any equity security
of the Company or has an equity kicker or other participation rights, (D) any
security of the Company that is a combination of debt and equity or (E) any
option, warrant or other right to subscribe for, purchase or otherwise acquire
any equity security or any such debt security of the Company; PROVIDED that
<PAGE>
Offered Securities shall not include (i) any Security that is issued in a
public offering that is registered under the Securities Act, (ii) any options
to acquire shares of Common Stock granted to employees, directors or
consultants of the Company or any Security issued upon exercise of any such
options or (iii) any Security issued as consideration in any acquisition of a
business..
"OTHER SHARES" means at any time those shares of Common Stock
which do not constitute Primary Shares or Restricted Shares.
"PRIMARY SHARES" means at any time the authorized but unissued
shares of Common Stock or shares of Common Stock held by the Company in its
treasury.
"REFUSED SECURITIES" has the meaning given to it in Section 2(d).
"RESTRICTED SHARES" means at any time, with respect to any
Investor, the shares of Common Stock held by such Investor.
"RULE 144" means Rule 144 promulgated under the Securities Act or
any successor rule thereto or any complementary rule thereto.
"RULE 144A" means Rule 144A promulgated under the Securities Act
or any successor rule thereto or any complementary rule thereto.
"SELLING INVESTOR" has the meaning given to it in Section 10(b).
"SELLING INVESTORS' COUNSEL" has the meaning given to it in
Section 10(b).
SECTION 2. RIGHTS TO SUBSCRIBE FOR SECURITIES.
(a) The Company shall not issue, sell or exchange, or agree to issue,
sell or exchange, any Offered Securities unless the Company shall have first
offered to sell to each Investor up to such Investor's Common Stock Percentage
of such Offered Securities, at a price and on such other terms as shall have
been specified by the Company in writing delivered to the Investors (the
"OFFER"), which Offer by its terms shall remain open for a period of 15
business days from the date it is delivered by the Company (the "OFFER
PERIOD"). The rights of the Investors to subscribe for Offered Securities
pursuant to this Section are assignable to any other Investor or any Affiliate
of any Investors.
(b) Notice of any Investors 's intention to accept, in whole or in part,
an Offer shall be evidenced by a writing signed by such Investor and delivered
to the Company prior to the end of the Offer Period, setting forth such
portion of the Offered Securities as such Investor elects to purchase (the
"NOTICE OF ACCEPTANCE"); PROVIDED, HOWEVER, that if such Investor exercises
its rights under this Section 2, such Investor must purchase a ratable portion
of each class of the Offered Securities (if more than one class is offered).
Within 20 days after receipt by the Company of such Notices of Acceptance, the
Company shall sell and each Investor shall purchase the Offered Securities in
respect of which such Investor's Notice of Acceptance was delivered, upon the
terms and conditions of the Offer.
2
<PAGE>
(c) In the event the Company materially amends the terms of the Offer at
any time, the Offer Period shall be extended for a period of not less than 10
business days (or 48 hours if the amendment relates solely to the price of the
Offer or the number of shares to be sold in the Offer, in each case based
solely on the closing price of the shares of Common Stock as quoted by the
NYSE).
(d) In the event that Notices of Acceptance are not given by the
Investors in respect of all the Offered Securities, the Company shall have 90
days from the expiration of the Offer Period to sell all or any part of such
Offered Securities as to which Notices of Acceptance have not been given (the
"REFUSED SECURITIES") to any other Person(s), but only upon terms and
conditions in all respects, including, without limitation, unit price and
interest rates, which are no more favorable, in the aggregate, to such other
Person(s) or less favorable, in the aggregate, to the Company than those set
forth in the Offer.
(e) In each case, any Offered Securities not purchased by the Investors
or any other Person(s) in accordance with Sections 2(b) and 2(d) may not be
sold or otherwise disposed of until they are again offered to the Investors
under the procedures specified in this Section 2.
SECTION 3. BOARD OF DIRECTORS.
(a) The Investors shall have the right to designate persons who shall be
observers, and shall be entitled to be present, at each meeting of the Board
(the "BOARD OBSERVERS"). The number of Board Observers that the Investors
shall be entitled to designate shall equal the greater of (i) one and (ii)
such number as would represent as a percentage of the number of directors
constituting the entire Board, the aggregate Common Stock Percentage of all
Investors.
(b) The Investors may designate the Board Observers at a meeting (by a
vote of a majority of the Investors present provided that a quorum exists) or
by delivering a notice to the Corporation signed by the Requisite Senior
Holders. At any meeting held for the purpose of designating the Board
Observers, the presence, in person or by proxy, of the holders of a majority
of the number of shares of Senior Preferred Stock at the time outstanding
shall be required to constitute a quorum of such class to designate the Board
Observers.
(c) Upon delivery of a written request by any Investor, the President,
any Vice President, the Secretary or any Assistant Secretary of the
Corporation shall call a special meeting of the Investors. Such meeting shall
be held at the earliest practicable date at the principal executive office of
this Corporation or at such other location as the Investors submitting a
written request shall designate.
(d) The Board Observers will have the right to attend each meeting of
the Board and at least one of such observers shall be entitled to attend each
meeting of each committee of the Board. Any such attendance may be
teleconference. No meeting of the Board or any committee thereof may be
conducted by teleconference if all participants therein cannot hear all other
participants. The Company shall provide the Board Observers with (i) copies of
all actions taken by written consent of the Board and/or any committee thereof
promptly after the execution thereof, (ii) simultaneously with any
distribution to directors of the Company or any members of any committee of
the Board, copies of all materials that are distributed to such directors or
3
<PAGE>
members (including requests for actions by written consent) and (iii) written
notice at least one week prior to any meeting of the Board or any committee of
the Board that such Board Observer is entitled to attend.
(e) The Company shall reimburse each observer designated by the
Investors for all out-of-pocket expenses incurred in connection with or
relating to any meeting of the Board or any committee thereof.
SECTION 4. INFORMATION RIGHTS; COVENANTS.
(a) ACCESS TO RECORDS. The Company shall, and shall cause each
Subsidiary to, afford to the Investors, the Affiliates of the Investors and
each of their respective officers, employees, advisors, counsel and other
authorized representatives (collectively with the Affiliates of the Investors,
the "REPRESENTATIVES"), during normal business hours, reasonable access, upon
reasonable advance notice, to all of the books, records and properties of the
Company and such Subsidiary and all officers and employees of the Company and
such Subsidiary.
(b) FINANCIAL REPORTS. The Company shall furnish each Investor with the
following:
(i) MONTHLY REPORTS. As soon as available, but not later than 30
days after the end of each fiscal month, a consolidated balance sheet of
the Company as of the end of such period and consolidated statements of
income of the Company for such period and for the period commencing at
the end of the previous fiscal year and ending with the end of such
period, setting forth in each case in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year, and
including comparisons to the budget or business plan and an analysis of
the variances from the budget or plan, all prepared in accordance with
generally accepted accounting principles consistently applied (except
for the absence of footnotes and year-end adjustments).
(ii) QUARTERLY REPORTS. As soon as available, but not later than
45 days after the end of each quarterly accounting period, (A) a
consolidated balance sheet of the Company as of the end of such period
and consolidated statements of income, cash flows and changes in
stockholders' equity for such quarterly accounting period and for the
period commencing at the end of the previous fiscal year and ending with
the end of such period, setting forth in each case in comparative form
the corresponding figures for the corresponding period of the preceding
fiscal year, and including comparisons to the budget or business plan
and an analysis of the variances from the budget or plan, all prepared
in accordance with generally accepted accounting principals consistently
applies and (B) a report by management of the Company of the operating
and financial highlights of the Company and its Subsidiaries for such
period, which shall include (x) a comparison between operating and
financial results and budget and (y) an analysis of the operations of
the Company and its Subsidiaries for such period.
(iii) ANNUAL AUDIT. As soon as available, but not later than 90
days after the end of each fiscal year of the Company, audited
consolidated financial statements of the Company, which shall include
4
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statements of income, cash flows and changes in Investors' equity for
such fiscal year and a balance sheet as of the last day thereof, each
prepared in accordance with generally accepted accounting principles,
consistently applied, and accompanied by the report of a "Big 5" firm of
independent certified public accountants selected by the Board (the
"ACCOUNTANTS"). The Company and its Subsidiaries shall maintain a system
of accounting sufficient to enable its Accountants to render the report
referred to in this Section 4.
(iv) BUDGETS. As soon as available, but not more than 90 days
after the commencement of each new fiscal year, a business plan and
projected financial statements for such new fiscal year.
(v) MISCELLANEOUS. Promptly upon becoming available, the Company
shall provide to each Investor:
(A) copies of all financial statements, reports, press
releases, notices, proxy statements and other documents sent by
the Company or its Subsidiaries to its Investors generally or
released to the public and copies of all regular and periodic
reports, if any, filed by the Company or its Subsidiaries with the
Commission, any securities exchange or the NASD;
(B) notification in writing of any litigation or
governmental proceeding in which it or any of its Subsidiaries is
involved and which might, if determined adversely, materially and
adversely effect the Company or any of its Subsidiaries;
(C) notification in writing of the existence of any default
under any material agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which any of their assets
are bound;
(D) copies of the minutes and actions by written consent of
the board of directors of the Company;
(E) upon request, copies of all reports prepared for or
delivered to the management of the Company or its Subsidiaries by
its accountants; and
(F) upon request, any other routinely collected financial or
other information available to management of the Company or its
subsidiaries (including, without limitation, routinely collected
statistical data).
(c) COMPLIANCE WITH INDENTURE. So long as any shares of Senior
Preferred Stock are outstanding, the Company will comply and perform all
obligations under SECTION 5.04, SECTION 5.05, SECTION 5.06, the first
sentence of SECTION 5.07, the first sentence of SECTION 5.09, SECTION
5.10 AND SECTION 6.10 of the Credit Agreement.
(d) NO CONFLICTING AGREEMENTS. Neither the Company nor shall the
Company permit any of its Subsidiaries to enter into any agreement
containing any provision which would (i) be violated or breached by the
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exercise or performance by Company or its Subsidiary of any of their
respective rights or obligations under any Related Document, (ii) impair
in any material respect the ability of the Company or any Subsidiary to
comply with the terms of the Documents or (iii) prohibit a wholly- owned
Subsidiary from paying dividends or making other distributions..
SECTION 5. SHELF REGISTRATION.
(a) Prior to the Actual Conversion Date for any conversion at the option
of the Company, the Company shall file with the Commission a Registration
Statement for an offering to be made on a continuous basis pursuant to Rule
415 covering all of the Restricted Shares (the "INITIAL SHELF REGISTRATION").
The Company shall use its best efforts to file with the Commission the Initial
Shelf Registration at least 60 days prior to the Actual Conversion Date for
any conversion at the option of the Company. The Initial Shelf Registration
shall be on Form S-1 or another appropriate form permitting registration of
such Restricted Shares for resale by the Investors in the manner or manners
designated by them (including, without limitation, one underwritten offering).
The Issuers shall not permit any securities other than the Restricted Shares
to be included in the Initial Shelf Registration or any Subsequent Shelf
Registration (as defined below).
The Company shall, subject to applicable Law or applicable
interpretations of the staff of the Commission, use its best efforts to cause
the Initial Shelf Registration to be declared effective under the Securities
Act on or prior to the Actual Conversion Date for any conversion at the option
of the Company and to keep the Initial Shelf Registration continuously
effective under the Securities Act until the date which is two years from such
Actual Conversion Date or such shorter period ending when (i) all Restricted
Shares covered by the Initial Shelf Registration have been sold in the manner
set forth and as contemplate in the Initial Shelf Registration or cease to be
outstanding or (ii) a Subsequent Shelf Registration covering all of the
Restricted Shares covered by and not sold under the Initial Shelf Registration
or an earlier Subsequent Shelf Registration has been declared effective under
the Securities Act (the "EFFECTIVENESS PERIOD"), PROVIDED, HOWEVER, that the
Effectiveness Period in respect of the Initial Shelf Registration shall be
extended to the extent required to permit dealers to comply with the
applicable prospectus delivery requirements of Rule 174 under the Securities
Act and as otherwise provided herein.
No Investor may include any of its Restricted Shares in any Shelf
Registration Statement pursuant to this Agreement unless and until such
Investor furnishes to the Company in writing, within 15 business days after
receipt of a request therefor, such information concerning such Investor
required to be included in any Shelf Registration Statement or Prospectus or
preliminary prospectus included therein. Each holder of Restricted Shares as
to which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make information previously furnished to the Company by such Investor not
materially misleading.
(b) SUBSEQUENT SHELF REGISTRATION. If the Initial Shelf Registration or
any Subsequent Shelf Registration ceases to be effective for any reason at any
time during the Effectiveness Period (other than because of the sale of all of
the securities registered thereunder), the Company shall use its best efforts
to obtain the prompt withdrawal of any order suspending the effectiveness
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thereof, and in any event shall within 45 days of such cessation of
effectiveness use their best efforts to amend the Initial Shelf Registration
in a manner to obtain the withdrawal of the order suspending the effectiveness
thereof, or file an additional "shelf" Registration Statement pursuant to Rule
415 covering all of the Restricted Shares covered by and not sold under the
Initial Shelf Registration or an earlier Subsequent Shelf Registration (each,
a "SUBSEQUENT SHELF REGISTRATION"). If a Subsequent Shelf Registration is
filed, the Company shall use its best efforts to cause the Subsequent Shelf
Registration to be declared effective under the Securities Act as soon as
practicable after such filing and to keep such subsequent Shelf Registration
continuously effective for a period equal to the number of days in the
Effectiveness Period less the aggregate number of days during which the
Initial Shelf Registration or any Subsequent Shelf Registration was previously
continuously effective. As used herein the term "SHELF REGISTRATION" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Company shall promptly supplement
and amend any Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably requested by
the Investors or by any underwriter of such Restricted Shares.
(d) SUSPENSION OF SHELF REGISTRATION STATEMENT. The Company's obligation
to keep the Shelf Registration Statement effective and usable for offers and
sales of the Registrable Securities may be suspended by the Company in good
faith for valid business reasons, including, without limitation, a pending
acquisition or divestiture of assets. Any such period during which the Company
fails to keep the Shelf Registration Statement effective and usable for offers
and sales of Restricted Securities is referred to as a "Suspension Period." A
Suspension Period shall commence on and include the date that the Company
gives notice that the Shelf Registration Statement is no longer effective or
the prospectus included therein is not longer usable for offers and sales of
the Restricted Securities and shall end on the date when each Investor covered
by such registration statement either receives the copies of the supplemented
or amended prospectus or is advised in writing by the Company that the use of
the prospectus may be resumed; PROVIDED that the aggregate of all Suspension
Periods shall not exceed 90 days in any period of 365 consecutive days.
SECTION 6. DEMAND REGISTRATION.
(a) If at any time after the third anniversary of the date hereof the
Company shall be requested by the Requisite Senior Holders to effect a
registration under the Securities Act of Restricted Shares in accordance with
this Section, then the Company shall promptly give written notice of such
proposed registration to all holders of Restricted Shares and shall offer to
include in such proposed registration any Restricted Shares requested to be
included in such proposed registration by such holders who respond in writing
to the Company's notice within 15 days after delivery of such notice (which
response shall specify the number of Restricted Shares proposed to be included
in such registration and the intended method of distribution, which may be
pursuant to a shelf registration). The Company shall promptly use its best
efforts to effect such registration on an appropriate form, including Form
S-2, if available, under the Securities Act of the Restricted Shares which the
Company has been so requested to register; PROVIDED, HOWEVER, that the Company
shall not be obligated to effect any registration under the Securities Act
except in accordance with the following provisions:
(i) the Company shall not be obligated to file more than one
registration statement in total pursuant to this Section, subject to
paragraph (c) below;
(ii) the Company shall not be obligated to file any registration
statement during any period in which (A) any other registration
statement (other than on Form S-4 or Form S-8 promulgated under the
Securities Act or any successor forms thereto) pursuant to which Primary
Shares are to be or were sold has been filed and not withdrawn or has
been declared effective within the prior 60 days or (B) the Company has
determined in good faith that the filing of a registration statement
would require the disclosure of material information that the Company
has a bona fide business purpose for preserving as confidential, such
filing to be delayed until the date which is 90 days after such request
for registration pursuant to this Section 6(a); PROVIDED that the
Company may only so delay the filing or effectiveness of a registration
statement pursuant to this Section 6(a)(ii)(B) on one occasion during
any twelve month period;
(iii) with respect to the registration pursuant to this Section,
the Company may include in such registration any Primary Shares or Other
Shares; PROVIDED, HOWEVER, that if the managing underwriter advises the
Company in writing that the inclusion of all Restricted Shares, Primary
Shares and Other Shares proposed to be included in such registration
would interfere with the successful marketing (including pricing) of all
such securities, then the number of Restricted Shares, Primary Shares
and Other Shares proposed to be included in such registration shall be
included in the following order:
(A) FIRST, the Restricted Shares held by all Investors, PRO
RATA based upon the number of Restricted Shares owned by each such
Investor at the time of such registration;
(B) SECOND, the Primary Shares; and
(C) THIRD, the Other Shares.
(b) the Investors requesting a registration pursuant to this Section
may, in the notice delivered pursuant to paragraph (a) above, elect that such
registration cover an underwritten offering. Upon such election, such
Investors shall select one or more nationally recognized firms of investment
banks to act as the managing underwriters and shall select any additional
investment banks to be used in connection with such offering, provided that
such investment banks must be reasonably satisfactory to the Company. The
Company shall, together with all Investors proposing to sell Restricted Shares
in such offering, enter into a customary underwriting agreement with such
underwriters.
(c) A requested registration under this Section may be rescinded by
written notice to the Company by the Investors holding a majority of the
Restricted Shares to be included in such registration under the following
circumstances:
(A) If such registration statement is rescinded prior to the
filing date, such rescinded registration shall not count as a
registration statement initiated pursuant to this Section for
purposes of paragraph (a) above;
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(B) If such registration statement is rescinded after the
filing date but prior to its effective date, such rescinded
registration shall not count as a registration statement initiated
pursuant to this Section for purposes of paragraph (a) above if
the participating Investors (x) have reimbursed the Company for
all out-of-pocket fees and expenses incurred by the Company in
connection with such rescinded registration or (y) (1) reasonably
believed that the registration statement contained an untrue
statement of material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
made therein not misleading, (2) notified the Company of such fact
and requested that the Company correct such alleged misstatement
or omission and (3) the Company has refused to correct such
alleged misstatement or omission; and
(C) A registration shall not count as a registration
statement initiated pursuant to this Section for purposes of
paragraph (a) above unless it becomes effective and the
participating Investors are able to sell at least 80% of the
Restricted Shares sought to be included in such registration
statement.
SECTION 7. PIGGYBACK REGISTRATION.
If at any time the Company proposes for any reason to register Primary
Shares or Other Shares under the Securities Act (other than on Form S-4 or
Form S-8 promulgated under the Securities Act or any successor forms thereto),
it shall promptly give written notice to each Investor of its intention to so
register the Primary Shares or Other Shares and, upon the written request,
given within 15 days after delivery of any such notice by the Company, of any
Investor to include in such registration Restricted Shares held by such
Investor (which request shall specify the number of Restricted Shares proposed
to be included in such registration), the Company shall use its best efforts
to cause all such Restricted Shares to be included in such registration on the
same terms and conditions as the securities otherwise being sold in such
registration; PROVIDED, HOWEVER, that if the managing underwriter advises the
Company that the inclusion of all Restricted Shares or Other Shares proposed
to be included in such registration would interfere with the successful
marketing (including pricing) of the Primary Shares proposed to be registered
by the Company, then the number of Primary Shares, Restricted Shares and Other
Shares proposed to be included in such registration shall be included in the
following order:
(a) FIRST, the Primary Shares;
(b) SECOND, the Restricted Shares requested to be included in such
registration, PRO RATA based upon the number of Shares of Common Stock (based
upon Common Stock Equivalents) owned by each such seller at the time of such
registration; and
(c) THIRD, the Other Shares.
SECTION 8. SHORT FORM REGISTRATIONS.
If at any time after the third anniversary of the date hereof any
Investor requests that the Company file a registration statement on Form S-2,
Form S-3 or any successor forms thereto for a public offering of all or any
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portion of the Restricted Shares held by such Investor, and the Company is a
registrant entitled to use Form S-3 or any successor thereto to register such
shares, then the Company shall use its best efforts to register under the
Securities Act on Form S-3 or any successor thereto, for public sale in
accordance with the method of disposition specified in such notice, the number
of shares of Restricted Shares specified in such notice. Whenever the Company
is required by this Section 8 to use its best efforts to effect the
registration of Restricted Shares, each of the procedures and requirements of
Section 6 (including but not limited to the requirement that the Company
notify all holders of Restricted Shares from whom notice has not been received
and provide them with the opportunity to participate in the offering) shall
apply to such registration. Notwithstanding anything to the contrary contained
herein, no request may be made under this Section 8 within three months after
the effective date of a registration statement filed by the Company covering a
firm commitment underwritten public offering in which the holders of
Restricted Shares shall have been entitled to join pursuant to Section 6 or 7
in which there shall have been effectively registered all Restricted Shares as
to which registration shall have been requested. There is no limitation on the
number of registrations pursuant to this Section 8 that the Company is
obligated to effect.
SECTION 9. EXPENSES.
The Company shall bear the expense of any registrations effected
pursuant to Sections 5, 6, 7 and 8 including, without limitation, all
registration and filing fees (including all expenses incident to filing with
the NASD), fees and expenses of complying with securities and blue sky laws,
printing expenses, and fees and expenses of the Company's counsel and
accountants, and the fees and expenses of the Selling Investors' Counsel (as
defined below), but excluding any underwriters' or brokers' discounts or
commissions, transfer taxes (to the extent that such taxes are required by law
to be paid by the Selling Investors) and the fees of any counsel to any
Selling Investor, other than the Selling Investors' Counsel (it being
understood that the fees and expenses of any underwriter and such
underwriter's counsel shall be the responsibility of such underwriter).
SECTION 10. PREPARATION AND FILING.
If and whenever the Company is under an obligation pursuant to the
provisions of this Agreement to use its best efforts to effect the
registration of any Restricted Shares, the Company shall, as expeditiously as
practicable:
(a) with respect to a registration under Sections 6, 7 and 8, use its
best efforts to cause a registration statement that registers such Restricted
Shares to become and remain effective for a period of 180 days or until all of
such Restricted Shares have been disposed of (if earlier);
(b) furnish, at least five business days before filing a registration
statement that registers such Restricted Shares, a prospectus relating thereto
or any amendments or supplements relating to such a registration statement or
prospectus, to each holder of Restricted Shares, to any counsel to any seller
of Restricted Shares (the "SELLING INVESTOR") and to one counsel selected by
the holders of a majority of such Restricted Shares (the "SELLING INVESTORS'
COUNSEL"), copies of all such documents proposed to be filed (it being
understood that such five-business-day period need not apply to successive
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drafts of the same document proposed to be filed so long as such successive
drafts are supplied to each Selling Investor and such counsel in advance of
the proposed filing by a period of time that is customary and reasonable under
the circumstances);
(c) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for at least
the periods set forth in Section 9(a) or until all of such Restricted Shares
have been disposed of (if earlier) and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of such
Restricted Shares;
(d) notify in writing any Selling Investor, any counsel to any Selling
Investor and the Selling Investors' Counsel promptly (i) of the receipt by the
Company of any notification with respect to any comments by the Commission
with respect to such registration statement or prospectus or any amendment or
supplement thereto or any request by the Commission for the amending or
supplementing thereof or for additional information with respect thereto, (ii)
of the receipt by the Company of any notification with respect to the issuance
by the Commission of any stop order suspending the effectiveness of such
registration statement or prospectus or any amendment or supplement thereto or
the initiation or threatening of any proceeding for that purpose and (iii) of
the receipt by the Company of any notification with respect to the suspension
of the qualification of such Restricted Shares for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purposes;
(e) use its best efforts to register or qualify such Restricted Shares
under such other securities or blue sky laws of such jurisdictions as any
seller of Restricted Shares reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such
seller of Restricted Shares to consummate the disposition in such
jurisdictions of the Restricted Shares owned by such seller; PROVIDED,
HOWEVER, that the Company will not be required to qualify generally to do
business, subject itself to general taxation or consent to general service of
process in any jurisdiction where it would not otherwise be required so to do
but for this paragraph (e);
(f) furnish to each seller of such Restricted Shares such number of
copies of a summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and
such other documents as such seller of Restricted Shares may reasonably
request in order to facilitate the public sale or other disposition of such
Restricted Shares;
(g) use its best efforts to cause such Restricted Shares to be
registered with or approved by such other governmental agencies or authorities
as may be necessary by virtue of the business and operations of the Company to
enable the seller or sellers thereof to consummate the disposition of such
Restricted Shares;
(h) notify on a timely basis each seller of such Restricted Shares at
any time when a prospectus relating to such Restricted Shares is required to
be delivered under the Securities Act within the appropriate period mentioned
in paragraph (a) of this Section, of the happening of any event as a result of
which the prospectus included in such registration statement, as then in
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effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing
and, at the request of such seller, prepare and furnish to such seller a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
offerees of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing;
(i) make available for inspection by any Selling Investor, any counsel
to any Selling Investor and the Selling Investors' Counsel or any underwriter
participating in any disposition pursuant to such registration statement and
any attorney, accountant or other agent retained by any such underwriter
(collectively, the "INSPECTORS"), all pertinent financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"RECORDS"), as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause the Company's officers, directors and
employees to supply all information (together with the Records, the
"INFORMATION") reasonably requested by any such Inspector in connection with
such registration statement. Any of the Information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, shall not be disclosed by the Inspectors unless
(i) the disclosure of such Information is necessary to avoid or correct a
misstatement or omission in the registration statement, (ii) the release of
such Information is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction or (iii) such Information has been made generally
available to the public. The seller of Restricted Shares agrees that it will,
upon learning that disclosure of such Information is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company, at
the Company's expense, to undertake appropriate action to prevent disclosure
of the Information deemed confidential;
(j) use its best efforts to obtain from its independent certified public
accountants "comfort" letters in customary form and at customary times and
covering matters of the type customarily covered by comfort letters;
(k) use its best efforts to obtain from its counsel an opinion or
opinions in customary form;
(l) provide a transfer agent and registrar (which may be the same entity
and which may not be the Company) for such Restricted Shares;
(m) issue to any underwriter to which any seller of Restricted Shares
may sell shares in an offering certificates evidencing such Restricted Shares;
PROVIDED, HOWEVER, that the Company shall have the right to approve any such
underwriter with such approval not to be unreasonably withheld;
(n) list such Restricted Shares on the NYSE and any other national
securities exchange on which any shares of the Common Stock are listed and on
NASDAQ if then included, or if the Common Stock is not listed on a national
securities exchange, use its best efforts to qualify such Restricted Shares
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for inclusion on such national securities exchange or NASDAQ as the holders of
a majority of such Restricted Shares shall request;
(o) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission and make available to its securityholders,
as soon as reasonably practicable, earnings statements (which need not be
audited) covering a period of 12 months beginning within three months after
the effective date of the registration statement, which earnings statements
shall satisfy the provisions of Section 11(a) of the Securities Act; and
(p) use its best efforts to take all other steps necessary to effect the
registration of such Restricted Shares contemplated hereby.
SECTION 11. INDEMNIFICATION.
(a) In connection with any registration of any Restricted Shares under
the Securities Act pursuant to this Agreement, the Company shall indemnify and
hold harmless the seller of such Restricted Shares, its officers and
directors, each underwriter, broker or any other person acting on behalf of
such seller and each other person, if any, who controls any of the foregoing
persons within the meaning of the Securities Act against any losses, claims,
damages or liabilities, joint or several, (or actions in respect thereof) to
which any of the foregoing persons may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in the registration
statement under which such Restricted Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein or otherwise filed with the Commission, any amendment or supplement
thereto or any document incident to registration or qualification of any
Restricted Shares, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse
such seller, such officer or director, such underwriter, such broker or such
other person acting on behalf of such seller and each such controlling person
for any legal or other expenses reasonably incurred by any of them in
connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
preliminary prospectus, final prospectus, amendment, supplement or document
incident to registration or qualification of any Restricted Shares in reliance
upon and in conformity with written information furnished to the Company
through an instrument duly executed by such seller or underwriter specifically
for use in the preparation thereof; PROVIDED, FURTHER, that with respect to
any preliminary prospectus, the foregoing indemnity shall not inure to the
benefit of (a) any underwriter or, in the case of a registration statement
filed with respect to an offering which is not an underwritten offering, any
Selling Investor, from whom the person asserting any losses, claims, damages
and liabilities and judgments purchased Restricted Shares or (b) any person
controlling such underwriter or Selling Investor, if (i) a copy of the
prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was required by law to have
been delivered by such underwriter or Selling Investor (as applicable), (ii)
the prospectus had not been sent or given by or on behalf of such underwriter
or Selling Investor (as applicable) to such person with or prior to a written
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confirmation of the sale of the Restricted Shares to such person, (iii) the
prospectus (as so amended and supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or judgment and (iv) such failure
to deliver the prospectus (as so amended and supplemented) was not the result
of noncompliance by the Company with Section 10(f) hereof.
(b) In connection with any registration of Restricted Shares under the
Securities Act pursuant to this Agreement, each seller of Restricted Shares
shall indemnify and hold harmless (in the same manner and to the same extent
as set forth in the preceding paragraph of this Section) the Company, each
director of the Company, each officer of the Company who shall sign such
registration statement, each underwriter, broker or other person acting on
behalf of such seller, each person who controls any of the foregoing persons
within the meaning of the Securities Act and each other seller of Restricted
Shares under such registration statement with respect to any statement or
omission from such registration statement, any preliminary prospectus or final
prospectus contained therein or otherwise filed with the Commission, any
amendment or supplement thereto or any document incident to registration or
qualification of any Restricted Shares, if such statement or omission was made
in reliance upon and in conformity with written information furnished to the
Company or such underwriter through an instrument duly executed by such seller
specifically for use in connection with the preparation of such registration
statement, preliminary prospectus, final prospectus, amendment, supplement or
document; PROVIDED, HOWEVER, that the obligation to indemnify will be several,
not joint and several, among such sellers of Restricted Shares, and the
maximum amount of liability in respect of such indemnification shall be in
proportion to and limited to, in the case of each seller of Restricted Shares,
an amount equal to the net proceeds actually received by such seller from the
sale of Restricted Shares effected pursuant to such registration.
(c) The indemnification required by this Section 11 will be made by
periodic payments during the course of the investigation or defense, as and
when bills are received or expenses incurred, subject to prompt refund in the
event any such payments are determined not to have been due and owing
hereunder.
(d) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section, such indemnified party will, if a claim in respect
thereof is made against an indemnifying party, give written notice to the
latter of the commencement of such action (it being understood that no delay
in delivering or failure to deliver such notice shall relieve the indemnifying
persons from any liability or obligation hereunder unless (and then solely to
the extent that) the indemnifying person is prejudiced by such delay and/or
failure). In case any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified
to the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be responsible for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof;
PROVIDED, HOWEVER, that if any indemnified party shall have reasonably
concluded that there may be one or more legal or equitable defenses available
to such indemnified party which are additional to or conflict with those
available to the indemnifying party, or that such claim or litigation involves
or could have an effect upon matters beyond the scope of the indemnity
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agreement provided in this Section, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party
and such indemnifying party shall reimburse such indemnified party and any
person controlling such indemnified party for that portion of the fees and
expenses of any counsel retained by the indemnified party which is reasonably
related to the matters covered by the indemnity agreement provided in this
Section.
(e) The indemnification provided for under this Agreement will remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling person of such
indemnified party and will survive the transfer of securities.
(f) If the indemnification provided for in this Section 11 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such loss, claim, damage or
liability as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the indemnifying
party or by the indemnified party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the sellers of Restricted Shares agree that it would
not be just and equitable if contributions pursuant to this paragraph were
determined by PRO RATA allocation or by any other method of allocation which
did not take into account the equitable considerations referred to herein. The
amount paid or payable to an indemnified party as a result of the losses,
claims, damages, liabilities or expenses referred to above shall be deemed to
include, subject to the limitation set forth in Section 11(d), any legal or
other expenses reasonably incurred in connection with investigating or
defending the same. Notwithstanding the foregoing, in no event shall the
amount contributed by a seller of Restricted Shares exceed the aggregate net
offering proceeds received by such seller from the sale of its Restricted
Shares.
SECTION 12. UNDERWRITING AGREEMENT.
Notwithstanding the provisions of Sections 9 and 10, to the extent that
the Company and the holders selling Restricted Shares in a proposed
registration shall enter into an underwriting or similar agreement, which
agreement contains provisions covering one or more issues addressed in such
Sections, the provisions contained in such Sections addressing such issue or
issues shall be superseded with respect to such registration by such other
agreement.
SECTION 13. INFORMATION BY INVESTOR.
Each Investor selling Restricted Shares in a proposed registration shall
furnish to the Company such written information regarding such Investor and
the distribution proposed by such Investor as the Company may reasonably
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request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
SECTION 14. EXCHANGE ACT COMPLIANCE.
The Company shall comply with all of the reporting requirements of the
Exchange Act and with all other public information reporting requirements of
the Commission which are conditions to the availability of Rule 144 for the
sale of the Common Stock. The Company shall cooperate with each Investor in
supplying such information as may be necessary for such Investor to complete
and file any information reporting forms presently or hereafter required by
the Commission as a condition to the availability of Rule 144.
SECTION 15. NO CONFLICT OF RIGHTS.
The Company represents and warrants to the Investors that the
registration rights granted to the Investors hereby do not conflict with any
other registration rights granted by the Company to any Person other than any
Investor. The Company shall not, after the date hereof, grant any registration
rights which conflict with or are not expressly subordinated to the
registration rights granted hereby.
SECTION 16. MISCELLANEOUS.
(a) REMEDIES. In case any one or more of the representations,
warranties, covenants and/or agreements set forth in this Agreement shall have
been breached by the Company, the Investors (or any Investor) may proceed to
protect and enforce its or their rights either by suit in equity and/or by
action at law, including an action for damages as a result of any such breach
and/or an action for specific performance of any such covenant or agreement
contained in this Agreement.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the Company and the Investors and their respective successors,
assigns, heirs and personal representatives. Upon any transfer of any
Applicable Securities, the transferee shall be bound by, and entitled to the
benefits of, this Agreement with respect to such transferred Securities in the
same manner as the transferring Investor.
(c) ENTIRE AGREEMENT. This Agreement and the other writings referred to
herein or delivered pursuant hereto which form a part hereof contain the
entire agreement among the parties with respect to the subject matter hereof
and thereof and supersede all prior and contemporaneous arrangements or
understandings with respect thereto.
(d) NOTICES. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument and shall be deemed to have been duly given when delivered
in person, by telecopy, by nationally-recognized overnight courier, or by
first class registered or certified mail, postage prepaid, addressed to such
party at the address set forth in the Securities Purchase Agreement or such
other address as may hereafter be designated in writing by the addressee to
the addressor. All such notices, requests, consents and other communications
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shall be deemed to have been delivered (a) in the case of personal delivery or
delivery by telecopy, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day and (c) in
the case of mailing, on the third business day following such mailing if sent
by certified mail, return receipt requested.
(e) AMENDMENTS, MODIFICATIONS AND WAIVERS. The terms and provisions of
this Agreement may not be modified or amended, nor may any of the provisions
hereof be waived, temporarily or permanently, except pursuant to a written
instrument executed by the Company and the Requisite Senior Holders; PROVIDED
HOWEVER that any such amendment, modification or waiver that would adversely
affect the rights hereunder of any Investor, in its capacity as a Investor,
without similarly affecting the rights hereunder of all Investors, in their
capacities as Investors, shall not be effective as to such Investor without
its prior written consent. No waiver by any party shall operate or be
construed as a waiver of any subsequent breach by any other party.
(f) GOVERNING LAW; WAIVER OF JURY TRIAL. All questions concerning the
construction, interpretation and validity of the Documents shall be governed
by and construed and enforced in accordance with the domestic laws of the
State of Delaware, without giving effect to any choice or conflict of law
provision or rule (whether in the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than
the State of Delaware. In furtherance of the foregoing, the internal law of
the State of Delaware will control the interpretation and construction of the
Documents, even if under such jurisdiction's choice of law or conflict of law
analysis, the substantive law of some other jurisdiction would ordinarily or
necessarily apply.
BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS
AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
(g) SUBMISSION TO JURISDICTION. Any legal action or proceeding with
respect to this Agreement or the other Documents may be brought in the courts
of the State of New York and the United States of America for the Southern
District of New York and, by execution and delivery of this Agreement, the
Company hereby accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid courts. The Company
hereby irrevocably waives, in connection with any such action or proceeding,
any objection, including, without limitation, any objection to the venue or
based on the grounds of forum non conveniens, which it may now or hereafter
have to the bringing of any such action or proceeding in such respective
jurisdictions. The Company hereby irrevocably consents to the service of
process of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
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prepaid, to it at its address as set forth herein. Nothing herein shall affect
the right of the Investors to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against the Company
in any other jurisdiction.
(h) SEVERABILITY. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permissible
under the law and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, in the event that any provision of this
Agreement would be held in any jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such jurisdiction, shall
be ineffective, without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provision in any
jurisdiction. Notwithstanding the foregoing, if such provision could be more
narrowly drawn so as not be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
(i) INDEPENDENCE OF AGREEMENTS, COVENANTS, REPRESENTATIONS AND
WARRANTIES. All agreements and covenants hereunder shall be given independent
effect so that if a certain action or condition constitutes a default under a
certain agreement or covenant, the fact that such action or condition is
permitted by another agreement or covenant shall not affect the occurrence of
such default, unless expressly permitted under an exception to such initial
covenant.
(j) COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed
in any number of counterparts, and each such counterpart hereof shall be
deemed to be an original instrument, but all such counterparts together shall
constitute but one agreement. Facsimile counterpart signatures to this
Agreement shall be acceptable an binding.
* * * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Investor
Rights Agreement on the date first written above.
HANGER ORTHOPEDIC GROUP, INC.
By: /s/IVAN R. SABEL
------------------------------------
Name: Ivan R. Sabel
Title: Chairman, President and Chief
Executive Officer
PURCHASERS
CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capital Partners,
its General Partner
By: /s/MITCHELL J. BLUTT, M.D.
------------------------------
Name: Mitchell J. Blutt, M.D.
Title: Executive Partner
PARIBAS NORTH AMERICA, INC.
By: /s/JOHN G. MARTINEZ
---------------------------
Name: John G. Martinez
Title: Financial Controller
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-63191) of Hanger Orthopedic Group, Inc. of our
report dated March 19, 1999 relating to the financial statements of NovaCare
Orthotics and Prosthetics, Inc. and subsidiaries, which appears in the Current
Report on Form 8-K of Hanger Orthopedic Group, Inc. dated July 15, 1999.
Philadelphia, Pennsylvania
July 15, 1999
