<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
Commission Registrant, State of Incorporation IRS Employer
File Number Address and Telephone Number Identification No.
- ------------- ---------------------------------- ------------------
<S> <C> <C>
0-13813 Alco Health Services Corporation 23-2353106
(a Delaware Corporation)
P.O. Box 959, Valley Forge,
Pennsylvania 19482
(215) 296-4480
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
The number of shares of common stock of Alco Health Services Corporation
outstanding as of March 31, 1994 was 1,000.
<PAGE>
INDEX
ALCO HEALTH SERVICES CORPORATION
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets -- March 31, 1994 and
September 30, 1993
Consolidated statements of operations -- Three months
ended March 31, 1994 and March 31, 1993
Consolidated statements of operations -- Six months
ended March 31, 1994 and March 31, 1993
Consolidated statements of cash flows -- Six months
ended March 31, 1994 and March 31, 1993
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Alco Health Services Corporation Financial Statements (Unaudited)
-----------------------------------------------------
ALCO HEALTH SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------
(dollars in thousands)
<TABLE>
<CAPTION>
March 31 September 30
ASSETS 1994 1993
- ------ -------------- ------------
<S> <C> <C>
Current Assets
Cash $ 27,695 $ 27,098
Accounts receivable less
allowance for doubtful
accounts: 3/94 - $8,752
9/93 - $7,681 267,472 251,999
Merchandise inventories 356,775 346,371
Prepaid expenses 2,120 1,977
--------------- --------
Total current assets 654,062 627,445
Property and Equipment, at cost 65,804 57,282
Less accumulated depreciation 24,626 21,176
--------------- --------
41,178 36,106
Other Assets
Excess of cost over net assets
acquired, less accumulated
amortization: 3/94 - $27,714
9/93 - $25,053 181,149 183,810
Deferred financing costs and other,
less accumulated amortization:
3/94 - $5,271; 9/93 - $3,703 12,483 15,453
--------------- --------
193,632 199,263
--------------- --------
$ 888,872 $862,814
=============== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
ALCO HEALTH SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------
(dollars in thousands)
<TABLE>
<CAPTION>
March 31 September 30
LIABILITIES AND STOCKHOLDER'S EQUITY 1994 1993
- ------------------------------------ ---------- -------------
<S> <C> <C>
Current Liabilities
Current portion of other debt $ 126 $ 122
Accounts payable 382,790 379,826
Accrued expenses 20,127 24,507
Accrued income taxes 13,456 7,899
Deferred income taxes 31,650
-------- --------
Total current liabilities 448,149 412,354
Long-Term Debt
Revolving credit facility 266,910 248,000
Senior subordinated notes 166,134 170,562
Other debt 1,304 1,311
Convertible subordinated debentures 238 238
-------- --------
434,586 420,111
Other Liabilities
Deferred compensation 511 701
Other 4,145 740
-------- --------
4,656 1,441
Stockholder's Equity
Common stock, $.01 par value:
1,000 shares authorized and issued 1 1
Capital in excess of par value 78,050 78,050
Retained earnings (deficit) (76,570) (49,143)
-------- --------
1,481 28,908
-------- --------
$888,872 $862,814
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
ALCO HEALTH SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------------------
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------
1994 1993
---------- ----------
<S> <C> <C>
Revenues $1,067,112 $920,195
Costs and expenses
Cost of goods sold 1,008,632 866,810
Selling and administrative 36,033 33,722
Depreciation 1,489 1,336
Interest 13,048 12,080
Non-recurring charges 821
---------- --------
1,059,202 914,769
---------- --------
Income before taxes and extraordinary
items 7,910 5,426
Taxes on income 3,472 2,700
---------- --------
Income before extraordinary items 4,438 2,726
Extraordinary charge - write-off
of deferred financing fees, net
of income tax benefit (2,635)
---------- --------
Net income $ 4,438 $ 91
========== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
ALCO HEALTH SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------------------
(dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
March 31
-----------------------
1994 1993
---------- ----------
<S> <C> <C>
Revenues $2,112,888 $1,837,876
Costs and expenses
Cost of goods sold 2,000,409 1,733,113
Selling and administrative 70,419 67,450
Depreciation 3,078 2,760
Interest 24,615 24,076
Non-recurring charges 1,982
---------- ----------
2,098,521 1,829,381
Income before taxes, extraordinary items
and cumulative effects of accounting
changes 14,367 8,495
Taxes on income 6,307 4,800
---------- ----------
Income before extraordinary items and
cumulative effects of accounting
changes 8,060 3,695
Extraordinary charge - early retirement
of debt, net of income tax benefit (442)
Extraordinary charge - write-off of
deferred financing fees, net of income
tax benefit (2,635)
Cumulative effect of change in accounting
for postretirement benefits other than
pensions (1,199)
Cumulative effect of change in accounting
for income taxes (33,846)
---------- ----------
Net income (loss) $ (27,427) $ 1,060
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
ALCO HEALTH SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------
(dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
March 31
------------------------
1994 1993
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (27,427) $ 1,060
Adjustments to reconcile net income (loss) to
net cash (used in) provided by operating
activities:
Depreciation 3,078 2,760
Amortization 4,856 4,823
Provision for losses on accounts receivable 1,617 1,778
Loss on disposal of property and equipment 185 2,010
Loss on early retirement of debt 679
Write-off of deferred financing fees 3,285
Cumulative effects of changes in accounting
principles 35,045
Changes in operating assets and liabilities:
Accounts receivable (17,090) (7,472)
Merchandise inventories (10,404) 38,932
Prepaid expenses (143) (235)
Accounts payable, accrued expenses and
income taxes 1,703 29,253
Miscellaneous (812) (96)
---------- ----------
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (8,713) 76,098
INVESTING ACTIVITIES
Capital expenditures (4,597) (2,863)
Proceeds from sales of property and equipment 119 1,003
---------- ----------
NET CASH (USED IN)
INVESTING ACTIVITIES (4,478) (1,860)
FINANCING ACTIVITIES
Long-term debt borrowings 460,195 673,024
Long-term debt repayments (446,315) (733,570)
Deferred financing costs (92) (8,178)
---------- ----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 13,788 (68,724)
---------- ----------
Increase in cash 597 5,514
Cash at beginning of period 27,098 13,768
---------- ----------
CASH AT END OF PERIOD $ 27,695 $ 19,282
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
ALCO HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Basis of Presentation
The accompanying financial statements present the consolidated financial
position, results of operations and cash flows of Alco Health Services
Corporation ("Alco" or the "Company"). All material intercompany accounts and
transactions of Alco have been eliminated in consolidation. Alco is a wholly-
owned subsidiary of Alco Health Distribution Corporation ("Distribution").
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary to present
fairly the financial position as of March 31, 1994, the results of operations
for the three and six months ended March 31, 1994 and 1993 and the cash flows
for the six months ended March 31, 1994 and 1993 have been included. Earnings
(loss) per share are not presented, as all of Alco's issued and outstanding
common stock is owned by Distribution. Certain information and footnote
disclosures normally included in financial statements presented in accordance
with generally accepted accounting principles, but which are not required for
interim reporting purposes, have been omitted. The accompanying unaudited
condensed consolidated financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1993.
Note 2 - Excess of Cost Over Net Assets Acquired
The excess of cost over net assets acquired ("goodwill") was recorded at the
time of the Acquisition in 1988. Since the Acquisition, the Company has been
unable to achieve the operating results projected at the time of the
Acquisition. The projections at the time of the Acquisition assumed
significant growth rates in revenues, stable gross profit margins and cash
flow from operations to reduce Acquisition indebtedness. Due to persistent
competitive pressures and a shift in the customer mix to larger volume, lower
margin customers, gross profit margins have declined from 7.10% in fiscal 1989
to 5.63% in fiscal 1993 and 5.32% for the six months ended March 31, 1994,
resulting in higher than expected losses and an increase in the Company's
indebtedness. During this period, the Company has been affected by price
competition for market share withn the industry, health care industry
consolidation and the impact of group purchasing organizations, managed care
and health care reform on drug prices. As a result of the potential negative
impact of these factors on the ability to recover the recorded goodwill value
over its remaining estimated life and the recent increase in interest rates,
the Company
<PAGE>
ALCO HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 2 - Excess of Cost Over Net Assets Acquired (continued)
initiated a detailed evaluation of the carrying value of goodwill. The Company
is currently evaluating whether the carrying value of goodwill can be recovered
through future earnings. Although the Company currently cannot predict the
outcome of this evaluation, a determination could be made that, based on the
trends noted above, future earnings may not be sufficient to support the
recoverability of goodwill. Such a determination would require that all or a
portion of the carrying value of goodwill be written-off.
Note 3 - Long-Term Debt
In October, 1993, the Company redeemed an aggregate principal amount of
$4,428,000 of senior subordinated notes. The extraordinary charge of $442,000
from the early retirement of this debt relates to the write-off of unamortized
financing fees and premiums paid on redemption, net of a tax benefit.
The Company recently completed an exchange of $40,329,000 principal amount of 14
1/2% Senior Subordinated Notes due 1999, Series A (the "New Notes") and $101,000
in cash for $40,329,000 principal amount of its 14 1/2% Senior Subordinated
Notes due 1999 (the "Existing Notes"). The only material difference between the
terms of the New Notes and the terms of the Existing Notes is that the indenture
of the New Notes does not have the minimum consolidated net worth provisions set
forth in the indenture of the Existing Notes. The indenture of the Existing
Notes requires the Company to maintain a consolidated net worth (as defined) of
$80 million. If the Company's consolidated net worth, as defined in the
indenture of the Existing Notes, is less than $80 million at the end of each of
any two consecutive fiscal quarters, the Company is required to offer to
purchase (the "Offer") an amount of Existing Notes equal to 20% of the principal
amount of Existing Notes outstanding at the time the Offer is made. The
purchase price in any Offer is equal to 100% of the principal amount purchased
plus accrued interest to the date of purchase. The Offer required could be
triggered if the Company generated losses from operations, had charges or
expenses relating to a restructuring or recapitalization, or reductions in the
book value of tangible or intangible assets, if in each case the losses or
charges are of a sufficient magnitude. As a result of the elimination of the
minimum consolidated net worth provision in the indenture of the New Notes, the
Company would not be required to make an Offer to holders of the New Notes, even
in the event of a material decrease in the Company's consolidated net worth. In
addition to the exchange noted above, the Company paid the holders of an
aggregate of $125,388,000 in principal amount of Existing Notes cash
consideration of $523,000 in exchange for each holder's agreement not to tender
any of the Existing Notes as a result of any required Company Offer or to
exercise any rights they have or may have with respect to the consolidated net
worth provision of the indenture of the Existing Notes. The total cash
consideration of $624,000 noted above as well as related fees and expenses of
$600,000 were recognized as interest expense during the three months ended March
31, 1994.
<PAGE>
ALCO HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 4 - Postretirement Benefits
As a result of special termination benefit packages previously offered, the
Company provides medical, dental and life insurance benefits to certain retirees
and their dependents. These benefit plans are unfunded. Prior to October 1,
1993, the Company recognized the expenses for these plans on the cash basis.
Effective October 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106 "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (Statement 106), which requires that the cost of postretirement health
care benefits be recognized on the accrual basis as employees render service to
earn the benefit instead of on the cash basis when the benefits are paid. As of
October 1, 1993, the Company adopted Statement 106 by recognizing the
accumulated obligation related to these benefits. The cumulative effect of this
change in accounting principle resulted in a non-cash charge to net income of
$1.2 million. The application of the new rules will not result in an increase
in fiscal 1994 postretirement benefit cost, which will be approximately
$150,000. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7.25%. A health care cost
trend rate of 13% was assumed for fiscal 1994, gradually declining to an
ultimate level of 5.50% over 15 years. A 1% increase in the health care cost
trend rate would increase the accumulated postretirement benefit obligation as
of October 1, 1993 by $77,500.
Note 5 - Taxes on Income
Effective October 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (Statement 109), which requires
a change in the method of accounting for income taxes from the deferred method
to the liability method. In accordance with Statement 109, the Company recorded
an adjustment of $33.8 million for the cumulative effect of adopting Statement
109 as of October 1, 1993. As permitted under Statement 109, prior period
financial statements have not been restated. The cumulative effect adjustment
relates principally to the provision of deferred income taxes to reflect the tax
consequences on future years of the difference between the tax and financial
reporting basis of merchandise inventories. Significant components of the
Company's deferred tax liabilities (assets) as of October 1, 1993 are as follows
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
Inventory $ 35,748
Fixed assets 4,996
Other 376
--------
Gross deferred tax liabilities 41,120
--------
Net operating losses and tax credit carryovers (5,646)
Allowance for doubtful accounts (3,072)
Accrued expenses (2,488)
Other postretirement benefits (480)
Other (1,064)
--------
Gross deferred tax assets (12,750)
--------
Valuation allowance for deferred tax assets 5,452
--------
Net deferred tax liabilities $ 33,822
========
</TABLE>
<PAGE>
ALCO HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 6 - Legal Matters and Contingencies
In the ordinary course of its business, the Company becomes involved in
lawsuits, administrative proceedings and governmental investigations, including
antitrust, environmental and Drug Enforcement Administration matters. In some
of these proceedings, plaintiffs may seek to recover large and sometimes
unspecified amounts and the matters may remain unresolved for several years.
The Company does not believe that these matters, individually or in the
aggregate, will have a material adverse effect on its business or financial
condition.
In November 1993, the Company was named a defendant, along with six other
wholesale distributors and twenty-four pharmaceutical manufacturers, in fourteen
civil actions filed in the United States District Court for the Southern
District of New York by several independent retail pharmacies. Plaintiffs seek
to establish these lawsuits and over thirty-four others (to which the Company is
not a party) filed by other pharmacies as a class action. In essence, these
lawsuits all claim that the manufacturer and wholesaler defendants have
combined, contracted and conspired to fix the prices charged to plaintiffs and
class members for prescription brand name pharmaceuticals. Specifically,
plaintiffs claim that the defendants used "chargeback agreements" to give some
institutional pharmacies discounts that are not made available to retail drug
stores. Plaintiffs seek injunctive relief, treble damages, attorneys' fees and
costs. These actions were recently transferred to the United States District
Court for the Northern District of Illinois for consolidated and coordinated
proceedings. The Company believes it has meritorious defenses to the claims
asserted in these lawsuits and intends to vigorously defend itself in all of
these cases.
The Company has become aware that its former Charleston, South Carolina
distribution center, was previously owned by a fertilizer manufacturer and that
there is evidence of residual soil contamination remaining from the fertilizer
manufacturing process operated on that site over thirty years ago. The Company
engaged an environmental consulting firm to conduct a soil survey and expects to
initiate a groundwater study during fiscal year 1994. At the present time, it
is not possible to ascertain the cost, if any, of remediation or whether the
Company will be able to obtain reimbursement for such costs from any third party
that caused the contamination or any insurance carrier. Accordingly, the
Company has not recorded any provision for this matter.
Alco has been named as a defendant in several lawsuits based upon alleged
injuries and deaths attributable to the product L-Tryptophan. Alco did not
manufacture L-Tryptophan; however, prior to an FDA recall, Alco did distribute
the L-Tryptophan products of several of its vendors. Alco believes that it is
entitled to full indemnification by its suppliers and the manufacturer of L-
Tryptophan with respect to these lawsuits and any other lawsuits involving L-
Tryptophan in which Alco may be named in the future. To date, the indemnity to
Alco in such suits has not been in dispute and, although the Company believes it
is unlikely it will incur any loss as a result of such lawsuits, the Company
believes that its insurance coverage and supplier endorsements are adequate to
cover any losses should they occur.
<PAGE>
ALCO HEALTH SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 6 - Legal Matters and Contingencies (continued)
At March 31, 1994, there were contingent liabilities with respect to taxes,
guarantees of borrowings by certain customers, lawsuits and environmental and
other matters occurring in the ordinary course of business. On the basis of
information furnished by counsel and others, management believes that none of
these contingencies will materially affect the Company.
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
---------------------
<TABLE>
<CAPTION>
3 Months 3 Months 6 Months 6 Months
Ended Ended Ended Ended
March 31, March 31, March 31, March 31,
1994 1993 1994 1993
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $1,067,112 $920,195 $2,112,888 $1,837,876
Cost of goods sold 1,008,632 866,810 2,000,409 1,733,113
---------- -------- ---------- ----------
Gross profit 58,480 53,385 112,479 104,763
Operating expenses:
Selling and administrative 34,668 32,354 67,678 64,715
Depreciation 1,489 1,336 3,078 2,760
Amortization of intangibles 1,365 1,368 2,741 2,735
---------- -------- ---------- ----------
Operating income 20,958 18,327 38,982 34,553
Interest expense - in cash 11,691 11,036 22,500 21,988
Amortization of deferred
financing costs 1,357 1,044 2,115 2,088
Non-recurring charges 821 1,982
---------- -------- ---------- ----------
Income before taxes,
extraordinary items and
cumulative effects of
accounting changes 7,910 5,426 14,367 8,495
Taxes on income 3,472 2,700 6,307 4,800
---------- -------- ---------- ----------
Income before extraordinary
items and cumulative
effects of accounting
changes 4,438 2,726 8,060 3,695
Extraordinary charge - early
retirement of debt, net
of income tax benefit (442)
Extraordinary charge -
write-off of deferred
financing fees, net of
income tax benefit (2,635) (2,635)
Cumulative effect of change
in accounting for
postretirement benefits
other than pensions (1,199)
Cumulative effect of change
in accounting for income
taxes (33,846)
---------- -------- ---------- ----------
Net income (loss) $ 4,438 $ 91 $ (27,427) $ 1,060
========== ======== ========== ==========
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Continued)
Revenues in the second quarter of fiscal 1994 increased 16% to $1.1 billion from
$920 million in fiscal 1993. For the six months ended March 31, 1994, revenues
were $2.1 billion, an increase of 15% over the $1.8 billion reported for the six
months ended March 31, 1993, reflecting real volume growth as well as the pass
through to customers of price increases from manufacturers. Price increases
accounted for approximately one-seventh of the 15% revenue growth. The most
significant part of the revenue increase for the six months ended March 31, 1994
was attributable to the hospital customer group, where revenues were 29% ahead
of the comparable period of the prior year. Excluding brokerage business, sales
to the chain drug store customer group increased 10%, while sales to independent
drug store customers declined slightly during the six months ended March 31,
1994 as compared with the prior year. During the six months ended March 31,
1994, sales to hospitals accounted for 45% of total revenues, while sales to
independent drug stores represented 34% and sales to chain drug stores, 21% of
the total.
As a percentage of revenues, the gross profit margin for the second quarter was
5.48% as compared to 5.80% in the prior year. For the six months ended March
31, 1994, the gross profit margin percentage was 5.32% versus 5.70% in 1993.
The declines in the gross profit margin percentages reflect continuing industry
price competition and increased sales to larger volume, lower margin customers,
such as hospitals.
Selling and administrative expenses for the second quarter of fiscal 1994 were
$34.7 million compared to $32.4 million for the second quarter of fiscal 1993,
an increase of 7.2%. For the first six months of fiscal 1994, selling and
administrative expenses were $67.7 million, an increase of 4.6% over the prior
year. The cost increases reflect inflationary increases and increases in
warehouse and delivery expenses which are variable with the level of sales
volume. As a percentage to revenues, selling and administrative expenses
improved to 3.2% in the six months ended March 31, 1994 from 3.5% in the 1993
period. The decrease in the ratio of expenses to revenues reflects the
Company's ongoing efforts to control costs in response to the decline in the
gross profit margin as a percentage of revenues and the economies associated
with increased business with larger volume, lower cost to service customers.
As a result of the above, operating income increased 14.4% to $21.0 million for
the second quarter of fiscal 1994 versus the comparable prior year period. For
the six months ended March 31, 1994, operating income increased 12.8% to $39.0
million in comparison to the prior year. Operating income as a percentage of
revenues was 1.84% for the six months ended March 31, 1994 versus 1.88% in 1993.
The increase in interest expense in the second quarter of fiscal 1994 in
comparison to the second quarter of fiscal 1993 was as a result of higher
interest rates offset in part by lower borrowing levels under the Company's
revolving credit facility. Interest in the second quarter of fiscal 1994
includes $624,000 in consideration payable to the holders of an aggregate of
$165.7 million in principal amount of senior subordinated notes (see Note 2 of
"Notes to Consolidated
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Continued)
Financial Statements"). Interest expense in the second quarter and for the six
months ended March 31, 1994 reflects reductions as a result of the purchase and
retirement of an aggregate principal amount of $8.9 million on senior
subordinated notes, which occurred during the fourth quarter of fiscal 1993 and
first quarter of fiscal 1994. During the six-month period ended March 31, 1994,
the average outstanding debt level was $458 million at an average interest rate
of 9.5%. During the six-month period ended March 31, 1993, the comparable
average outstanding debt level was $483 million at an average interest rate of
9.1%. Interest expense in 1994 and 1993 includes $2.1 million in amortization
of financing fees.
As noted below, the Company changed its method of accounting for income taxes
effective October 1, 1993. Income taxes for the three and six month periods
ended March 31, 1994, were computed on a regular tax basis and based on an
estimate of the full year effective tax rate. The extraordinary charge of
$679,000, net of a tax benefit of $237,000, relates to the purchase and
retirement of an aggregate principal amount of $4.4 million of senior
subordinated notes.
Effective October 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106 "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (Statement 106) and Statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes" (Statement 109). The Company recorded, as of
October 1, 1993, a total of $35.0 million in non-cash charges to net income for
the effects of transition to these two new standards. Statement 106 requires
that the expected cost of providing postretirement medical benefits be accrued
during employees' working years rather than on a pay-as-you-go basis as was
previously permitted. The cumulative effect of this change in accounting
principle resulted in a non-cash charge to net income of $1.2 million as of
October 1, 1993. Statement 109 requires a change in the method of accounting
for income taxes from the deferred method to the liability method. Under the
liability method, deferred taxes result from differences between the tax and
financial reporting bases of assets and liabilities and are adjusted for changes
in tax rates and tax laws when changes are enacted. The cumulative effect of
this change in accounting principle resulted in a non-cash charge to net income
of $33.8 million as of October 1, 1993, principally related to the provision of
deferred income taxes to reflect the tax consequences on future years of the
difference between the tax and financial reporting basis of merchandise
inventories.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Continued)
Liquidity and Capital Resources
Historically, the Company's operating results have generated sufficient cash
flows which, together with borrowings under the revolving credit facility and
credit terms from suppliers, have provided sufficient capital resources to
finance working capital and cash operating requirements, fund capital
expenditures and interest currently payable on outstanding debt. Future cash
flows are expected to be sufficient to fund capital expenditures and interest
currently payable over the near term.
During the six-month period ended March 31, 1994, the Company's operating
activities used $8.7 million in cash. Accounts receivable and merchandise
inventories increased during the period by $17.1 million and $10.4 million,
respectively, offset by an increase of $3.0 million in accounts payable. The
increases in accounts receivable and merchandise inventories are commensurate
with the Company's revenue growth. A portion of the increase in merchandise
inventories was the result of the opening of the Dallas, Texas distribution
facility, which occurred in the first quarter of fiscal 1994. The decrease of
$4.4 million in accrued expenses was primarily the result of the timing of
interest payments due on LIBOR contracts maturing under the revolving credit
facility. Operating cash uses during the six-month period ended March 31, 1994
included $24.2 million in interest payments and $2.4 million in income tax
payments.
Capital expenditures for the six months ended March 31, 1994 were $4.6 million
and relate principally to improvements in warehouse distribution and management
information systems. Capital expenditures for the fiscal year ended September
30, 1994 are projected to approximate $8.0 million. Cash used in investing
activities during the six months ended March 31, 1994 included $5.0 million in
payments associated with the redemption of an aggregate principal amount of $4.4
million of senior subordinated notes. At March 31, 1994, borrowings under the
Company's $425 million revolving credit facility were $266.9 million (at an
average interest rate of 7.0%) as compared to the $248.0 million (at an average
interest rate of 6.4%) outstanding at September 30, 1993.
The Company has become aware that its former Charleston, South Carolina
distribution center, was previously owned by a fertilizer manufacturer and that
there is evidence of residual soil contamination remaining from the fertilizer
manufacturing process operated on that site over thirty years ago. The Company
engaged an environmental consulting firm to conduct a soil survey and expects to
initiate a groundwater study during fiscal year 1994. At the present time, it
is not possible to ascertain the cost, if any, of remediation or whether the
Company will be able to obtain reimbursement for such costs from any third party
that caused the contamination or any insurance carrier. Accordingly, the
Company has not recorded any provision for this matter.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Continued)
The Company's primary ongoing cash requirements will be to fund payment of
principal and interest on indebtedness, finance working capital and fund capital
expenditures. An increase in interest rates would adversely affect the
Company's operating results and the cash flow available after debt service to
fund operations and any expansion and, if permitted to do so under its revolving
credit facility and the indenture for the senior subordinated notes, to pay
dividends on its capital stock.
The excess of cost over net assets acquired ("goodwill") was recorded at the
time of the Acquisition in 1988. Since the Acquisition, the Company and its
parent, Alco Health Distribution Corporation ("Distribution"), have been unable
to achieve the operating results projected at the time of the Acquisition. The
projections at the time of the Acquisition assumed significant growth rates in
revenues, stable gross profit margins and cash flow from operations to reduce
Acquisition indebtedness. Due to persistent competitive pressures and a shift
in the customer mix to larger volume, lower margin customers, gross profit
margins have declined from 7.10% in fiscal 1989 to 5.63% in fiscal 1993 and
5.32% for the six months ended March 31, 1994, resulting in higher than expected
losses and an increase in the Company's indebtedness. While the Company has
recently improved its operating results and Distribution has been able to reduce
its pre-tax losses from $26.3 million in fiscal 1991 to $1.1 million in fiscal
1993, and has a pre-tax profit of $6.9 million for the six months ended March
31, 1994, the Company believes these recent improvements in operating results
may not be indicative of the long-term prospects of Distribution or the Company
due to the following factors:
Gross Profit Margin: The Company expects that gross profit margins will
continue to erode due to price competition for market share within the industry,
health care industry consolidation and the impact of group purchasing
organizations, managed care and health care reform on drug prices.
Selling and Administrative Expenses: Since the Acquisition, as a result of
facility consolidations and other ongoing efforts to control costs, the Company
has dramatically decreased selling and administrative expenses as a percentage
of revenues. This rate of decrease is not expected to continue as the Company
has substantially completed its facility consolidations.
Interest Expense: Since the Acquisition, the Company and Distribution have
operated with a substantial amount of indebtedness, which is expected to remain
at the same level or increase in the future. Given the substantial amount of
indebtedness, the Company's interest expense can be significantly impacted by
interest rate fluctuations. The Company's interest expense since 1991 has been
favorably impacted by a downward movement in interest rates. Given the recent
increase in interest rates combined with projected levels of indebtedness in the
future, the Company expects future interest expense to be higher than recent
results.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Continued)
As a result of the potential negative impact of these factors on the ability to
recover the recorded goodwill value over its remaining estimated life, the
Company initiated a detailed evaluation of the carrying value of goodwill. The
Company is currently evaluating whether the carrying value of goodwill can be
recovered through future earnings. Although the Company currently cannot
predict the outcome of this evaluation, a determination could be made that,
based on the trends noted above, future earnings may not be sufficient to
support the recoverability of goodwill. Such a determination would require that
all or a portion of the carrying value of goodwill be written-off.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits: The following exhibits are filed as part of this
-------- report (listed by number corresponding to the
Exhibit Table of Item 601 of Regulation S-K):
Number Description
------ -----------
(4) Instruments defining the rights
of security holders, including
indentures.
(b) Reports on Form 8-K: No reports on Form 8-K were filed
------------------- during the quarter ended March 31, 1994.
<PAGE>
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.
ALCO HEALTH SERVICES CORPORATION
/s/ John F. McNamara
----------------------------
John F. McNamara
Chairman, President and
Chief Executive Officer
(Principal Financial Officer)
Date: May 13, 1994 /s/ John A. Kurcik
------------ ----------------------------
John A. Kurcik
Vice President, Controller
(Principal Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
- -------
4.1 Indenture, dated as of March 31, 1994, between Alco and Bankers
Trust Company, as Trustee relating to the 14 1/2% Senior Subordinated
Notes due 1999, Series A.
4.2 Agreement, dated as of April 28, 1994 by and among Alco, W.R.Huff
Asset Management Co., L.P. and certain holders of Alco's 14 1/2% Senior
Subordinated Notes due 1999.
4.3 Amended and Restated Second Amendment to Credit Agreement, dated as
of March 31, 1993 among Alco, General Electric Capital Corporation,
individually and as agent, BA Business Credit, Inc., as co-agent, and
the banks and other financial institutions named therein.
<PAGE>
Execution Copy
Exhibit 4.1
ALCO HEALTH SERVICES CORPORATION, as Issuer
14-1/2% Senior Subordinated Notes due 1999,
Series A
---------------------------------------------
INDENTURE
Dated as of March 31, 1994
---------------------------------------------
Bankers Trust Company,
Trustee
<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.
(b) 7.8; 7.10; 11.2
(c) N.A.
311(a) 7.11
(b) 7.11
(c) N.A.
312(a) 2.5
(b) 11.3
(c) 11.3
313(a) 7.6
(b)(1) N.A.
(b)(2) 7.6
(c) 11.2
(d) 7.6
314(a) 4.4; 11.2
(b) N.A.
(c)(1) 11.4
(c)(2) 11.4
(c)(3) N.A.
(d) N.A.
(e) 11.5
(f) N.A.
315(a) 7.1(b)
(b) 7.5; 11.2
(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
317(a)(1) 6.8
(a)(2) 6.9
(b) 2.4
318(a) 11.1
</TABLE>
N.A. means Not Applicable.
- -------------------------
Note: This Cross Reference Table shall not, for any purpose,
be deemed to be part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE................ 1
Section 1.1. Definitions........................................... 1
-----------
Section 1.2. Other Definitions..................................... 11
-----------------
Section 1.3. Incorporation by Reference of Trust
-----------------------------------
Indenture Act......................................... 12
-------------
Section 1.4. Rules of Construction................................. 12
---------------------
ARTICLE II THE SECURITIES................................... 13
Section 2.1 Form and Dating....................................... 13
---------------
Section 2.2 Execution and Authentication.......................... 14
----------------------------
Section 2.3 Registrar and Paying Agent............................ 15
--------------------------
Section 2.4 Paying Agent to Hold Money in Trust................... 15
-----------------------------------
Section 2.5 Securityholder Lists.................................. 16
--------------------
Section 2.6 Transfer and Exchange................................. 16
---------------------
Section 2.7 Replacement Securities................................ 17
----------------------
Section 2.8 Outstanding Securities................................ 17
----------------------
Section 2.9 Treasury Securities................................... 18
-------------------
Section 2.10 Temporary Securities.................................. 18
--------------------
Section 2.11 Cancellation.......................................... 18
------------
Section 2.12 CUSIP Numbers......................................... 19
-------------
Section 2.13 Defaulted Interest.................................... 19
------------------
Section 2.14 Home Office Payment Agreements........................ 19
------------------------------
ARTICLE III REDEMPTION....................................... 20
Section 3.1 Notices to Trustee.................................... 20
------------------
Section 3.2 Selection of Securities to be Redeemed................ 20
--------------------------------------
Section 3.3 Notice of Redemption.................................. 21
--------------------
Section 3.4 Effect of Notice of Redemption........................ 22
------------------------------
Section 3.5 Deposit of Redemption Price........................... 22
---------------------------
Section 3.6 Securities Redeemed in Part........................... 23
--------------------------
Section 3.7 Mandatory Redemption or Repurchase.................... 23
----------------------------------
Section 3.8 Offer to Repurchase by Application of Net
-----------------------------------------
Proceeds.............................................. 24
--------
ARTICLE IV COVENANTS........................................ 27
Section 4.1 Payment of Securities................................. 27
---------------------
Section 4.2 Maintenance of Office or Agency....................... 27
-------------------------------
Section 4.3 Corporate Existence................................... 28
-------------------
</TABLE>
- i -
<PAGE>
<TABLE>
<C> <S> <C>
Section 4.4 SEC Reports and Reports to
--------------------------
Securityholders....................................... 28
---------------
Section 4.5 Compliance Certificate; Notice of
---------------------------------
Defaults.............................................. 29
--------
Section 4.6 Waiver of Stay, Extension or Usury Laws............... 30
---------------------------------------
Section 4.7 Limitation on Restricted Payments..................... 30
---------------------------------
Section 4.8 Limitation on Dividend and Other Payment
----------------------------------------
Restrictions Affecting Subsidiaries................... 35
-----------------------------------
Section 4.9 Limitation on Additional Indebtedness................. 35
-------------------------------------
Section 4.10 Limitation on Material Acquisitions................... 38
-----------------------------------
Section 4.11 Sale of Certain Business Segments..................... 39
---------------------------------
Section 4.12 Maintenance of Properties, etc. ...................... 41
-------------------------------
Section 4.13 Limitation on Liens................................... 42
-------------------
Section 4.14 [Intentionally Omitted.].............................. 42
------------------------
Section 4.15 Liquidation or Dissolution............................ 42
--------------------------
Section 4.16 Prohibition Against Becoming an Investment
------------------------------------------
Company............................................... 43
-------
Section 4.17 No Senior Subordinated Indebtedness Other
-----------------------------------------
Than the Securities................................... 43
-------------------
Section 4.18 Restriction on Sale and Issuance of
-----------------------------------
Subsidiary Stock...................................... 43
----------------
Section 4.19 [Intentionally Omitted.].............................. 44
------------------------
Section 4.20 Transactions with Shareholders and
----------------------------------
Affiliates............................................ 44
----------
Section 4.21 Change of Control..................................... 44
-----------------
ARTICLE V MERGER, ETC. .................................... 45
Section 5.1 When Company May Merge, etc. ......................... 45
----------------------------
Section 5.2 Successor Corporation Substituted..................... 47
---------------------------------
ARTICLE VI DEFAULTS AND REMEDIES................................. 47
Section 6.1 Events of Default..................................... 47
-----------------
Section 6.2 Acceleration.......................................... 49
------------
Section 6.3 Other Remedies........................................ 50
--------------
Section 6.4 Waiver of Past Defaults............................... 50
-----------------------
Section 6.5 Control by Majority................................... 50
-------------------
Section 6.6 Limitation on Suits................................... 51
-------------------
Section 6.7 Rights of Holders to Receive Payment.................. 51
------------------------------------
Section 6.8 Collection Suit by Trustee............................ 52
--------------------------
Section 6.9 Trustee May File Proofs of Claim...................... 52
--------------------------------
Section 6.10 Priorities............................................ 52
----------
Section 6.11 Undertaking for Costs................................. 53
---------------------
ARTICLE VII TRUSTEE.......................................... 53
Section 7.1 Duties of Trustee..................................... 53
-----------------
</TABLE>
- ii -
<PAGE>
<TABLE>
<S> <C> <C>
Section 7.2 Rights of Trustee..................................... 55
-----------------
Section 7.3 Individual Rights of Trustee.......................... 56
----------------------------
Section 7.4 Trustee's Disclaimer.................................. 57
--------------------
Section 7.5 Notice of Defaults.................................... 57
------------------
Section 7.6 Reports by Trustee to Holders......................... 57
-----------------------------
Section 7.7 Compensation and Indemnity............................ 57
--------------------------
Section 7.8 Replacement of Trustee................................ 58
----------------------
Section 7.9 Successor Trustee or Agent by Merger, etc. ........... 60
------------------------------------------
Section 7.10 Eligibility; Disqualification......................... 60
-----------------------------
Section 7.11 Preferential Collection of Claims Against
-----------------------------------------
the Company........................................... 60
-----------
ARTICLE VIII DISCHARGE OF INDENTURE........................... 60
Section 8.1 Termination of Company's Obligations.................. 60
------------------------------------
Section 8.2 Application of Trust Money............................ 62
--------------------------
Section 8.3 Repayment to Company.................................. 62
--------------------
Section 8.4 Reinstatement......................................... 62
-------------
ARTICLE IX AMENDMENTS................................... 63
Section 9.1 Without Consent of Holders............................ 63
--------------------------
Section 9.2 With Consent of Holders............................... 64
-----------------------
Section 9.3 Compliance with Trust Indenture Act................... 65
-----------------------------------
Section 9.4 Revocation and Effect of Consents..................... 65
---------------------------------
Section 9.5 Notation on or Exchange of Securities................. 66
-------------------------------------
Section 9.6 Trustee to Sign Amendments, etc....................... 66
--------------------------------
ARTICLE X SUBORDINATION................................ 66
Section 10.1 Agreement to Subordinate.............................. 66
------------------------
Section 10.2 Certain Definitions................................... 67
-------------------
Section 10.3 Liquidation; Dissolution; Bankruptcy.................. 67
------------------------------------
Section 10.4 Default on Senior Indebtedness........................ 68
------------------------------
Section 10.5 Acceleration of Securities............................ 70
--------------------------
Section 10.6 When Distribution Must Be Paid Over................... 70
-----------------------------------
Section 10.7 Notice by Company..................................... 70
-----------------
Section 10.8 Distribution or Notice to Representative.............. 70
----------------------------------------
Section 10.9 Rights of Holders of Senior Indebtedness
----------------------------------------
Not to Be Impaired.................................... 71
------------------
Section 10.10 Authorization to Trustee to Take Action to
------------------------------------------
Effectuate Subordination.............................. 71
------------------------
Section 10.11 Subrogation........................................... 71
-----------
Section 10.12 Obligations of Company Unconditional.................. 72
------------------------------------
Section 10.13 Trustee Entitled to Assume Payments Not
---------------------------------------
Prohibited in Absence of Notice....................... 73
-------------------------------
Section 10.14 Right of Trustee to Hold Senior
-------------------------------
Indebtedness.......................................... 73
------------
</TABLE>
- iii -
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE XI MISCELLANEOUS................................. 74
Section 11.1 Trust Indenture Act Controls.......................... 74
----------------------------
Section 11.2 Notices............................................... 74
-------
Section 11.3 Communication by Holders with Other
-----------------------------------
Holders............................................... 75
-------
Section 11.4 Certificate and Opinion as to Conditions
----------------------------------------
Precedent............................................. 76
---------
Section 11.5 Statements Required in Certificate or
-------------------------------------
Opinion............................................... 76
-------
Section 11.6 Rules by Trustee and Agents........................... 77
---------------------------
Section 11.7 Legal Holidays........................................ 77
--------------
Section 11.8 Duplicate Originals................................... 77
-------------------
Section 11.9 Governing Law......................................... 77
-------------
Section 11.10 No Adverse Interpretation of Other
----------------------------------
Agreements............................................ 77
----------
Section 11.11 Successors............................................ 77
----------
Section 11.12 Severability.......................................... 77
------------
Section 11.13 No Recourse Against Others............................ 78
--------------------------
Section 11.14 Table of Contents, Headings, etc. .................... 78
---------------------------------
Section 11.15 Counterpart Originals................................. 78
---------------------
Section 11.16 Benefits of Indenture................................. 78
---------------------
Section 11.17 Qualification of Indenture............................ 78
--------------------------
Section 11.18 [Intentionally Omitted.].............................. 79
------------------------
SIGNATURES .............................................................. 80
Exhibit A Form of Security
</TABLE>
- -------------------------
Note: This Table of Contents shall not, for any
purposes, be deemed to be a part of the Indenture.
- iv -
<PAGE>
INDENTURE dated as of March 31, 1994, between Alco Health Services
Corporation, a Delaware corporation (the "Company") and Bankers Trust Company,
a New York banking corporation, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the holders of the Company's 14-1/2% Senior
Subordinated Notes due 1999, Series A (the "Securities"):
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
-----------
"Affiliate" means, when used with reference to the Company or another
---------
Person, any Person directly or indirectly controlling, controlled by, or under
direct or indirect common control with, the Company or such other Person, as
the case may be. For the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct or cause the
direction of management or policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Agent" means any Registrar, Paying Agent, co-registrar or agent for
-----
service of notices and demands.
"Alco" means Alco Health Services Corporation, a Delaware corporation.
----
"Asset Sale" means any sale, transfer or other disposition of assets or
----------
rights (including, without limitation, dispositions pursuant to merger,
consolidation or sale lease-back transactions) by a Person or one of such
Person's Subsidiaries to any Person other than to such Person or one of such
Person's Subsidiaries of a Business Segment.
"Bank Debt" means all obligations, including any Guarantys, to the banks
---------
named in the Credit Agreement and the Credit Agent outstanding from time to
time under the Credit Agreement, the Loan Documents (as defined in the Credit
Agreement), and each other agreement, document or instrument delivered by the
Company or any of its Subsidiaries pursuant to the Credit Agreement or any
Loan Document.
<PAGE>
"Bank Notes" means the promissory notes issued pursuant to the Credit
----------
Agreement, as the same may be renewed, extended, amended, modified or
supplemented, including any replacement for any thereof.
"Board of Directors" means the Board of Directors of any Person, or any
------------------
duly authorized committee thereof.
"Business Day" means a day that is not a Legal Holiday as defined in
------------
Section 11.7.
"Business Segment" means any assets, group of assets, any Subsidiary, or
----------------
stock of a Subsidiary owned as of the date hereof or hereafter acquired by the
Company or a Subsidiary, which constitute 10% or more of the assets, operating
revenues or EBIT of the Company (as determined on a consolidated basis in
conformity with generally accepted accounting principles).
"Capital Lease" means, as applied to any Person, any lease of any
-------------
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with generally accepted accounting principles, is accounted for as
a capital lease on the balance sheet of such Person.
"Capital Stock" means, with respect to any Person, any and all shares,
-------------
interests, participations, rights or other equivalents (however designated) of
corporate stock, including mandatorily redeemable preferred stock,
outstanding, whether or not included in shareholders equity.
"Company" means the party named as such in this Indenture, and after the
-------
Merger shall mean Alco, until a successor replaces it pursuant to the
applicable provisions of this Indenture and thereafter means the successor and
any other obligor on the Securities.
"Company Common Stock" means the Common Stock, par value $.01 per share,
--------------------
of the Company as it exists on the date of this Indenture or as it may be
constituted from time to time.
"Consolidated Fixed Charges" of any Person is defined as, for any period,
--------------------------
the sum of Consolidated Interest Expense and Preferred Stock Dividends;
provided that if, during such period, such Person or any of its Subsidiaries
- --------
shall have made any Asset Sales, Consolidated Fixed Charges of such Person and
its Subsidiaries for such period shall be reduced by an amount equal to the
Consolidated Fixed Charges directly attributable to the assets which are
subject of or have been repaid with the proceeds
- 2 -
<PAGE>
of such Asset Sales for such period; and provided further, that if, during such
-------- -------
period, such Person or any of its Subsidiaries shall have made any Material
Acquisitions, Consolidated Fixed Charges of such Person and its Subsidiaries for
such period shall be adjusted by an amount equal to the Consolidated Fixed
Charges attributable to the assets which are the subject of such Material
Acquisitions on a pro forma basis as if such Material Acquisition had occurred
--- -----
on the first day of such period.
"Consolidated Fixed Charge Ratio" of any Person means the ratio of (i)
-------------------------------
the aggregate amount of Consolidated Gross Cash Flow of such Person for the
four fiscal quarters for which financial information in respect thereof is
available immediately prior to the date of the transaction giving rise to the
need to calculate the Consolidated Fixed Charge Ratio (the "Transaction Date")
to (ii) the aggregate Consolidated Fixed Charges of such Person for the four
fiscal quarters for which financial information in respect thereof is
available immediately prior to the Transaction Date.
"Consolidated Gross Cash Flow" shall mean with respect to any Person, for
----------------------------
any period for which it is to be determined (x) the sum of such Person's (i)
Earnings Before Interest and Taxes computed without giving effect to any
nonrecurring gains and losses (other than in the ordinary course of business);
and (ii) to the extent earnings have been reduced thereby, depreciation
expenses, amortization expenses and other non-cash expenses; minus (y) the sum
-----
of such Person's (i) non-cash items to the extent earnings have been increased
thereby and (ii) 25% of the increase, if any, in such Person's Net Working
Capital (if positive) during such period, or 25% of the decrease, if any, in
such Person's Net Working Capital (if negative) during such period, all as
determined on a consolidated basis in conformity with, except as noted above,
generally accepted accounting principles provided, that if, during such period,
--------
such Person or any of its Subsidiaries shall have made any Asset Sales,
Consolidated Gross Cash Flow of such Person and its Subsidiaries for such period
shall be reduced by an amount equal to the Consolidated Gross Cash Flow (if
positive) attributable to the assets which are the subject of such Asset Sales
for such period or increased by an amount equal to the Consolidated Gross Cash
Flow (if negative) attributable thereto for such period, in either case as if
such Asset Sale had occurred on the first day of such period; and provided
--------
further, that if, during such period, such Person or any of its Subsidiaries
- -------
shall have made any Material Acquisitions, Consolidated Gross Cash Flow of such
Person and its Subsidiaries for such period shall be adjusted by an amount equal
to the Consolidated Gross Cash Flow attributable
- 3 -
<PAGE>
to the assets which are the subject of such Material Acquisitions on a pro forma
--- -----
basis as if such Material Acquisition had occurred on the first day of such
period.
"Consolidated Interest Expense" of any Person means, for any period for
-----------------------------
which the determination thereof is to be made, the aggregate amount of
interest in respect of Indebtedness of such Person and its Subsidiaries
(including all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing and the net
cost associated with Interest Swap Obligations but excluding amortization of
all fees, charges and other issuance costs associated with Indebtedness
incurred in connection with the Tender Offer and the Merger) and all but the
principal component of rentals in respect of Capital Lease obligations, paid,
accrued or scheduled to be paid or accrued by such Person during such period,
all as determined on a consolidated basis in accordance with generally
accepted accounting principles.
"Consolidated Net Income" with respect to any Person means, for any
-----------------------
period, the aggregate of the net income (or loss) of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in
accordance with generally accepted accounting principles; provided, however,
-------- -------
that (i) any gain (but not loss), together with any related provision for
taxes, realized upon the sale or other disposition (including, without
limitation, dispositions pursuant to sale and leaseback transactions) of any
property or assets which are not sold or otherwise disposed of in the ordinary
course of business shall be excluded, (ii) the net income (or loss) of any
Person which is not a Subsidiary or is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid to the referent Person or a Subsidiary thereof, (iii) the
net income (or loss) of any Person that is a Subsidiary (other than a
Subsidiary of which at least 80% of the capital stock having ordinary voting
power for the election of directors or other governing body of such Subsidiary
is owned by the referent Person directly or indirectly through one or more
Subsidiaries) shall be included only to the extent of the lesser of (a) the
amount of dividends or distributions paid to the referent Person or a
Subsidiary thereof or (b) the net income (or loss) of such Person, and (iv)
the net income (or loss) of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded.
- 4 -
<PAGE>
"Consolidated Net Worth" with respect to any Person means, as at any date
----------------------
of determination, the sum of the Capital Stock and additional paid-in capital
plus retained earnings (or minus accumulated deficit) of such Person and its
Subsidiaries on a consolidated basis and with respect to the Company and its
Subsidiaries, the amount of LIFO reserve, less amounts attributable to
Disqualified Interests. Notwithstanding anything to the contrary contained
herein, Consolidated Net Worth shall be calculated as if (i) in connection
with making purchase accounting adjustments to the recorded value of assets
acquired or liabilities assumed in the Tender Offer and the Merger, the entire
excess of purchase cost over net assets (on a historical book basis) acquired
is allocated to goodwill and accordingly the LIFO reserve will not be
eliminated and (ii) all transaction and other costs relating to the Tender
Offer and the Merger and the financing thereof are included in the purchase
cost of Alco for the purpose of calculating the excess of purchase cost over
net assets acquired and none of such transaction and other costs are expensed.
"Corporate Trust Office" means the principal office of the Trustee at
----------------------
which any particular time its corporate trust business shall be administered
which office at the date of execution of this Indenture is located at Four
Albany Street, New York, New York 10006 (Attention: Corporate Trust and Agency
Group).
"Credit Agent" means General Electric Capital Corporation, as agent under
------------
the Credit Agreement, or any successor thereto or any agent under any
agreement pursuant to which Indebtedness under the Credit Agreement has been
refinanced, as to whom the Company has notified the Trustee and the Holders
pursuant to the terms hereof.
"Credit Agreement" means the Credit Agreement dated as of March 30, 1993
----------------
between the Company and the lenders named therein and the Credit Agent, as
such agreement may be amended, supplemented or modified from time to time, or
any agreement pursuant to which Indebtedness under the Credit Agreement is
refunded or refinanced.
"Currency Agreement" means any foreign exchange contract, currency swap
------------------
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values.
"Default" means any event which is, or after notice or passage of time or
-------
both would be, an Event of Default.
- 5 -
<PAGE>
"Disqualified Interest" means any Equity Interest that, by its terms (or
---------------------
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (i) is exchangeable or
convertible into Indebtedness, (ii) matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, on or prior to the
maturity date of the Securities, or (iii) is redeemable at the option of the
holder thereof, in whole or in part on, or prior to, the maturity date of the
Securities.
"Earnings Before Interest and Taxes" or "EBIT" shall mean Consolidated
---------------------------------- ----
Net Income of a Person, except that there shall be excluded from the
calculation thereof (i) all taxes paid or payable by such Person to any
government or governmental instrumentality (other than real estate taxes,
sales taxes or use taxes), (ii) Consolidated Interest Expense, (iii)
amortization of all transaction and other costs relating to the Tender Offer
and the Merger and the financing thereof and all goodwill and other
intangibles, (iv) all depreciation and amortization of the write-up of assets
resulting from the Tender Offer and the Merger and (v) all transaction and
other costs relating to the Tender Offer and the Merger and the financing
thereof that are expensed.
"Effective Time" means the time and date when the Merger becomes
--------------
effective under the laws of the State of Delaware.
"Equity Interests" means Capital Stock or other equity participations,
----------------
including partnership interests, or warrants, options or other rights to
acquire Capital Stock or other equity participations (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock or other
such equity participations).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations promulgated by the SEC thereunder.
"Guaranty" means a guaranty (other than by endorsement of negotiable
--------
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
indebtedness.
"Holder" or "Securityholder" means the person in whose name a Security is
------ --------------
registered on the Registrar's books.
- 6 -
<PAGE>
"Holdings" means Alco Health Distribution Corporation, a Delaware
--------
corporation.
"Holdings Debentures" means the 11-1/4 Senior Debentures due 2005 of
-------------------
Holdings.
"Indebtedness" with respect to any Person means any indebtedness, whether
------------
or not contingent, in respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or representing the balance deferred and unpaid
of the purchase price of any property (including pursuant to Capital Leases),
except any such balance that constitutes an accrued expense or a trade payable
and which is not overdue by more than 60 days and not being contested in good
faith, if and to the extent such indebtedness would appear as a liability upon
a balance sheet of such Person prepared on a consolidated basis in accordance
with generally accepted accounting principles, and also includes, to the
extent not otherwise included, any Guaranty of Indebtedness.
"Indebtedness to Net Worth Ratio" means with respect to any Person, at
-------------------------------
any date of determination, the ratio of (i) the outstanding aggregate amount
of Indebtedness of such Person and its Subsidiaries, other than, with respect
to the Company and its Subsidiaries, Indebtedness incurred pursuant to Section
4.9(k) determined on a consolidated basis, to (ii) the Consolidated Net Worth
of such Person.
"Indenture" means this Indenture as originally executed or as amended or
---------
supplemented from time to time pursuant to applicable provisions of this
Indenture.
"Interest Payment Date" means the stated maturity of an installment of
---------------------
interest on the Notes as set forth in Exhibit A hereto.
"Interest Rate" shall mean the interest rate of 14-1/2% per annum
-------------
payable on the principal amount of the Securities.
"Interest Swap Obligations" means the obligations of any Person pursuant
-------------------------
to any interest rate swap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates.
"Junior Indebtedness" means any Indebtedness of the Company and its
-------------------
Subsidiaries, whether outstanding at the date
- 7 -
<PAGE>
hereof or incurred thereafter, that is subordinate in right of payment to the
Securities at least to the same extent as the Securities are subordinated to
Senior Indebtedness and which does not mature or have any mandatory redemptions
or prepayments in respect thereof prior to the final scheduled maturity date of
the Securities.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
----
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell and any filing of
or agreement to give any financing statement under the Uniform Commercial Code
(or equivalent statutes) of any jurisdiction).
"Material Acquisition" means any merger, consolidation, acquisition or
--------------------
lease of assets, acquisition of securities or other business combination or
acquisition, or any two or more such transactions if part of a common plan to
acquire a business or group of related businesses, if the assets thus acquired
in the aggregate would constitute a Significant Subsidiary of the Company (if
such businesses or assets were organized in the corporate form) immediately
preceding such transaction.
"Merger" means the merger on October 31, 1989 of Alco Health Distribution
------
Corporation with and into Alco, which continued as the surviving corporation.
"Merger Agreement" means the Agreement and Plan of Merger, dated as of
----------------
November 14, 1988, pursuant to which the Merger was effected.
"Net Proceeds" with respect to any sale or other disposition of a
------------
Business Segment, means (i) cash (freely convertible into U.S. dollars)
received by the Company or any Subsidiary for such sale or other disposition,
after (a) provision for all income or other taxes measured by or resulting
from such sale or other disposition, (b) payment of all brokerage commissions
and other fees and expenses related to such sale or other disposition, and (c)
deduction of appropriate amounts to be provided by the Company or a
Subsidiary, as a reserve, in accordance with generally accepted accounting
principles, against any liabilities associated with such Business Segment and
retained by the Company or a Subsidiary after such sale or other disposition
thereof, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to
- 8 -
<PAGE>
environmental matters or against any indemnification obligations associated with
the sale or other disposition of such Business Segment and (ii) promissory notes
received by the Company or any Subsidiary from such sale or other disposition
upon the liquidation or conversion of such notes into cash.
"Net Working Capital" shall mean, with respect to any Person, for any
-------------------
date for which it is to be determined, (i) the sum of such Person's inventory,
trade receivables and prepaid expenses, minus (ii) the sum of such Person's
accrued expenses payable and trade payables, as each of such items would
appear on the consolidated balance sheet of such Person and its Subsidiaries
prepared as of the date of determination in accordance with generally accepted
accounting principles consistently applied.
"Obligations" means, with respect to any Indebtedness, any principal,
-----------
interest (including, without limitation, any interest accruing subsequent to
an event specified in Sections 6.1(v) and 6.1(vi)), penalties, fees, expenses
and other monetary liabilities payable under the documentation governing such
Indebtedness.
"Officer" of any Person means the Chairman of the Board, the President,
-------
any Senior or Executive Vice President, and Vice President, the Treasurer, the
Secretary or the Controller of such Person.
"Officers' Certificate" means a certificate signed by two Officers of any
---------------------
Person conforming to the requirements set forth in Sections 11.4 and 11.5.
"Opinion of Counsel" means a written opinion from legal counsel who is
------------------
reasonably acceptable to the Trustee (the counsel may be an employee of or
counsel to the Company) conforming to the requirements set forth in Sections
11.4 and 11.5. For the purpose of rendering an opinion, such counsel may rely
as to factual matters upon certificates or other documents furnished by
Officers and directors of the Company and upon such other documents as such
counsel deems appropriate as a basis of his or their opinion, copies of which
shall be delivered with such opinion.
"Person" means any individual, corporation partnership, joint venture,
------
trust, unincorporated organization or government or any agency or political
subdivision thereof.
- 9 -
<PAGE>
"Preferred Stock Dividends" with respect to any Person for any period
-------------------------
means the aggregate dividends and other distributions on or in respect of or
to the holders of any preferred stock of such Person or its Subsidiaries paid
during such period provided, however, that such term shall not include any
-------- -------
such dividends or distribution paid to any Person who is an Affiliate.
"Redemption Date" means, with respect to any Security to be redeemed, the
---------------
date fixed for such redemption pursuant to this Indenture.
"Redemption Price" means, when used with respect to any Security to be
----------------
redeemed, the price fixed for such redemption pursuant to this Indenture as
set forth in paragraph 5 of the form of such Security.
"Refinancing Debentures" means any security issued by Holdings the
----------------------
proceeds of which are applied to refinance any or all of the Holdings
Debentures.
"Responsible Officer" means when used with respect to the Trustee, any
-------------------
officer within the Corporate Trust Office of the Trustee including any Vice
President, Assistant Vice President, Secretary, Assistant Secretary or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.
"SEC" means the Securities and Exchange Commission and any government
---
agency succeeding to its functions.
"Securities" or "Notes" means the Notes of the Company issued pursuant to
---------- -----
this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and all
--------------
rules and regulations promulgated by the SEC thereunder.
"Shares" means those shares of Holdings' Class C Common Stock, par value
------
$.01 per share, which were sold in units with the Company's 14-1/2% Senior
Subordinated Notes due 1999 issued pursuant to the Indenture dated as of
September 25, 1989 between the Company and Mellon Bank, N.A., as Trustee.
- 10 -
<PAGE>
"Significant Subsidiary" means any Subsidiary, the assets, operating
----------------------
revenues or EBIT of which constitutes 10% or more of the assets, operating
revenues or EBIT of the Company as determined on a consolidated basis in
conformity with generally accepted accounting principles.
"Specified Senior Indebtedness" means any issue of Senior Indebtedness
-----------------------------
(other than Bank Debt) having a principal amount of at least $50,000,000. For
purposes of this definition, a refinancing of any Indebtedness shall be
treated as such only if it ranks or would rank on a pari passu basis with the
---- -----
Indebtedness refinanced.
"Subordinated Indebtedness" means any Indebtedness (whether outstanding
-------------------------
on the date of the Indenture or hereafter created) which, pursuant to the
terms of the instrument creating or evidencing the same is subordinate in
right of payment to the Securities, to which issues the Securities shall be
senior in right of payment.
"Subsidiary" means, with respect to any Person, any corporation,
----------
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, officers
or trustees thereof is at the time owned in the aggregate, directly or
indirectly, by such Person and its Subsidiaries.
"Tender Offer" means the tender offer described in the Company's Offer to
------------
Purchase dated November 18, 1988.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-
---
77bbbb) as in effect on the date of this Indenture.
"Trustee" means the party named as such in this Indenture until a
-------
successor replaces it pursuant to the applicable provisions of this Indenture
and thereafter means the successor.
Section 1.2. Other Definitions.
-----------------
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Asset Sale Accelerated
Payment Date".................... 3.8
"Asset Sale Offer"................ 3.8
</TABLE>
- 11 -
<PAGE>
<TABLE>
<S> <C>
"Asset Sale Offer Amount"......... 3.8
"Bankruptcy Law".................. 6.1
"Custodian"....................... 6.1
"Event of Default"................ 6.1
"Legal Holiday"................... 11.7
"Paying Agent".................... 2.3
"Payment Blockage Period"......... 10.4
"Registrar"....................... 2.3
"Refinancing Indebtedness"........ 4.9(f)
"Representative".................. 10.2
"Repurchase Date"................. 3.7
"Restricted Payments"............. 4.7(d)
"Senior Indebtedness"............. 10.2
"U.S. Government Obligations"..... 8.1
</TABLE>
Section 1.3. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the 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 Securities;
--------------------
"indenture security holder" means a Securityholder;
-------------------------
"indenture to be qualified" means this Indenture;
-------------------------
"indenture trustee" or "institutional trustee" means the Trustee; and
----------------- ---------------------
"obligor" on the Securities means the Company.
-------
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the
TIA and not otherwise defined herein have the meanings so assigned to them.
Section 1.4. Rules of Construction.
---------------------
Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
- 12 -
<PAGE>
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles;
(iii) references to "generally accepted accounting principles" shall
mean generally accepted accounting principles in effect in the United
States as of the time when and for the Period as to which such accounting
principles are to be applied;
(iv) "or" is not exclusive;
(v) words in the singular include the plural, and in the plural
include the singular;
(vi) provisions apply to successive events and trans-actions; and
(vii) all ratios and computations based on generally accepted
accounting principles contained in this Indenture shall be computed in
accordance with generally accepted accounting principles except that
calculations made for the purpose of determining compliance with the terms
of the covenants set forth in Article IV and other provisions of this
Indenture shall utilize accounting principles and policies in effect at the
time of preparation of, and in conformity with those used to prepare, the
historical financial statements of the Company for the fiscal year ended
September 30, 1988. Notwithstanding anything to the contrary contained
herein, each accounting term used herein shall be used as if, and each
financial test shall be calculated as if, the Company and its Subsidiaries
valued inventory on a FIFO basis (other than with respect to the
calculation of taxes) and without regard to the effects of Emerging Issues
Task Force 86-16.
ARTICLE II
THE SECURITIES
Section 2.1 Form and Dating.
---------------
The Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A, which is part of this Indenture. The
Securities shall be generally designated as the Company's "14- 1/2% Senior
Subordinated Notes due 1999, Series A." Each Security shall be dated the date
of its authentication. The Securities may have notations,
- 13 -
<PAGE>
legends or endorsements required by law, stock exchange rule or usage which
will be provided by the Company.
The terms and provisions contained in the Securities, annexed hereto as
Exhibit A, shall constitute, and are hereby expressly made, a part of this
Indenture. To the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Section 2.2 Execution and Authentication.
----------------------------
Two Officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Securities
and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until executed on behalf of the Company and
authenticated by the manual signature of the Trustee. The signature of the
Trustee or an authenticating agent shall be conclusive evidence that the
Security has been authenticated under this Indenture.
The Trustee shall authenticate Securities for original issue in an
aggregate principal amount up to $166,134,000 upon written order of the
Company signed by two Officers. The order shall specify the amount of
Securities to be authenticated and the date upon which the original issue of
Securities is to be authenticated. The aggregate principal amount of
Securities outstanding at any time may not exceed (except as provided by
Section 2.7) the aggregate principal amount of Securities permitted to be
issued pursuant to the first sentence of this paragraph.
The Trustee may appoint an authenticating agent reasonable acceptable to
the Company to authenticate Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. An authenticating agent may authenticate Securities on
behalf of the Trustee, except upon original issuance and pursuant to Section
2.7. Except as provided in the preceding sentence, each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with
the Company, a Subsidiary or an Affiliate of the Company.
- 14 -
<PAGE>
The Securities shall be issuable only in registered form without coupons
and only 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 where Securities may be
presented for registration of transfer or for exchange ("Registrar"), an
office or agency where Securities may be presented for payment ("Paying
Agent") and an office or agency where notices or demands to or upon the
Company in respect of the Securities and the Indenture may be served. The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional
Paying Agent.
The Company shall enter into an appropriate written agency agreement with
any Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall give
prompt written notice to the Trustee of the name and address of any Agent who
is not a party to this Indenture. If the Company fails to appoint or maintain
another entity to act as Registrar or Paying Agent, the Trustee shall act as
such. The Company, any Subsidiary or any of their Affiliates may act as Paying
Agent, Registrar or co-registrar.
The Company initially appoints the Trustee as Registrar and Paying Agent
and agent for service of notices and demands under this Indenture.
Section 2.4 Paying Agent to Hold Money in Trust.
-----------------------------------
On or prior to the due date of principal of and interest on any
Securities, the Company shall deposit with the Paying Agent money sufficient
to pay such principal and/or interest so becoming due. The Company shall
require each Paying Agent other than the Trustee to agree in writing that such
Paying Agent shall hold in trust for the benefit of Securityholders or the
Trustee all money held by the Paying Agent for the payment of principal of or
interest on the Securities (whether such money has been paid to it by the
Company or any other obligor on the Securities) and shall notify the Trustee
in writing of any failure by the Company (or any other obligor on the
Securities) in making any such payment. While any such failure continues, the
Trustee may require a Paying Agent to pay all money held by it to the Trustee
and to account for any funds disbursed. The
- 15 -
<PAGE>
Company at any time may require a Paying Agent to pay all money held by it to
the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than
the Company) shall have no further liability for the money so paid over to the
Trustee. If the Company, any Subsidiary or any of their Affiliates acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Securityholders all money held by it as Paying Agent.
Section 2.5 Securityholder 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
Securityholders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee at least ten days prior to each semiannual interest
payment date for the Securities and at such other times as the Trustee may
request in writing, a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Securityholders.
Section 2.6 Transfer and Exchange.
---------------------
When Securities are presented to the Registrar or a co-registrar with a
request to register their transfer or to exchange them for an equal principal
amount of Securities of other authorized denominations, the Registrar shall
register the transfer or make the exchange if its requirements for such
transaction are met; provided that a Security 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 Registrar and the
Trustee, in the event the Trustee is not then the Registrar, duly executed by
the Holder thereof or his attorney duly authorized in writing. The
registration of any Security upon transfer or exchange shall be effective only
after the surrender of the Security and the issuance by the Company and
authentication by the Trustee of replacement Securities. To permit
registrations of transfer and exchanges, the Company shall issue and the
Trustee shall authenticate Securities at the Registrar's request. The Company
will not make any service charge for any registration of transfer or exchange
but may require payment by the party requesting such registration of a
transfer or exchange of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchanges pursuant
to Section 2.10, 3.6 or 9.5).
- 16 -
<PAGE>
The Company shall not be required to, and without the prior written
consent of the Company, the Registrar shall not register the transfer or
exchange of (i) any Security selected for redemption in whole or in part,
except the unredeemed portion of any Security being redeemed in part, or (ii)
any Security for a period of 15 days before a selection of Securities to be
redeemed.
Section 2.7 Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Trustee or if the Holder of
a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee, at the Company's request,
shall authenticate a replacement Security if the requirements of the Trustee
and Company are met, provided that the Trustee shall not be required to
--------
authenticate or replace any such Security which has been called for redemption
in accordance with the terms thereof. If required by the Trustee or the
Company, an indemnity bond must be provided that is sufficient in the judgment
of each to protect the Company, the Trustee or any Agent from any loss which
any of them may suffer if a Security is replaced. The Company may charge the
Securityholder who has lost a Security for its expenses in replacing a
Security.
Every replacement Security is an additional obligation of the Company and
shall be entitled to the benefits of this Indenture.
Section 2.8 Outstanding Securities.
----------------------
The Securities outstanding at any time are all Securities executed on
behalf of the Company and authenticated by the Trustee except for those
cancelled by it, those delivered to it for cancellation and those described in
this Section as not outstanding. A Security does not cease to be outstanding
because the Company, a Subsidiary or an Affiliate holds such Security.
If a Security is replaced pursuant to Section 2.7, it ceases to be
outstanding and interest ceases to accrue unless the Company and the Trustee
receive proof satisfactory to each of them that the replaced Security is held
by a bona fide purchaser.
---- ----
If the Paying Agent (other than the Company, a Subsidiary of the Company
or an Affiliate of any thereof) holds, on a redemption date or maturity date,
money sufficient to pay Securities payable on that date, then on and after
that date,
- 17 -
<PAGE>
such Securities shall be deemed to be no longer outstanding and interest on
them shall cease to accrue.
Section 2.9 Treasury Securities.
-------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, amendment, supplement, waiver or
consent, Securities owned by the Company, a Subsidiary or an Affiliate of the
Company or an Affiliate of any thereof, shall be 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, amendment,
supplement, waiver or consent, only Securities which the Trustee knows are so
owned shall be so disregarded. Securities owned by the Company, a Subsidiary
or an Affiliate of the Company which have been pledged in good faith may be
regarded as outstanding if the Trustee receives an Officers' Certificate
stating that said Securities have been so pledged, that the pledgee is
entitled to vote with respect to such Securities and that the pledgee is not
the Company or any other obligor on the Securities, a Subsidiary or an
Affiliate of the Company, or a Subsidiary of such other obligor.
Section 2.10 Temporary Securities.
--------------------
Until definitive Securities are ready for delivery, the Company may
prepare and execute and the Trustee, upon receipt of a written order of the
Company signed by two Officers, shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive
Securities but may have variations that the Company considers appropriate for
temporary Securities. Without unreasonable delay, the Company shall prepare
and the Trustee, upon receipt of a written order of the Company signed by two
Officers, shall authenticate definitive Securities in exchange for temporary
Securities. Until such exchange, temporary Securities shall be entitled to the
same rights, benefits and privileges as definitive Securities.
Section 2.11 Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for registration of transfer, exchange,
payment, replacement or cancellation. The Trustee and no one else shall cancel
all Securities surrendered for registration of transfer, exchange, payment,
replacement or cancellation. The Company may not issue new Securities to
replace Securities that it has paid or that
- 18 -
<PAGE>
have been delivered to the Trustee for cancellation. All cancelled Securities
held by the Trustee shall be destroyed in accordance with the ordinary customs
and practices of the Trustee.
Section 2.12 CUSIP Numbers.
-------------
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and if so, the Trustee shall use CUSIP numbers in notices
of redemption or exchange as a convenience to Holders; provided that any such
--------
notice shall state that no representation is made as to the correctness or
accuracy of such numbers either as printed on the Securities or as contained
in any notice of redemption or exchange and that reliance may be placed only
on the other identification numbers printed on the Securities. The Company
will promptly notify the Trustee in writing of any change in the CUSIP number.
Section 2.13 Defaulted Interest.
------------------
If the Company fails to make a payment of interest on the Securities, it
shall pay such interest plus, to the extent lawful, interest payable on the
defaulted interest, to the Persons who are Securityholders on a subsequent
special record date. The Company shall fix the special record date and payment
date in a manner reasonably satisfactory to the Trustee. The payment date
shall be no less than 15 days after such special record date. At least 15 days
before the special record date, the Company shall mail to Securityholders a
notice that states the special record date, payment date and amount of such
interest to be paid.
Section 2.14 Home Office Payment Agreements.
------------------------------
Cash payments of interest on, and all or any portion of the principal of,
any Security shall be made by check to the Holder; provided, however, so long
as any Holder shall own Securities with an aggregate principal amount greater
than $1 million such Holder may elect to have any payments to such Holder of
principal (other than in complete redemption) and interest due by wire
transfer in immediately available funds by 12:00 noon local time or as soon
thereafter as practicable, at the location of such Holder's account; on the
date of payment to such account as specified by separate written notice to the
Trustee (with a copy to the Company) by such Holder (providing sufficient
information with such wire transfer to identify the source and application of
the funds and requesting the bank to send a credit advice thereof to such
Holder), or to such other account or in
- 19 -
<PAGE>
such other similar manner as such Holder may designate to the Trustee (with a
copy to the Company) in writing. Each Holder electing to have home office
payments (or the person for whom such Holder is a nominee) shall, before
selling, transferring or otherwise disposing of any such Security, make a
notation thereon, or submit the same to the Trustee for notation thereon, of the
date to which interest has been paid thereon and the amount of all redemptions
previously made thereon, or surrender the same to the Trustee in exchange for a
Security or Securities aggregating the same principal amount as the unredeemed
principal amount of the Securities surrendered. The final payment of principal
on a Security may be made only upon presentment of such Security to the Trustee.
The Company will indemnify and save the Trustee, its directors, officers, agents
and employees, harmless against any liability resulting from any act or omission
to act on the part of the Company or any such Holder in connection with any such
notice or which the Trustee may incur as a result of making any payment in
accordance with any such notice.
ARTICLE III
REDEMPTION
Section 3.1 Notices to Trustee.
------------------
If the Company elects to redeem all or any of the Securities pursuant to
the provisions of this Article III and paragraph 5 of the Securities, at least
60 days before a Redemption Date, or such shorter period as shall be
satisfactory to the Trustee, it shall deliver to the Trustee an Officers'
Certificate specifying the Redemption Date, the principal amount of Securities
to be redeemed on the Redemption Date, the specific paragraph of the
Securities pursuant to which the Securities being called for redemption are
being redeemed and the Redemption Price.
Section 3.2 Selection of Securities to be Redeemed.
--------------------------------------
If less than all of the Securities are to be redeemed, the Trustee shall
select Securities to be redeemed, pro rata, by lot or by a method that
--- ----
complies with the requirements of any exchange on which the Securities are
listed and that the Trustee considers fair and appropriate. The Trustee shall
make the selection from Securities outstanding and not previously called for
redemption. The Trustee may select for redemption portions of the principal of
Securities that have denominations larger than $1,000. Securities and portions
of them it selects shall be in amounts of $1,000 or integral multiples of
$1,000. Provisions
- 20 -
<PAGE>
of this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption. The Trustee shall notify the
Company promptly of the Securities or portions of Securities to be called for
redemption.
Section 3.3 Notice of Redemption.
--------------------
At least 30 days, but in any event not more than 60 days before the
Redemption Date, the Company shall mail a notice of redemption by first-class
mail to each Holder whose Securities are to be redeemed at his address as it
appears in the Securities register maintained by the Registrar.
The notice shall identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(3) if any Security is being redeemed in part, the portion of the
principal amount (in integral multiples of $1,000) of such Security to be
redeemed and that, after the Redemption Date, upon surrender of such
Security, a new Security or Securities in principal amount equal to the
unredeemed portion shall be issued;
(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest to the
Redemption Date;
(6) the paragraph of the Securities or the Section of this Indenture
pursuant to which the Securities called for redemption are being redeemed;
(7) that, unless the Company defaults in making payment of the
Redemption Price and accrued interest to the Redemption Date, interest on
Securities called for redemption ceases to accrue on and after the
Redemption Date and the only remaining right of the Holders is to receive
payment of the Redemption Price plus accrued interest to the Redemption
Date upon surrender of the Securities to the Trustee or the Paying Agent;
and
- 21 -
<PAGE>
(8) the Security's CUSIP number (subject to the proviso in Section
2.12).
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at the Company's expense; provided, however, that
the Company shall deliver to the Trustee, at least 45 days prior to the
Redemption Date or such shorter period as may be satisfactory to the Trustee,
an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph. Concurrently with the giving of any such notice by the
Company to the Securityholders, the Company shall deliver to the Trustee an
Officers' Certificate stating that such notice has been given. The notice
mailed in the manner herein provided shall be conclusively presumed to have
been duly given whether or not the Holder receives such notice. In any case,
failure to give such notice by mail or any defect in the notice to the Holder
of any Security shall not affect the validity of the proceeding for the
redemption of any other Security.
Section 3.4 Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the Redemption Date at the Redemption Price plus
accrued interest to the Redemption Date. Upon surrender to the Paying Agent,
such Securities shall be paid at the Redemption Price plus accrued interest to
the Redemption Date. Unless the Company defaults in making payment of the
Redemption Price and accrued interest to the Redemption Date, interest on the
Securities called for redemption ceases to accrue on and after the Redemption
Date and the only remaining right of the Holders is to receive payment of the
Redemption Price plus accrued interest to the Redemption Date upon surrender
of the Securities to the Paying Agent.
Section 3.5 Deposit of Redemption Price.
---------------------------
On or prior to the Redemption Date, the Company shall deposit with the
Trustee or with the Paying Agent (or if the Company is acting as its own
Paying Agent the Company shall segregate and hold in trust) in federal or
other immediately available funds money sufficient to pay the Redemption Price
of and accrued interest to the Redemption Date on all Securities to be
redeemed on that date other than Securities or portions thereof called for
redemption on that date which have been delivered by the Company to the
Trustee for cancellation.
- 22 -
<PAGE>
If any Security called for Redemption shall not be so paid (in the manner
provided in Section 4.1) on the applicable Redemption Date, interest shall be
paid, from the Redemption Date until such Redemption Price is paid, on the
unpaid principal and, to the extent permitted by law, on any interest not paid
on such unpaid principal, in each case at the rate and in the manner provided
in the Securities. Prior to the date such Redemption Price and accrued
interest is paid, the Company shall deposit with the Trustee or the Paying
Agent (or if the Company is acting as its own Paying Agent, the Company shall
segregate or hold in trust) money to pay the additional interest contemplated
by the previous sentence.
Section 3.6 Securities Redeemed in Part.
---------------------------
Upon surrender of a Security that is redeemed in part, the Company shall
issue, and the Trustee shall authenticate for the Holder at the expense of the
Company, a new Security equal in principal amount to the unredeemed portion of
the Security surrendered.
Section 3.7 Mandatory Redemption or Repurchase.
----------------------------------
In addition to any repurchases required by Sections 3.8, 4.11 and 4.21
hereof, if, for the 12 month period ending on each of August 31, 1996 and
1997, the Company's Consolidated Fixed Charge Ratio (as defined) exceeds 1.5
to 1, the Company shall be required, within 90 days from such August 31 (the
"Repurchase Date"), to optionally redeem or otherwise repurchase in the open
market and retire 5% and 10%, respectively, of the principal amount of Notes
offered hereby. Notwithstanding the requirement of the preceding sentence, the
Company shall not be required to make such redemption or repurchase until such
time, and to the extent, funds become available under the Credit Agreement or
any successor or replacement facility. In addition, on August 31, 1998, the
Company shall redeem $87,500,000 million in aggregate principal amount of the
Securities at a Redemption Price equal to 100% of the aggregate principal
amount thereof, plus accrued interest thereon to the Redemption Date. The
Company may reduce the principal amount of Notes to be redeemed pursuant to
this Section by subtracting 100% of the principal amount of any Notes that the
Company has previously acquired and surrendered for cancellation or that the
Company has repurchased or redeemed on or prior to the Redemption Date or the
Repurchase Date and, in the case of a mandatory repurchase, which have not
previously been used as a credit against a prior mandatory repurchase.
- 23 -
<PAGE>
Section 3.8 Offer to Repurchase by Application of Net Proceeds.
--------------------------------------------------
Within 10 days after the occurrence of any event requiring the Company to
offer to repurchase Securities pursuant to the provisions of Section 4.11
hereof, the Company shall deliver to the Trustee an Officers' Certificate
stating that such event shall have occurred. In addition to such Officers'
Certificate, the Company shall deliver to the Trustee an Opinion of Counsel
stating that the Asset Sale Offer (as defined below) is being made in
compliance with all applicable law. Within 30 days after the occurrence of any
event requiring the Company to offer to repurchase Securities pursuant to the
provisions of Section 4.11 hereof, the Company shall mail or cause the Trustee
to mail (in the Company's name and expense) an offer to repurchase (the "Asset
Sale Offer") an aggregate principal amount of Securities equal to the Net
Proceeds of an Asset Sale (the "Asset Sale Offer Amount") at a purchase price
in cash equal to 100% of the principal amount thereof, plus accrued and unpaid
interest to the Asset Sale Accelerated Payment Date (as defined below) to all
Holders of Securities. The Asset Sale Offer shall remain open for a period of
twenty Business Days following the mailing of the notice and no longer, except
to the extent that a longer period is required by applicable law (the "Asset
Sale Offer Period"). No later than five Business Days after the termination of
the Asset Sale Offer Period (the date of such purchase being referred to
herein as the "Asset Sale Accelerated Payment Date"), the Company shall
purchase the Asset Sale Offer Amount of such Securities tendered on a pro rata
--- ----
basis (with such adjustments as may be deemed appropriate by the Company so
that only securities denominations of $1,000, or integral multiples thereof,
shall be purchased) or, if less than the Asset Sale Offer Amount has been
tendered, all such Securities tendered in response to the Asset Sale Offer.
If the Asset Sale Accelerated Payment Date is on or after an interest
payment record date and on or before the related Interest Payment Date, any
interest accrued to the Asset Sale Accelerated Payment Date but unpaid will be
paid to the Person in whose name a Security is registered at the close of
business on such record date, and no additional interest will be payable to
Holders who tender Securities pursuant to the Asset Sale Offer.
Upon the commencement of any Asset Sale Offer, the Company or the
Trustee, at the written request of the Company, shall send, by first class
mail, a notice to each of the Holders. The notice shall, to the extent
permitted by applicable law, be
- 24 -
<PAGE>
accompanied by a copy of the information regarding the Company that is (or would
be, if the Company were subject to the reporting requirements of the Exchange
Act) required to be contained in a Quarterly Report on Form 10-Q for the fiscal
quarter ending prior to the quarter in which such Asset Sale Offer is made if
such fiscal quarter is one of the Company's first three fiscal quarters. If the
fiscal quarter ending prior to the quarter in which the Asset Sale Offer is made
is the Company's last fiscal quarter, a copy of the Company's most recent
financial statements, including any notes thereto, and an auditors' report by
Ernst & Young or another accounting firm of established national reputation, and
a "Management's Discussion and Analysis of Financial Condition and Results of
Operations" shall either accompany the notice or be delivered to Holders not
less than 15 days before the Asset Sale Accelerated Payment Date. The notice
shall contain instructions indicating how Holders may tender Securities pursuant
to the Asset Sale Offer. The notice, which shall set forth the terms of the
Indenture governing the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this
Section 3.8 and the length of time the Asset Sale Offer will remain open;
(b) the Asset Sale Offer Amount, the purchase price and the Asset
Sale Accelerated Payment Date;
(c) that any Security not tendered or accepted for payment will
continue to accrue interest;
(d) that any Security accepted for payment pursuant to the Asset
Sale Offer shall cease to accrue interest after the Asset Sale
Accelerated Payment Date;
(e) that Holders electing to have a Security purchased pursuant to
any Asset Sale Offer will be required to tender the Security, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Company, a depositary, if appointed by the
Company, or a Paying Agent at the address specified in the notice on or
before the last day of the Asset Sale Offer Period;
(f) that Holders will be entitled to withdraw their election if the
Company, depositary or Paying Agent, as the case may be, receives, not
later than on or before the last day of the Asset Sale Offer Period, a
telegram, telex, facsimile transmission (confirmed by
- 25 -
<PAGE>
overnight delivery of the original thereof) or letter setting forth the
name of the Holder, the principal amount of the Security the Holder
delivered for purchase and a statement that such Holder is withdrawing
his election to have the Security purchased;
(g) that, if the aggregate principal amount of Securities
surrendered by Holders exceeds the Asset Sale Offer Amount, the Company
shall select the Securities to be purchased on a pro rata basis (with
--- ----
such adjustments as may be deemed appropriate by the Company so that only
Securities in denominations of $1,000, or integral multiples thereof,
shall be purchased); and
(h) that Holders whose Securities were purchased only in part will
be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered.
On or before an Asset Sale Accelerated Payment Date, the Company shall,
to the extent lawful, (i) accept for payment on a pro rata basis (with such
--- ----
adjustments as may be deemed appropriate by the Company so that only
Securities in denominations of $1,000 or integral multiples thereof, shall be
purchased) the Asset Sale Offer Amount of Securities or portions thereof
tendered pursuant to the Asset Sale Offer, (ii) if the Company appoints a
depositary or Paying Agent, deposit with such depositary or Paying Agent money
sufficient to pay the purchase price (including accrued interest) of all
Securities or portions thereof so accepted, (iii) deliver or cause the
depositary or Paying Agent to deliver to the Trustee the Securities so
accepted and (iv) deliver to the Trustee an Officers' Certificate stating that
such Securities or portions thereof are accepted for payment by the Company in
accordance with the terms of this Section 3.8 and, if the Company has
appointed a depositary or Paying Agent, that sufficient funds have been
deposited with such depositary or Paying Agent to pay the purchase price
(including accrued interest) on such Securities or portions thereof accepted
for payment. The depositary, the Paying Agent or the Company shall promptly
(but in any case not later than five Business Days after the Asset Sale
Accelerated Payment Date) mail to each tendering Securityholder an amount
equal to the purchase price of the Securities tendered by such Securityholder
and accepted by the Company for purchase, and the Trustee shall promptly
authenticate and mail to such Holders a new Security equal in principal amount
to any unpurchased portion of the Security surrendered. Any
- 26 -
<PAGE>
Securities not so accepted shall be promptly mailed by the Company to the Holder
thereof. The Company will publicly announce the results of the Asset Sale Offer
on the Asset Sale Accelerated Payment Date in a financial newspaper of
widespread circulation in the City of New York.
ARTICLE IV
COVENANTS
Section 4.1 Payment of Securities.
---------------------
The Company shall pay the principal of and interest on the Securities on
the dates and in the manner provided in the Securities and in this Indenture.
An installment of principal (including any redemption or repurchase of
Securities pursuant to Article III), or interest shall be considered paid on
the date it is due if the Trustee or Paying Agent holds on that date money (or
if the Company is its own Paying Agent, on the date such money is segregated
in trust) designated for and sufficient to pay the installment if payment
thereof is not prohibited pursuant to the terms of this Indenture. Interest
payable on any Interest Payment Date on and after the date on which the Bank
Debt (and any refinancing thereof) has been paid in full shall be payable only
in cash.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law to the full extent permitted thereby) on
overdue principal at the rate then borne by the Securities; it shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law to the full extent permitted thereby) on overdue installments
of interest at the same rate to the extent legally permitted.
Section 4.2 Maintenance of Office or Agency.
-------------------------------
The Company will maintain in the Borough of Manhattan, New York, New
York, an office or agency (which may be an office of the Trustee, Registrar or
co-registrar) where at all times the Securities may be surrendered for
registration of transfer or exchange and where at all times the notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Company shall give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations,
- 27 -
<PAGE>
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 11.2.
The Company may also designate from time to time one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided that no such designation or rescission shall in any manner relieve
- --------
the Company of its obligation so to designate as aforesaid an office or agency
in the Borough of Manhattan, New York, New York, for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
The Company hereby designates the Trustee's Corporate Trust Office, as
one such office or agency of the Company in accordance with Section 2.3.
Section 4.3 Corporate Existence.
-------------------
Subject to Article V, Section 4.11 and Section 4.15, the Company shall do
or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence and that of each Subsidiary of the Company
and the rights (charter and statutory), licenses and corporate franchises of
the Company and its Subsidiaries; provided that the Company shall not be
--------
required to preserve any such existence (except of the Company), right or
franchise if the Board of Directors of the Company or of the Subsidiary
concerned 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 as a whole and that the loss thereof is not adverse in any
material respect to the Holders.
Section 4.4 SEC Reports and Reports to Securityholders.
------------------------------------------
(a) The Company shall file with the Trustee, within 15 days after it
files them with the SEC, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the
foregoing as the SEC may by rules and regulations prescribe), if any, which
the Company is required to file with the SEC pursuant to Sections 13 or 15(d)
of the Exchange Act ("SEC Reports"). The Company shall file SEC Reports with
the Trustee and the SEC in accordance with the requirements of the previous
sentence at all times, whether or not the Company is subject to the
requirements of such Sections 13 or 15(d). The Company also shall comply with
the other provisions of TIA Section 314(a).
- 28 -
<PAGE>
(b) So long as any of the Securities remain outstanding, the Company
shall cause any annual report furnished to its stockholders generally and any
quarterly or other financial reports furnished by it to its stockholders
generally to be filed with the Trustee and mailed to the Securityholders at
their addresses appearing in the register of Securities maintained by the
Registrar at the time of such mailing or furnishing to shareholders. The
Company shall furnish annual or quarterly reports to its stockholders pursuant
to the Exchange Act, whether or not so required by the Exchange Act. In each
report required to be mailed to the Holders pursuant to this Section 4.4(b),
the Company shall include a calculation of the Consolidated Fixed Charge Ratio
and a description, in reasonable detail, of its component parts for the period
covered by such report.
Section 4.5 Compliance Certificate; Notice of Defaults.
------------------------------------------
(a) The Company shall deliver to the Trustee within 45 days after the end
of each fiscal quarter of the Company and within 90 days after the end of each
fiscal year of the Company an Officers' Certificate, conforming to the
requirements set forth in Sections 11.4 and 11.5 hereof, stating a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
quarter has been made under the supervision of the signing Officers with a
view to determining whether the Company has kept, observed, performed and
fulfilled in all material respects its obligations under this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his knowledge the Company has kept, observed, performed and fulfilled
in all material respects each and every covenant contained in this Indenture
applicable to it and that it is not in default in any material respect in the
performance or observance of any of the terms, provisions and conditions
hereof applicable to it (or, if a Default or Event of Default shall have
occurred, describing all such Defaults or Events of Default of which he may
have knowledge and what action the Company has taken, is taking or proposes to
take with respect thereto) and that to the best of his knowledge no event has
occurred and remains in existence by reason of which payments on account of
the principal of or interest on the Securities are prohibited or if such event
has occurred, a description of the event and what action the Company has
taken, is taking or proposes to take with respect thereto. Any Officers'
Certificate delivered pursuant to this Section 4.5(a) shall comply with the
requirements of Section 314(a)(4) of the TIA.
- 29 -
<PAGE>
(b) The Company shall deliver to the Trustee within 90 days after the end
of each fiscal year a written statement by the Company's independent certified
public accountants stating (A) that their audit examination has included a
review of the terms of this Indenture and the Securities as they relate to
accounting matters, and (B) whether, in connection with their audit
examination, any Default has come to their attention and if such a Default has
come to their attention, specifying the nature and period of existence
thereof; provided that, without any restriction as to the scope of the audit
--------
examination, such independent certified public accountants shall not be liable
by reason of any failure to obtain knowledge of any such Default that would
not be disclosed in the course of an audit examination conducted in accordance
with generally accepted auditing standards.
(c) The Company shall deliver to the Trustee as soon as possible and in
any event within 10 days after the occurrence of each Event of Default which
is continuing, an Officers' Certificate setting forth the details of such
Event of Default and the action which the Company proposes to take with
respect thereto.
Section 4.6 Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, or plead, or in any manner whatsoever
claim, and shall resist any and all efforts to be compelled to take the
benefit or advantage of, any stay or extension law or any usury law or other
law which would prohibit or forgive the Company from paying all or any portion
of the principal of and/or interest on the Securities 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 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 4.7 Limitation on Restricted Payments.
---------------------------------
Subject to the other provisions of this Section 4.7, the Company will
not, nor will it permit any of its Subsidiaries to, directly or indirectly:
- 30 -
<PAGE>
(a) declare or pay any dividend or make any distribution on account of
the Company's or such Subsidiary's Capital Stock, partnership interests or
other Equity Interests (other than dividends or distributions payable in
Equity Interests (other than Disqualified Interests) of the Company or a
Subsidiary and other than dividends or distributions payable to the Company
or a wholly owned Subsidiary of the Company);
(b) make any loan advance, extension of credit or investment in any
Affiliate or Subsidiary other than a Subsidiary wholly owned, either
directly or indirectly, by the Company;
(c) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company, Holdings, any Subsidiary or other
Affiliate of the Company or Holdings held by any Person other than the
Company or a wholly owned Subsidiary of the Company; or
(d) voluntarily prepay Indebtedness that is pari passu with, or
---- -----
subordinated to, the Securities, other than as specifically permitted by
the terms hereof and other than Indebtedness which matures or has any
mandatory redemptions or prepayments in respect thereof prior to the final
scheduled maturity date of the Securities (all such dividends,
distributions, purchases, redemptions or other acquisitions, retirements
and prepayments being collectively referred to as "Restricted Payments"),
If, at the time of such Restricted Payment:
(i) a Default or Event of Default shall have occurred and be
continuing,
(ii) immediately after such Restricted Payment and after giving
effect thereto on a pro forma basis, Consolidated Net Worth of the Company
--- -----
does not exceed $265 million,
(iii) the Company's Consolidated Fixed Charge Ratio is less than 2.0
to 1 after giving pro forma effect to such Restricted Payment by
--- -----
subtracting the amount of such Restricted Payment from the amount of
Consolidated Gross Cash Flow used in calculating the Consolidated Fixed
Charge Ratio, or
- 31 -
<PAGE>
(iv) such Restricted Payment, together with the aggregate of all other
Restricted Payments (valued as set forth below) made after the satisfaction
of the conditions in clauses (ii) and (iii) above, exceeds the sum of (x)
25% (or 33% after the Company's Consolidated Net Worth is equal to or
greater than $350 million) of the amount of the aggregate Consolidated Net
Income of the Company for the period (taken as one accounting period) from
the beginning of the first quarter immediately after the initial
satisfaction of the condition in clause (ii) above to the end of the
Company's most recently ended fiscal quarter at the time of such Restricted
Payment plus (y) 100% of the aggregate net cash proceeds and the fair
market value of marketable securities received by the Company from the
issue or sale of (A) Equity Interests or warrants, options or rights to
acquire Equity Interests of the Company subsequent to the date hereof
(other than Equity Interests issued or sold to a Subsidiary and other than
Disqualified Interests), or (B) any Indebtedness or other security
convertible into any such Equity Interest that has been so converted.
For the purposes of the foregoing, the net proceeds from the issuance of
Equity Interests of the Company or any Subsidiary Issued upon conversion of
debt securities shall be deemed to be the net book value of such debt
securities at the date of conversion (plus the additional amount required to
be paid upon such conversion, if any), less any cash payment on account of
fractional shares. For purposes of this paragraph, the net book value of a
security shall be the amount received by the Company on the issuance of such
security, as adjusted on the books of the Company to the date of conversion.
For purposes of determining under clause (iv) above the amount expended
for Restricted Payments, cash distributed shall be valued at the face amount
thereof and property other than cash shall be valued at its fair market value,
as determined in good faith by the Board of Directors of the Company.
The provisions of this Section 4.7 shall not prohibit:
(A) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
comply with the provisions hereof; or
(B) the retirement of any of the Company's Equity Interests in
exchange for, or out of the net proceeds of the substantially concurrent
sale (other than to a
- 32 -
<PAGE>
Subsidiary) of, other Equity Interest (other than Disqualified
Interests); or
(C) Restricted Payments to finance loans made to management
employees (i) in the ordinary course of business or (ii) in an aggregate
principal amount outstanding at any time not to exceed $1,000,000 in
connection with the exercise of employee stock options and any costs or
expenses (including taxes) incurred in connection therewith; or
(D) Restricted Payments made to refinance Indebtedness subordinated
in right of payment to the Securities with the proceeds of Indebtedness
permitted by Section 4.9(e); or
(E) Restricted Payments required to be made pursuant to Section
262(i) of the Delaware General Corporation Law (or any successor statute)
or payments pursuant to settlement agreements with holders of Shares that
have perfected appraisal rights thereunder in an amount not in excess of
$31 per Share; or
(F) [Intentionally Omitted.]
(G) [Intentionally Omitted.]
(H) [Intentionally Omitted.]
(I) Restricted Payments to redeem prior to maturity Alco's 6 1/4%
convertible subordinated debentures due 2001.
(J) Restricted Payments to Holdings in an amount necessary to meet
the cash requirements of Holdings to pay interest on the Holdings
Debentures in any 6 month period; provided, that (i) no Event of
--------
Default or event which with the giving of notice or passage of time would
constitute an Event of Default shall occur after giving effect to such
Restricted Payments; (ii) the Indebtedness to Net Worth Ratio of the
Company is not more than 2.9 to 1 at the time of, and after giving effect
to, such Restricted Payment, (iii) Consolidated Net Worth of the Company
is more than $160 million at the time of, and after giving effect to,
such Restricted Payment, and (iv) the Consolidated Fixed Charge Ratio of
the Company is more than 1.5 to 1 after giving pro forma effect to such
--- -----
Restricted Payment by
- 33 -
<PAGE>
subtracting the amount of such Restricted Payment from the amount of
Consolidated Gross Cash Flow used in calculating the Consolidated Fixed
Charge Ratio; or
(K) Restricted Payments to Holdings to allow Holdings to pay income
taxes, provided that such Restricted Payments may not exceed the lesser
of (i) income taxes actually paid by Holdings and (ii) the amount of
income taxes which would be paid by the Company if it were the tax paying
entity; or
(L) Restricted Payments to Holdings to finance the purchase from
terminated management employees of the Company of Capital Stock or
Indebtedness of Holdings provided that the aggregate amount of such
Restricted Payments which may be outstanding at any time may not exceed
$5 million; and provided further that if such amounts are not repaid by
Holdings to the Company within six months of such advance, the amount
available for Restricted Payments shall be reduced by the amount of such
Restricted Payment until repaid to the Company;
(M) Restricted Payments for (i) actual legal, accounting and other
operating expenses (which shall not in any event include any interest
payments on Indebtedness or management or similar fees) of Holdings to
the extent reasonably necessary to permit Holdings to perform its
obligations under the Holdings Debentures (other than the payment of
interest), subscription and stockholder agreements pursuant to which
Company Common Stock is issued or issuable and the transactions and
matters contemplated thereby including the obtaining of officers' and
directors' liability insurance and indemnification agreements or (ii)
actual fees and expenses incurred in connection with the refinancing by
Holdings of the Holdings Debentures; or
(N) Restricted Payments to Holdings which are used by Holdings to
finance the repurchase of common stock of Holdings or the redemption of
Holdings Debentures, for an aggregate repurchase or redemption price not
in excess of $1,500,000 plus accrued interest on the Holdings Debentures,
if (i) such repurchase and/or redemption occurs substantially
simultaneously with (x) the sale of common stock (or the granting of
options to purchase common stock) or Holdings
- 34 -
<PAGE>
Debentures for cash to management employees of Alco and its Subsidiaries,
or (y) the surrender by management employees of Alco and its Subsidiaries
of options to purchase the common stock of Alco, and (ii) the amount paid
by Holdings in respect of such repurchase or redemption does not exceed
the aggregate of the cash proceeds so received and value of Alco common
stock options so surrendered.
Section 4.8 Limitation on Dividend and Other Payment Restrictions Affecting
---------------------------------------------------------------
Subsidiaries.
-----------------
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary of
the Company to (a) pay dividends or make any other distributions on its
Capital Stock or any other equity interest or participation in, or measured
by, its profits, owned by the Company or any Subsidiary of the Company, or pay
any Indebtedness owed to, the Company or any Subsidiary of the Company, (b)
make loans or advances to the Company or any Subsidiary of the Company or (c)
transfer any of its properties or assets to the Company or any Subsidiary of
the Company, except for such encumbrances or restrictions existing under or by
reasons of (i) applicable law, (ii) this Indenture, (iii) the Credit Agreement
or any agreement with respect to Refinancing Indebtedness (as defined in
Section 4.9(f)), (iv) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of the Company or any
Subsidiary of the Company, (v) customary restrictions contained in agreements
with suppliers or customers, (vi) any instrument governing Indebtedness of a
Person acquired by the Company or any Subsidiary of the Company at the time of
such acquisition, which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person other than the Person so
acquired, or (vii) Indebtedness existing on the date hereof.
Section 4.9 Limitation on Additional Indebtedness.
-------------------------------------
(a) Subject to the other provisions of this Section 4.9, the Company
will not, nor will it permit any of its Subsidiaries, directly or indirectly,
to create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness other than the Securities
unless the Company's Consolidated Fixed Charge Ratio for its four full fiscal
quarters next preceding the date such additional Indebtedness is created,
incurred, assumed or guaranteed would have been at least 1.5 to 1, determined
on a pro forma basis
--- -----
- 35 -
<PAGE>
(including a pro forma application of the net proceeds of such Indebtedness and
--- -----
after giving effect on a pro forma basis to any acquisition of assets as if such
--- -----
acquisition had occurred at the beginning of such period) as if the additional
Indebtedness had been created, incurred, assumed or guaranteed at the beginning
of the period.
(b) Notwithstanding the foregoing, the limitations of this Section 4.9
shall not apply to existing Indebtedness of Alco or its Subsidiaries which
remained outstanding immediately after the Merger or the incurrence by the
Company of Indebtedness represented by the Securities or Indebtedness pursuant
to the Credit Agreement in an aggregate principal not to exceed $350 million,
less any amounts required to be repaid (and which may not be reborrowed) in
accordance with the repayment provisions of the Credit Agreement as in effect
at the date hereof, without giving effect to any amendments, alterations or
waivers of any provisions thereof.
(c) The limitation of Sections 4.9(a) hereof notwithstanding, the
Company and its Subsidiaries may create, incur, assume or guarantee additional
Indebtedness in connection with or arising out of obligations for property
acquired in the ordinary course of business or other similar financing
transactions of up to an aggregate of $10 million at any one time outstanding;
provided, however, that the Company and its Subsidiaries may create, incur,
- -------- -------
assume or guarantee additional Indebtedness in connection with or arising out of
Capital Lease obligations or purchase money indebtedness of up to an aggregate
of $5 million per fiscal year.
(d) The limitations of Section 4.9(a) hereof notwithstanding, the
Company and its Subsidiaries may create, incur or assume other Indebtedness of
up to an aggregate principal amount of $35 million, all or a portion of which
may be Indebtedness pursuant to the Credit Agreement.
(e) The limitations of Section 4.9(a) hereof notwithstanding, the
Company or a Subsidiary of the Company may create, incur or assume
Indebtedness the proceeds of which are used to refinance outstanding
Indebtedness (other than borrowings under the Credit Agreement) of the Company
or any of its Subsidiaries in a principal amount (or, if such Indebtedness is
issued with original issue discount, in a principal amount equal to the
original issue price of such Indebtedness plus accretion, if any) not to
exceed the principal amount so refinanced; provided that Indebtedness the
--------
proceeds of which are used to refinance the Securities or other Indebtedness
of the Company
- 36 -
<PAGE>
which is subordinated in right of payment to the Securities shall only be
permitted (l) if the Securities are refinanced in part, such Indebtedness is
expressly made pari passu or subordinate in right of payment to the remaining
---- -----
Securities, (2) if the Indebtedness to be refinanced is subordinated in right of
payment to the Securities, the Indebtedness incurred in the refinancing is
subordinated in right of payment to the Securities at least to the extent that
the Indebtedness to be refinanced is subordinated to the Securities, and (3) if
the Securities are refinanced in part or if the Indebtedness to be refinanced is
subordinated in right of payment to the Securities and matures after the
maturity date of the Securities, such Indebtedness determined as of the date of
incurrence does not have a final maturity (after assuming the exercise of any
and all unconditional (other than as to the giving of notice) options to extend
the maturity thereof) prior to the final scheduled maturity date of the
Securities; and provided, further, that in no event shall any Subsidiary of the
--------
Company, create, incur or assume any Indebtedness the proceeds of which are used
to refinance Indebtedness of the Company.
(f) The limitations of Section 4.9(a) hereof notwithstanding, the
Company may create, incur or assume any Indebtedness (including commercial
paper) that serves to refund or refinance all or any portion of borrowings
then outstanding under the Credit Agreement (the "Refinancing Indebtedness"),
provided that such Refinancing Indebtedness is in an aggregate principal
- --------
amount not greater than the greater of (i) the aggregate principal amount of
such Indebtedness outstanding at the time of the refunding or refinancing and
(ii) 90% of the sum of, as determined on a consolidated basis at the time of
the refunding or refinancing, its (a) accounts receivable, (b) inventory
valued on a FIFO basis and (c) the fair market value of property, plant and
equipment; provided, however, that in no event may the aggregate principal
--------
amount of such Refinancing Indebtedness exceed $350 million.
(g) The limitations of Section 4.9(a) hereof notwithstanding, the
Company or a Subsidiary of the Company may create, incur or assume
Indebtedness (a) under Interest Swap Obligations, (b) evidenced by letters of
credit issued in the ordinary course of business or reimbursement obligations
in respect thereof, (c) for bank overdrafts that are repaid in three Business
Days.
(h) The limitations of Section 4.9(a) hereof notwithstanding, the
Company or a Subsidiary of the Company may create, incur or assume
Indebtedness in respect of performance
- 37 -
<PAGE>
bonds provided by the Company and its Subsidiaries in the ordinary course of
business, and refinancings thereof.
(i) The limitations of Section 4.9(a) hereof notwithstanding, the
Company or any Subsidiary of the Company may create, incur or assume
Indebtedness to the Company or a Subsidiary of the Company, or if such
Indebtedness would be permitted as a Restricted Payment, to Holdings.
(j) The limitations of Section 4.9(a) notwithstanding, the Company or a
Subsidiary of the Company may create, incur or assume Indebtedness that
constitutes an accrued expense or a trade payable which is overdue by more
than 60 days.
(k) The limitations of Section 4.9(a) hereof notwithstanding, the
Company and its Subsidiaries may guarantee or assume Indebtedness of
independent pharmaceutical stores in the ordinary course consistent with past
practice in an aggregate principal amount at any time outstanding not in
excess of $20 million.
(l) The limitations of Section 4.9(a) hereof notwithstanding, the
Company may create, incur or assume any Junior Indebtedness in an aggregate
principal amount not to exceed $20 million at any time; provided, however,
--------
that the Consolidated Fixed Charge Ratio, after giving effect to the
incurrence of such additional Junior Indebtedness shall be at least 1.2 to 1.
(m) The limitations of Section 4.9(a) hereof notwithstanding, the
Company will not permit any Subsidiary, directly or indirectly, to create,
incur, issue, assume, guarantee or otherwise become liable with respect to,
contingently or otherwise, any Indebtedness except as specifically permitted
in Sections 4.9(b) through 4.9(1) with respect to Subsidiaries.
Section 4.10 Limitation on Material Acquisitions.
-----------------------------------
Except for the Merger neither the Company nor any Subsidiary shall
participate as the acquiring party in a Material Acquisition unless:
(a) no Default or Event of Default exists as a result of and after
giving effect to the Material Acquisition;
(b) after giving effect to the Material Acquisition on a pro forma
--- -----
basis and immediately thereafter, the Company
- 38 -
<PAGE>
shall (i) be permitted to incur at least $1.00 of additional Indebtedness
pursuant to Section 4.9(a) or (ii) have a Consolidated Fixed Charge Ratio
of at least 1.3 to 1; provided, that, in the case of (ii) hereof, if such
--------
Consolidated Fixed Charge Ratio is 1.5 or less, then the Consolidated Fixed
Charge Ratio after giving effect to the transaction shall be at least equal
to the Consolidated Fixed Charge Ratio prior thereto; and
(c) subject to Article 5, any business acquired as part of a Material
Acquisition shall be consolidated with or merged into or made a Subsidiary
of the Company, and shall be in the same or related line of business as the
Company and its Subsidiaries.
The Company shall deliver to the Trustee, prior to the consummation of
any proposed Material Acquisition, an Officers' Certificate stating that the
proposed transaction complies with the requirements of this Section 4.10.
Section 4.11 Sale of Certain Business Segments.
---------------------------------
(a) Neither the Company nor any of its Subsidiaries shall sell,
lease, convey or otherwise dispose of, in any one or a series of related
transactions, any Business Segment unless at least 75% of the proceeds
therefor received by the Company or such Subsidiary, prior to giving effect
to any assumption of indebtedness or liabilities by the purchaser of the
Business Segment are in the form of cash.
(b) The Company shall apply the Net Proceeds from an Asset Sale to
either: (i) payment (scheduled or otherwise) of any Senior Indebtedness
outstanding, (ii) to an investment in an asset or business in the same line
of business of the Company or to expenditures in the business of the
Company provided such investment or expenditure occurs within 360 days from
receipt of such Net Proceeds or (iii) to an Asset Sale Offer pursuant to
the provisions of Section 3.8 hereof. To the extent that the Company does
not and is not required to apply any or all of the Net Proceeds in
accordance with one or more of the foregoing clauses, then, if permitted
pursuant to Section 4.7 hereof, the Company may make Restricted Payments.
In the event the Company elects to apply such proceeds in accordance with
clause (ii), the Company shall deliver an Officers' Certificate to the
Trustee stating that such reinvestment has occurred. In the event the Net
Proceeds from a single
- 39 -
<PAGE>
Asset Sale, whether received in a single transaction or series of
transactions, exceed $75,000,000, the Company shall apply the Net Proceeds
from an Asset Sale to either: (i) payment (scheduled or otherwise) of any
Senior Indebtedness outstanding or (ii) to an Asset Sale Offer pursuant to
the provisions of Section 3.08 hereof. To the extent that the Company does
not and is not required to apply any or all of the Net Proceeds in
accordance with one or more of the foregoing clauses, then, if permitted
pursuant to Section 4.7 hereof, the Company may make Restricted Payments.
(c) Simultaneously with the notification of such Asset Sale Offer to
the Trustee as required hereby, the Company shall provide the Trustee with
an Officers' Certificate setting forth the information required hereby to
be included therein and in addition, setting forth the calculations used in
determining the Asset Sale Amount.
(d) In the event that the Company shall make any payment of Net
Proceeds to the Trustee that should properly have been made by the Company
in the prepayment of outstanding Senior Indebtedness pursuant to the
provisions of this Section 4.11, such payment shall be held by the Trustee
for the benefit of, and, upon written request, shall be paid forthwith over
and delivered to, the appropriate Representative for application in
accordance with the provisions of this Section 4.11. With respect to a
Representative, the Trustee undertakes to perform only such obligations on
the part of the Trustee as are specifically set forth in this Section
4.11(d), and no implied covenants or obligations with respect to a
Representative shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to a Representative
and shall not be liable to a Representative if the Trustee shall distribute
any such payment or any portion thereof to the Securityholders, except if
such distribution is made as a result of the willful misconduct or gross
negligence of the Trustee. If Net Proceeds are received by Securityholders
that, pursuant to the provisions of this Section 4.11, should properly have
been received by a Representative for the prepayment of Senior
Indebtedness, the Securityholders who receive such Net Proceeds shall hold
such Net Proceeds in trust for, and pay such Net Proceeds over to, the
appropriate Representative.
(e) Notwithstanding the provisions of this Section 4.11 or any other
provision of this Indenture, the
- 40 -
<PAGE>
Trustee shall not be charged with knowledge of the existence of any facts
that would prohibit the making of any payment or distribution by the
Trustee, or the taking of any action by the Trustee, and the Trustee and
the Paying Agent may continue to make payments on the Securities pursuant
to an Asset Sale Offer, unless a Responsible Officer of the Trustee shall
have received at its Corporate Trust Office at least three Business Days
prior to the date of such payment written notice of facts that would cause
the payment with respect to the Securities to violate this Article. Only
the Company, a Representative of Senior Indebtedness or a holder of an
issue of Senior Indebtedness that has no Representative may give the
notice. Nothing in this Section 4.11 shall impair the claims of, or
payments to, the Trustee under or pursuant to Section 7.7 hereof.
Section 4.12 Maintenance of Properties, etc.
-------------------------------
The Company shall, and shall cause each of its Subsidiaries to, maintain
its properties and assets in good working order and condition and make all
necessary repairs, renewals, replacements, additions, betterments and
improvements thereto, as shall be reasonably necessary for the proper conduct
of its business.
The Company shall, and shall cause each of its Subsidiaries to, maintain
with financially sound and reputable insurers such insurance as may be
required by law and such other insurance to such extent and against such
hazards and liabilities, as is customarily maintained by companies similarly
situated (which may include self insurance in the same form as is customarily
maintained by companies similarly situated).
The Company shall, and shall cause each of its Subsidiaries to, keep true
books of records and accounts in which full and correct entries will be made
of all its business transactions, in accordance with sound business practices,
and reflect in its financial statements adequate accruals and appropriations
to reserves, all in accordance with generally accepted accounting principles.
The Company shall, and shall cause each of its Subsidiaries to, comply
with all statutes, laws, ordinances or government rules and regulations to
which it is subject, noncompliance with which would materially adversely
affect the earnings, properties, assets or condition, financial or otherwise,
of the Company and its Subsidiaries, taken as a whole.
- 41 -
<PAGE>
The Company shall, and shall cause each of its Subsidiaries to, pay prior
to delinquency all taxes, assessments and governmental levies which if not
paid would have a material adverse effect on the business, earnings,
properties, assets, financial condition or results of operations of the
Company and its Subsidiaries taken as a whole and except as contested in good
faith and by appropriate proceedings.
Section 4.13 Limitation on Liens.
-------------------
The Company will not, and will not permit any Subsidiary to create,
incur, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired by it securing Indebtedness (other than accrued expenses and trade
payables) which is either pari passu with or subordinate to or otherwise
---- -----
junior in right of payment to the Securities unless the Company will make or
cause to be made effective provision whereby the Securities will be secured by
such Lien equally and ratably with any and all other Indebtedness thereby
secured as long as any such Indebtedness shall be so secured.
Section 4.14 [Intentionally Omitted.]
------------------------
Section 4.15 Liquidation or Dissolution.
--------------------------
Neither the Board of Directors nor the stockholders of the Company may
adopt a plan of liquidation or dissolution that provides for, contemplates or
the effectuation of which is preceded by (a) the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company,
otherwise than substantially as an entirety (Article V of this Indenture being
the Article hereof that governs any such sale, lease, conveyance or other
disposition substantially as an entirety) and (b) the distribution of all or
substantially all of the proceeds of such sale, lease, conveyance or other
disposition and of the remaining assets of the Company to the holders of
Capital Stock of the Company, unless the Company, prior to making any
liquidating distribution pursuant to such plan, makes provision for the
satisfaction of the Company's obligations hereunder and under the Securities
as to the payment of principal and interest. The Company shall be deemed to
make provision for such payments only if the Company delivers in trust to the
Trustee or Paying Agent (other than the Company or a Subsidiary) money or U.S.
Government Obligations maturing as to principal and interest in such amounts
and at such times as are sufficient without consideration of any reinvestment
of such interest to pay, when due, the principal of and interest on the
Securities and also delivers to the Trustee an Opinion of Counsel to the
- 42 -
<PAGE>
effect that Holders of the Securities will not recognize income, gain or loss
for Federal income tax purposes as a result of such action and will be subject
to Federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such action had not been taken;
provided, however, that the Company shall not make any liquidating or
- -------- -------
dissolution distributions until after the Company shall have certified to the
Trustee with an Officers' Certificate at least five days prior to the making
of any liquidating or dissolution distribution that it has complied with the
provisions of this Section 4.15 and that no Default or Event of Default then
exists or would occur as a result of any such liquidating distribution.
Section 4.16 Prohibition Against Becoming an Investment Company.
--------------------------------------------------
The Company shall not, nor shall it permit a Subsidiary to, conduct
its business or take any action so as to (i) require registration of the Company
or any Subsidiary as an investment company under the Investment Company Act of
1940, or (ii) subject the Company or any Subsidiary to regulation as an
investment company under the Investment Company Act of 1940 pursuant to an order
to the SEC which remains unstayed and in effect for 60 days.
Section 4.17 No Senior Subordinated Indebtedness Other Than the Securities.
-------------------------------------------------------------
The Company shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Indebtedness and senior in any respect in right of
payment to the Securities other than Indebtedness of the Company under the
Credit Agreement guaranteed by Citicorp Venture Capital Ltd. ("CVCL") or any of
its Affiliates in an aggregate principal amount of not greater than $20 million
at any one time outstanding; provided, however, that additional borrowings are
-------- -------
otherwise unavailable to the Company (i) as advances in aggregate amounts
exceeding the borrowing base provisions of the Credit Agreement or (ii) as a
result of any default which has occurred and is continuing with respect to the
financial covenants of the Credit Agreement at the time of incurrence by the
Company of such Indebtedness.
Section 4.18 Restriction on Sale and Issuance of Subsidiary Stock.
----------------------------------------------------
The Company will not permit any of its Subsidiaries to, directly or
indirectly, issue, contingently or otherwise, any
- 43 -
<PAGE>
shares of its Capital Stock, including any rights, warrants or options with
respect thereto, to any Person other than the Company or one or more wholly
owned Subsidiaries.
Section 4.19 [Intentionally Omitted.]
------------------------
Section 4.20 Transactions with Shareholders and Affiliates.
---------------------------------------------
The Company will not, and will not permit any Subsidiary of the
Company to, directly or indirectly, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or other assets or the rendering of any service or the
making of any loan or advance or the guarantee of any indebtedness) with any
holder of 10% or more of any class of equity securities of Holdings, any
Subsidiary of Holdings or any Affiliates of any thereof or of any such holder,
on terms that are materially less favorable to Holdings or such Subsidiary or
Affiliate, as the case may be, than those which might be obtained at the time
from persons who are not such a holder or Affiliate; provided that the foregoing
--------
restrictions shall not apply to any transaction between the Company and any of
its wholly-owned Subsidiaries; provided, further, that the foregoing
-------- -------
restrictions shall not apply to (i) stock and debt purchase arrangements of
Holdings and Alco with the employees of Alco and its Subsidiaries, and (ii)
provided, further, that the foregoing restrictions shall not apply to any
- -------- -------
arrangements entered into on or prior to the date of the Indenture dated
September 25, 1989 for the Company's 14-1/2 Senior Subordinated Notes due 1989
(the "Existing Indenture"), between the Company and/or Holdings and/or any of
their respective Subsidiaries or Affiliates and CVCL and/or any of its
Subsidiaries or Affiliates, for services rendered on or prior to the date of
the Existing Indenture by CVCL.
Section 4.21 Change of Control.
-----------------
(a) If, at any time, (i) any issuance of shares of capital stock of
Holdings or any sale, transfer or other disposition of any shares of capital
stock of Holdings or the Holdings Debentures by any Person to any Person (other
than an affiliate of CVCL or an officer, director or employee of CVCL or Alco)
results in CVCL, its affiliates and officers, directors and employees of CVCL
and Alco holding less than 50% of either (a) the total common equity interest in
Holdings or the total voting power of all the outstanding shares of capital
stock of Holdings entitled to vote in the election of directors of Holdings or
(b) the aggregate principal amount outstanding of Holdings Debentures or
Refinancing Debentures, as the case may be, or (ii) Holdings
- 44 -
<PAGE>
owns less than 80% of the outstanding shares of voting stock of the Company
(each, a "Change of Control"), each holder of Notes shall have the right to
require that the Company repurchase such holder's Notes at a purchase price in
cash equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase, in accordance with the terms
contemplated in paragraph (b) below; provided, however, that a Change of Control
-------- -------
pursuant to clause (i) of this sentence will be deemed not to have occurred if,
at the time of any such issuance, sale, transfer or disposition, the
Consolidated Fixed Charge Ratio is greater than 1.5 to 1. The Company hereby
covenants that, prior to the mailing of the notice to holders provided for in
paragraph (b) below, it will repay in full all Indebtedness under the Credit
Agreement or offer to repay in full all such Indebtedness and to repay the
Indebtedness of each lender who has accepted such offer. The Company shall
first comply with the covenant in the preceding sentence before the Company
shall be required to repurchase Notes pursuant to this Section 4.21.
(b) Within 30 days following any Change of Control, the Company shall
mail a notice to each holder of Notes stating:
(1) that a Change of Control has occurred and that such holder
has the right to require the Company to repurchase such holder's Notes at a
purchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase;
(2) the circumstances and relevant facts regarding such Change
of Control;
(3) the purchase date (which shall be no earlier than 30 days
nor later than 40 days from the date such notice is mailed); and
(4) the instructions a holder must follow in order to have its
Notes repurchased.
ARTICLE V
MERGER, ETC.
Section 5.1 When Company May Merge, etc.
---------------------------
The Company shall not consolidate or merge with or into, or sell,
assign, transfer or lease all or substantially all of its assets to, any Person
unless:
- 45 -
<PAGE>
(i) the Company shall be the continuing Person, or the Person formed
by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer or lease or
conveyance shall have been made, is a corporation organized and existing
under the laws of the United States, any state thereof or the District of
Columbia;
(ii) the corporation formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale or conveyance
shall have been made, expressly assumes by indenture supplemental hereto,
executed and delivered to the Trustees, in form satisfactory to the
Trustee, all the obligations of the Company under the Securities and this
Indenture;
(iii) immediately before and after giving effect to such transaction
no Default or Event of Default exists; and
(iv) if as a result of such transaction, the corporation formed by or
surviving any such consolidation or merger, or to which such sale or
conveyance shall have been made (a) shall have Consolidated Net Worth
(immediately after the transaction but prior to any purchase accounting
adjustments resulting from the transaction) equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction
and (b) shall immediately after giving effect to the transaction on a pro
---
forma basis either (i) be permitted to incur at least $1.00 of additional
-----
Indebtedness pursuant to Section 4.9(a) or (ii) have a Consolidated Fixed
Charge Ratio of at least 1.1:1; provided, that, in the case of (ii) hereof,
--------
if such Consolidated Fixed Charge Ratio is 1.5:1 or less, then the
Consolidated Fixed Charge Ratio after giving effect to the transaction
shall be at least .1:1 greater than the Consolidated Fixed Charge Ratio
prior thereto.
Notwithstanding the foregoing (a) nothing in this Article 5 shall
prohibit or restrict the Merger and (b) any Subsidiary of the Company may
consolidate with, merge into or transfer all or part of its properties and
assets to the Company or any wholly owned Subsidiary or Subsidiaries of the
Company.
The Company shall deliver to the Trustee prior to the proposed
transaction on Officers' Certificate and an Opinion of Counsel, each stating
that the proposed transaction and such supplemental indenture comply with this
Indenture.
- 46 -
<PAGE>
Section 5.2 Successor Corporation Substituted.
---------------------------------
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets, of the Company in accordance with Section 5.1
the successor corporation formed by such consolidation or into which the Company
is merged or to which such transfer is made shall succeed to, and be substituted
for, and may exercise every right and power and will assume all obligations and
covenants of the Company under this Indenture with the same effect as if such
successor corporation had been named as the Company herein and thereafter the
Company (which term shall for this purpose mean the Person named as the
"Company" in the first paragraph of this Indenture or any successor corporation
which previously shall have become liable in the manner prescribed in this
Article V), shall be relieved of all obligations and covenants and shall no
longer exercise any rights or powers under this Indenture and the Securities.
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1 Events of Default.
-----------------
An "Event of Default" occurs if:
(i) the Company defaults in the payment of interest on any Security
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 the
provisions of Article X hereof;
(ii) the Company defaults in the payment of the principal of any
Security when the same becomes due and payable at maturity, upon
acceleration, upon redemption, or otherwise, whether or not such payment
shall be prohibited by the provisions of Article X;
(iii) the Company fails to comply in any material respect with any of
its other agreements or covenants in, or provisions of, the Securities or
this Indenture (including, without limitation, the Company's covenant to
repay or offer to repay Indebtedness under the Credit Agreement under the
circumstances described under Section 4.21), and the Default continues for
the period and after the notice specified below;
- 47 -
<PAGE>
(iv) default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness of the Company or a Subsidiary of the Company (or the payment
of which is guaranteed by the Company or a Subsidiary of the Company), in
an amount or amounts over $10 million in the aggregate whether such
Indebtedness or guarantee now exists or shall be created hereafter, and
such default results in the acceleration of such Indebtedness which,
together with the principal amount of any such other Indebtedness so
accelerated, and then remaining unsatisfied, and in respect of which such
acceleration has not been rescinded, aggregates in excess of $10 million;
(v) the Company or any Subsidiary of the Company pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief against it in
an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(D) makes a general assignment for the benefit of its creditors,
or
(E) generally is unable to pay its debts as they become due;
(vi) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Subsidiary of the
Company in an involuntary case or proceeding,
(B) appoints a Custodian of the Company or any Subsidiary of the
Company or for all or substantially all of its property, or
(C) orders the liquidation of the Company or any Subsidiary,
and in each case the order or decree remains unstayed and in effect
for 60 days; or
- 48 -
<PAGE>
(vii) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company
or a Subsidiary of the Company and such judgment or judgments remain
undischarged, unstayed or unbonded for a period of 60 days, provided that
the aggregate of all such judgments remaining undischarged, unstayed or
unbonded at the end of such 60-day period exceeds $10 million.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator, sequestrator or similar official under
any Bankruptcy Law.
A Default under clause (iii) of this Section 6.1 is not an Event of
Default until the Trustee notifies the Company in writing, or the Holders of at
least 25 percent in principal amount of the Securities then outstanding notify
the Company and the Trustee in writing, of the Default, and the Company does not
cure the Default within 30 days after receipt of the notice. The notice must
specify the Default, demand that it be remedied and state that the notice is a
"Notice of Default." Such notice shall be given by the Trustee if so requested
in writing by the Holders of 25 percent of the principal amount of the
Securities then outstanding.
Section 6.2 Acceleration.
------------
If an Event of Default (other than an Event of Default specified in
clause (v) or (vi) of Section 6.1 with respect to the Company) occurs and is
continuing, the Trustee or the Holders of at least 25 percent of the principal
amount of the Securities then outstanding, by written notice to the Company, the
Credit Agent, and to the Trustee if given by the Holders, may declare the
principal of and accrued but unpaid interest on all the Securities to be due and
payable. If an Event of Default specified in clause (v) or (vi) of Section 6.1
with respect to the Company occurs, all principal of and accrued but unpaid
interest on the Securities then outstanding 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. The Holders of at least a majority in principal
amount of the Securities then outstanding by written notice to the Trustee and
the Credit Agent may rescind an acceleration and its consequences if (i) all
existing Events of Default, other than the nonpayment of principal of or accrued
but unpaid interest on the Securities which have become due solely because of
the acceleration, have
- 49 -
<PAGE>
been cured or waived (ii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal, which has
become due otherwise than by the acceleration, has been paid, (iii) the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction, (iv) all payments then due to the Trustee and any
predecessor Trustee under Section 7.7 have been made, and (v) in the event of a
cure or waiver of a Default under clause (iv) of Section 6.1, the Trustee shall
have received an Officers' Certificate and an Opinion of Counsel that such
Default has been cured or waived.
Section 6.3 Other Remedies.
--------------
Subject to the provisions of Article X, 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
Securities or to enforce the performance of any provision of the Securities or
this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder 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 remedies are cumulative to the extent
permitted by law.
Section 6.4 Waiver of Past Defaults.
-----------------------
Subject to Sections 6.7 and 9.2, the Holders of at least a majority in
principal amount of the Securities then outstanding by notice to the Trustee
may waive an existing Default or Event of Default and its consequences, except
a Default in the payment of the principal of or interest on any Security as
specified in clauses (i) or (ii) of Section 6.1. Upon any such waiver, such
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
Section 6.5 Control by Majority.
-------------------
The Holders of at least a majority in principal amount of the
Securities then outstanding may direct the time, method
- 50 -
<PAGE>
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on it. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture, that
the Trustee determines may be unduly prejudicial to the rights of other
Securityholders or that may involve the Trustee in personal liability.
Section 6.6 Limitation on Suits.
-------------------
Except as provided in Section 6.2 or 6.7 of this Indenture, a
Securityholder may not pursue a remedy with respect to this Indenture or the
Securities unless:
(i) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(ii) the Holders of at least 25 percent in aggregate principal amount
of the Securities then outstanding make a written request to the Trustee to
pursue the remedy;
(iii) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability, cost or expense;
(iv) the Trustee does not comply with the request within 30 days
after receipt of the request and the offer of indemnity; and
(v) during such 30-day period the Holders of at least a majority in
principal amount of the Securities then outstanding do not give the Trustee
a direction inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
Section 6.7 Rights of Holders to Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, except for the
provisions of Article X, the right of any Holder of a Security to receive
payment of principal of or interest on the Security on or after the respective
due dates expressed in the Security, 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 the Holder.
- 51 -
<PAGE>
Section 6.8 Collection Suit by Trustee.
--------------------------
If an Event of Default specified in Section 6.1(i) or (ii) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company or any other obligor on the Securities
for the whole amount of principal and accrued interest remaining unpaid on the
Securities, 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 then borne by the Securities, 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,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relative to the Company or
any other obligor on the Securities, its creditors or its property and shall be
entitled and empowered to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceeding is hereby authorized by each
Securityholder 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
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Securityholder in any such proceeding.
Section 6.10 Priorities.
----------
If the Trustee collects any money pursuant to this Article 6, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.7;
- 52 -
<PAGE>
Second: to holders of Senior Indebtedness, in accordance with Article X
hereof;
Third: to Securityholders for amounts due and unpaid on the Securities
for principal (or premium, if any) and interest ratably without
preference or priority of any kind, according to the amounts due
and payable on the Securities for principal (and premium, if any)
and interest, respectively; and
Fourth: to the Company or any obligors on the Securities, as their
interests may appear, or as a court of competent jurisdiction may
direct.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment of Securityholders 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 a 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 Holders of more than 10% in principal
amount of the Securities then outstanding.
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 their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
- 53 -
<PAGE>
(1) The Trustee need perform only those duties that are specifically
set forth in this Indenture or the TIA and no others, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions delivered to
the Trustee by the Company pursuant to this Indenture and conforming to the
requirements of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture but need not confirm the accuracy of
mathematical calculations.
(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:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.1.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts.
(3) Except as otherwise provided in Section 7.1(a), 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
6.5.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), (c) and (e) of this Section 7.1.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any 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.
- 54 -
<PAGE>
(f) The Trustee shall not be obligated to pay interest on any money
received by it unless otherwise agreed with the Company. Money held in trust by
the Trustee need not be segregated from other funds except to the extent
required by law.
Section 7.2 Rights of Trustee.
-----------------
Subject to Section 7.1;
(a) The Trustee may conclusively rely on any document 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 require
an Officers' Certificate or an Opinion of Counsel or both, which shall
conform to Section 11.4 and Section 11.5 hereof and containing such other
statements as the Trustee reasonably deems necessary to perform its duties
hereunder. The Trustee shall not be liable for any action it takes or
omits to take in good faith and without negligence in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act either directly or indirectly through
attorneys or agents and shall not be responsible for the misconduct or
negligence of, any attorney or agent appointed and retained with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith and without negligence which it reasonably believes
to be authorized or within the rights or powers conferred upon it by this
Indenture.
(e) The Trustee may consult with counsel, and the advice of such
counsel or any Opinion of Counsel as to matters of law shall be full and
complete authorization and protection in respect of any action taken,
omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(f) Unless otherwise specifically provided in the Indenture, any
demand, request, direction or notice from the Company shall be sufficient
if signed by an Officer of the Company.
(g) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this
- 55 -
<PAGE>
Indenture or any supplemental indenture, or to institute, conduct or defend
any litigation hereunder or in relation hereto, at the request, order or
direction of any Securityholder, pursuant to the provisions of this
Indenture or any supplemental indenture, unless such Securityholder shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred thereunder or
thereby.
(h) The Trustee shall not be bound to make any investigation into the
facts of matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, direction, order,
approval, bond, note or other paper or document, but the Trustee shall be
entitled to make such further inquiry or investigation into such facts or
matters as it may reasonable see fit, or if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine
the books and records of the Company, personally or by agent or attorney.
The Company shall reimburse the Trustee for all reasonable disbursements,
advances and expenses incurred by it in connection with the performance of
its duties under this paragraph (h); provided, however, that such
-------- -------
reimbursement shall be subject to the provisions of Section 7.7.
(i) In the event that the Trustee is also acting as Paying Agent or
Registrar hereunder, the rights and protections afforded to the Trustee
pursuant to this Article VII shall also be afforded to such Paying Agent
and Registrar.
(j) The Trustee shall not be charged with the knowledge of an Event
of Default unless a Responsible Officer obtains actual knowledge of such
event or the Trustee receives written notice of such event.
Section 7.3 Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or an
Affiliate of the Company with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 7.10 and 7.11.
- 56 -
<PAGE>
Section 7.4 Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Securities; it shall not be accountable for
the Company's use of the proceeds from the Securities; it shall not be
accountable for any money paid to the Company, or upon the Company's
direction, if made under and in accordance with any provision of this
Indenture; it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee; and it shall not be
responsible for any statement of the Company in this Indenture or any
statement in the Securities other than its certificate of authentication.
Section 7.5 Notice of Defaults.
------------------
If a Default occurs and is continuing and if it is actually known to
the Trustee, the Trustee shall mail to Securityholders a notice of the Default
within 30 days after the occurrence thereof. Except in the case of a Default
in payment of any Security, the Trustee may withhold the notice if and so long
as the board of directors, executive committee or a trust committee of
directors and/or Responsible Officers of the Trustee in good faith determines
that withholding the notice is in the interests of Securityholders.
Section 7.6 Reports by Trustee to Holders.
-----------------------------
Within 60 days after each May 15 following the date of this
Indenture, the Trustee shall mail to Securityholders a brief report dated as
of such reporting date that complies with TIA Section 313(a). The Trustee also
shall comply with TIA Section 313(b)(2) and shall transmit reports required by
TIA Section 313 by mail as required by TIA Section 313(c).
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the SEC and each securities
exchange, if any, on which the Securities are listed. The Company shall notify
the Trustee in writing when the Securities are listed on any securities
exchange.
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 disbursements, advances
- 57 -
<PAGE>
and expenses incurred by it in connection with the performance of its duties
under this Indenture, including the reasonable compensation, disbursements and
expenses of the Trustee's agents and counsel and any taxes or other expenses
incurred by a trust created pursuant to Section 8.1 hereof.
The Company shall indemnify the Trustee, its directors, officers,
employees and agents, against any loss, liability, cost or expense incurred by
it arising out of or in connection with the performance of its duties under
this Indenture, except as set forth in the next paragraph. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity. The
Company shall defend such claim and the Trustee shall cooperate in such
defense. The Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through negligence, willful
misconduct or bad faith. The Company need not pay for any settlement made by
the Trustee without the Company's consent, which consent shall not be
unreasonably withheld.
To secure the Company's payment obligations in this Section 7.7,
the Trustee shall have a Lien prior to the Securities on all money or property
held or collected by the Trustee, except that held in trust to pay the
principal of and interest on particular Securities. Such obligations shall
survive the satisfaction and discharge of the Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in clause (v) and (vi) of Section 6.1 occurs, the
expenses and the compensation for the services are intended to constitute
expenses of administration under any Bankruptcy Law.
Section 7.8 Replacement of Trustee.
----------------------
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
Subject to TIA Section 310(b), the Trustee may resign and be
discharged from the trust hereby created by so notifying the Company in
writing, such resignation and discharge to become effective as provided in the
last paragraph of this Section. The
- 58 -
<PAGE>
Holders of a majority in principal amount of the then outstanding Securities
may remove the Trustee by so notifying the Trustee and the Company. The
Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(iii) a Custodian or public officer takes charge of Trustee or its
property; or
(iv) 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 promptly appoint a successor
Trustee. The Trustee shall be entitled to payment of its fees and reimbursement
of its expenses while acting as Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Securities
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Securityholder who has
been a Securityholder for at least six months, fails to comply with Section
7.10, such Securityholder may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon 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. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the Lien
provided for in Section 7.7. 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.
- 59 -
<PAGE>
No Trustee hereunder shall be liable for the acts or omissions of any
successor Trustee.
Section 7.9 Successor Trustee or Agent by Merger, etc.
-----------------------------------------
If the Trustee or any Agent consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee or Agent, if such corporation complies with Section 7.10.
Section 7.10 Eligibility; Disqualification.
-----------------------------
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof authorized under such laws to exercise trust
powers, shall be subject to supervision or examination by Federal or State
authority and shall have a combined capital and surplus of at least $50 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1). The Trustee is subject to TIA Section
310(b).
Section 7.11 Preferential Collection of Claims Against the Company.
-----------------------------------------------------
The Trustee shall be subject to, and the Trustee shall at all times
comply with, TIA Section 311(a), excluding any creditor relationship listed in
TIA Section 311(b). A Trustee who has resigned or been removed shall be subject
to TIA Section 311(a) to the extent indicated therein.
ARTICLE VIII
DISCHARGE OF INDENTURE
Section 8.1 Termination of Company's Obligations.
------------------------------------
The Company may terminate its obligations under the Securities and
this Indenture, except those obligations referred to in the immediately
succeeding paragraph, if:
(1)(a) all Securities previously authenticated and delivered (other
than mutilated, destroyed, lost or stolen Securities which have been
replaced or paid or Securities
- 60 -
<PAGE>
for whose payment money or securities has theretofore been held in trust
and thereafter repaid to the Company) as provided in Section 8.3 have been
delivered to the Trustee for cancellation; or
(b)(i) the Securities mature within six months or all of them are to
be called for redemption within six months under arrangements satisfactory
to the Trustee for giving notice of redemption, and
(ii) the Company irrevocably deposits or causes to be deposited with
the Trustee, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee and its counsel, as trust funds in
trust solely for the benefit of the Holders for that purpose, money or
direct non-callable obligations of the United States of America for the
payment of which the full faith and credit of the United States is pledged
("U.S. Government Obligations"), maturing as to principal and interest in
such amounts and at such times as are sufficient (in an opinion set forth
in an accountants' certificate delivered by the Company to the Trustee,)
without consideration of any reinvestment of such interest, to pay
principal of and interest on the outstanding Securities to maturity or
redemption as the case may be; provided that the Trustee shall have been
--------
irrevocably instructed to apply such money or the proceeds of such U.S.
Government Obligations to the payment of said principal and interest with
respect to the Securities; and
(2) the Company pays or causes to be paid all sums then payable by
the Company hereunder and under the Securities; and
(3) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent provided
for herein relating to the satisfaction and discharge of this Indenture
have been complied with.
In such event, the obligations of the Company under this Indenture
shall cease to be of further effect (except as provided in this paragraph), and
the Trustee, on demand of the Company, shall execute proper instruments
acknowledging satisfaction of and discharge under this Indenture. The Company
may make the deposit only if Article X hereof does not prohibit such payment.
However, the Company's obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.13,
4.1, 7.7, 7.8, 8.1, 8.2 and 8.4
- 61 -
<PAGE>
and the Trustee's and Paying Agent's obligations hereunder, including under
Section 8.3, shall survive until the Securities are no longer outstanding.
Thereafter, only the Company's and the Trustee's obligations in Section 7.7 and
the Trustee's and Paying Agent's obligations in Section 8.3 shall survive.
After such irrevocable deposit made pursuant to this Section 8.1 and
satisfaction of the other conditions set forth in this Section 8.1, the Trustee
upon the written request signed by two Officers of the Company shall
acknowledge in writing the discharge of the Company's obligations under this
Indenture except for those surviving obligations specified above.
Section 8.2 Application of Trust Money.
--------------------------
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.1. It shall apply the deposited money
and the money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of principal, and interest on the
Securities, Money and U.S. Government Obligations held in trust are not subject
to Article X.
Section 8.3 Repayment to Company.
--------------------
The Trustee and the Paying Agent shall promptly pay to the Company
upon written request any excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon written
request any money held by them for the payment of principal or interest that
remains unclaimed for two years after the date upon which such payment shall
have become due; provided that the Company shall have first caused notice of
--------
such payment to be mailed to each Securityholder entitled thereto no less than
30 days prior to such repayment and/or within such period shall have published
such notice in a financial newspaper of widespread circulation in the City of
New York. After payment to the Company, Securityholders entitled to the money
must look to the Company for payment as general creditors unless an applicable
abandoned property law designates another Person, and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
Section 8.4 Reinstatement.
-------------
If (i) the Trustee or Paying Agent is unable to apply
- 62 -
<PAGE>
any money or U.S. Government Obligations in accordance with Section 8.2 by
reason of any decree, order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, and (ii) the
Holders of at least a majority in principal amount of the then outstanding
Securities so request by written notice to the Trustee, the Company's
obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.1 until
such time as the Trustee or Paying Agent is permitted to apply all such money
or U.S. Governmental Obligations in accordance with Section 8.2; provided,
--------
however, that if the Company has made any payment of interest on or principal
- -------
of any Securities because of the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Securities to receive
such payment from the money or U.S. Government Obligations held by the Trustee
or Paying Agent.
ARTICLE IX
AMENDMENTS
Section 9.1 Without Consent of Holders.
--------------------------
The Company, when authorized by a resolution of its Board of
Directors, and the Trustee may amend or supplement this Indenture or the
Securities without notice to or the consent of any Securityholder:
(i) to cure an ambiguity, defect or inconsistency;
(ii) to comply with Article V;
(iii) to provide for uncertificated Securities in addition to or in
place of certificated Securities provided that the Trustee consents to such
--------
amendment;
(iv) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA, as contemplated
by Section 9.3 or otherwise; or
(v) to make any change that does not adversely affect the rights
hereunder of any Securityholder.
After an amendment under this Section 9.1 becomes effective, the
Company shall mail to Securityholders a notice briefly describing the amendment.
- 63 -
<PAGE>
Section 9.2 With Consent of Holders.
-----------------------
Subject to Section 6.7 and with prior notice to the Securityholders,
the Company, when authorized by resolution of its Board of Directors, and the
Trustee may amend or supplement this Indenture or the Securities with the
written consent of the Holders of at least 66-2/3% in principal amount of the
then outstanding Securities. Upon the written request of the Company signed by
two Officers, accompanied by the resolution of the Board of Directors of the
Company authorizing the execution of any such supplemental indenture, and upon
the filing with the Trustee of evidence of the consent of the Securityholders as
aforesaid, the Trustee, subject to Section 9.6, shall join with the Company in
the execution of such supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof. An
amendment under this Section may not make any change that adversely affects the
rights under Article X, the definition of "Senior Indebtedness" and Sections
6.1, 6.2 and 6.9, of any holder of Senior Indebtedness unless the holders of
such Senior Indebtedness pursuant to its terms consent to the change.
Before an amendment or waiver under this Section 9.2 becomes
effective, the Company shall mail to the Holder of each Security affected
thereby, with a copy to the Trustee, a notice briefly describing the amendment
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 amendment or waiver. The Holders of at least 66-2/3% in principal amount
of the Securities then outstanding may waive compliance in a particular instance
by the Company with any provision of this Indenture or the Securities. However,
without the consent of each Securityholder affected, an amendment under this
Section may not:
(i) reduce the amount of Securities whose Holders must consent to an
amendment or waiver;
(ii) reduce the rate of or change the times for scheduled payments of
interest, including default interest, on any Security;
(iii) reduce the principal of or change the fixed maturity of any
Security or alter the redemption or repurchase provisions with respect
thereto;
- 64 -
<PAGE>
(iv) make any Security payable in money other than that stated in the
Security;
(v) make any change in Section 6.4, 6.7 or this Section 9.2;
(vi) make any change in this Article IX that adversely affects the
rights of any Securityholders; or
(vii) waive a Default in the payment of principal of or interest on,
or redemption payment with respect to, any Security.
Section 9.3 Compliance with Trust Indenture Act.
-----------------------------------
Every amendment of or supplement to this Indenture or the Securities
shall be set forth in a supplemental indenture that complies with the TIA as
then in effect.
Section 9.4 Revocation and Effect of Consents.
---------------------------------
(a) Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Security is a continuing consent by the Holder
and every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security, even if notation
of the consent is not made on any Security. However, any such Holder or
subsequent Holder may revoke the consent as to his Security or portion of a
Security if the Trustee receives written notice of revocation before the date
on which the Trustee receives an Officers' Certificate certifying that the
Holders of the requisite principal amount of Securities have consented to such
amendment, supplement or waiver. An amendment, supplement or waiver becomes
effective upon receipt by the Trustee of such Officers' Certificate and
evidence of the consent by the Holders of the requisite percentage in
principal amount of outstanding Securities.
(b) The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then
notwithstanding the second and third sentences of paragraph (a) of this
Section 9.4, those Persons who were Holders at such record date (or their duly
designated proxies), and only those Persons, shall be entitled to consent to
such amendment, supplement or waiver or to revoke any consent previously
given, whether or not such Persons continue to be
- 65 -
<PAGE>
Holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.
(c) After an amendment, supplement or waiver becomes effective it
shall bind every Securityholder.
Section 9.5 Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security
about the changed terms and return it to the Holder and the Trustee may place
an appropriate notation on any security thereafter authenticated.
Alternatively, if the Company or the Trustee so determine, the Company in
exchange for the Security shall issue and the Trustee shall authenticate a new
Security that reflects the changed terms.
Section 9.6 Trustee to Sign Amendments, etc.
-------------------------------
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article IX if the amendment does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. If it
does, the Trustee may, but need not, sign it. In signing or refusing to sign
such amendment or supplemental indenture, the Trustee shall be entitled to
receive and shall be fully protected in relying upon, an Officers' Certificate
and an Opinion of Counsel as conclusive evidence that such amendment or
supplemental indenture is authorized or Permitted by this Indenture, that it
is not inconsistent herewith, and that it will be valid and binding upon the
Company in accordance with its terms. The Company may not sign an amendment or
supplemental indenture until its Board of Directors approves it.
ARTICLE X
SUBORDINATION
Section 10.1 Agreement to Subordinate.
------------------------
The Company covenants and agrees, and each Securityholder by
accepting a Security likewise covenants and agrees, that the payment of the
principal of, interest on or any other amounts due on each Security is
Subordinated in right of payment, to the extent and in the manner provided in
this Article X, to the prior payment in full of all Senior Indebtedness, and
- 66 -
<PAGE>
that the subordination is for the benefit of the holders of Senior Indebtedness.
Section 10.2 Certain Definitions.
-------------------
"Representative" means the indenture trustee or other trustee, agent
or representative for any Senior Indebtedness.
"Senior Indebtedness" means (i) all indebtedness (including Interest
Swap Obligations) (present or future) created, incurred, assumed or guaranteed
by the Company, and (ii) all Obligations now or hereafter existing under the
Credit Agreement (including all permissible renewals, extensions, refundings
or refinancings thereof), unless the instrument governing such Indebtedness
expressly provides in each case that such Indebtedness is not senior or
superior in right of payment to the Securities; provided, however, that any
-------- -------
Indebtedness which is subordinated in right of payment to any other
Indebtedness of the Company shall not constitute Senior Indebtedness.
Notwithstanding the foregoing, Senior Indebtedness shall not include
Indebtedness of the Company to any of its Subsidiaries or Indebtedness
incurred for the purchase of goods or services obtained in the ordinary course
of business. Notwithstanding anything contained above, all Obligations under
the Credit Agreement shall be considered Senior Indebtedness.
A "distribution" may consist of cash, securities or other property,
by set-off or otherwise.
Section 10.3 Liquidation; Dissolution; Bankruptcy.
------------------------------------
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property or
in an assignment for the benefit of creditors or any marshalling of the assets
and liabilities of the Company:
(i) holders of Senior Indebtedness shall be entitled to receive
payment in full of the principal of and interest to, and all other
Obligations owing in respect of, the date of payment on the Senior
Indebtedness, or such payment shall first be duly provided for in cash or
in a manner satisfactory to the holders of Senior Indebtedness, before
Securityholders shall be entitled to receive any payment of principal of or
interest on Securities and before the Company acquires any Securities for
cash or property; and
- 67 -
<PAGE>
(ii) until all Senior Indebtedness (as provided in subsection (i)
above) is paid in full, any distribution to which Securityholders would be
entitled but for this Article X shall be made to holders of Senior
Indebtedness, as their interests may appear, except that Securityholders
may receive securities that are subordinated to at least the same extent as
the Securities are to (a) Senior Indebtedness and (b) any securities issued
in exchange for Senior Indebtedness.
Section 10.4 Default on Senior Indebtedness.
------------------------------
(a) Upon the maturity of any Senior Indebtedness by lapse of time,
acceleration (unless waived) or otherwise, all such Senior Indebtedness shall
first be paid in full, or such payment duly provided for in cash or in a
manner satisfactory to the holders of such Senior Indebtedness, before any
payment is made by the Company on account of the Securities or any acquisition
of any of the Securities and, until the Senior Indebtedness is paid in full,
any distribution to which Securityholders would be entitled but for this
Article X shall be made to holders of Senior Indebtedness as their interests
may appear, except that Securityholders may receive Indebtedness of the
Company that is subordinated to Senior Indebtedness to at least the same
extent as the Securities.
(b) During the continuance of any default relating to the payment of
any Senior Indebtedness, the Company may not make any payment or distribution
to the Trustee (other than payments pursuant to Section 7.7) or any
Securityholder in respect of the Securities, may not acquire from the Trustee
or any Securityholder any Securities for cash or property (other than in
Indebtedness of the Company which is subordinated to at least the same extent
as the Securities are to (i) Senior Indebtedness and (ii) any securities
issued in exchange for Senior Indebtedness), and neither the Trustee nor any
Holder may collect or receive any such payment or distribution (other than
payments pursuant to Section 7.7).
(c) During the continuance of any default with respect to Senior
Indebtedness, other than a default relating to the payment with respect to
such Senior Indebtedness, pursuant to which the maturity of such Senior
Indebtedness may be accelerated, upon the occurrence of (A)(i) receipt by the
Company and the Trustee of written notice of such default from the Credit
Agent or (ii) if such default results from an acceleration of the Securities,
the date of such acceleration, no payment, distribution or acquisition
prohibited by Section 10.4(b) may be
- 68 -
<PAGE>
made by the Company for a period (the "Payment Blockage Period") commencing on
the earlier of the date of receipt of such notice or the date of such
acceleration and ending 179 days thereafter (unless such Payment Blockage
Period shall be terminated by written notice to the Trustee and the Company
from the Credit Agent) or (B) receipt by the Company and the Trustee of
written notice of such default from the Trustee or other representative for
the holders of Specified Senior Indebtedness (or the holders of at least 25%
of the principal amount of such Specified Senior Indebtedness of the Company
then outstanding), no such payment, distribution or acquisition prohibited by
Section 10.4(b) may be made by the Company for a Payment Blockage Period
commencing on the date of the receipt of such notice and ending 119 days
thereafter (unless such Payment Blockage Period shall be terminated by written
notice to the Trustee from such trustee or other representative commencing the
Payment Blockage Period (or the holders of at least 25% of the principal
amount of such Specified Senior Indebtedness)) provided, however, that (x) no
-------- -------
more than two Payment Blockage Periods may be commenced during any period of
360 consecutive days, (y) only the Credit Agent may commence the second such
Payment Blockage Period during such 360 consecutive day period if the first
Payment Blockage Period was commenced by or on behalf of the Specified Senior
Indebtedness and (z) if the first Payment Blockage Period in a 360-day period
was commenced by the Credit Agent, all scheduled payments of principal (and
premium, in any) and interest due on the Securities on and prior to the date
of the termination of such first Payment Blockage Period shall have been paid
in full before a second Payment Blockage Period may be commenced during such
360-day period. Notwithstanding the foregoing, in no event may the total
number of days during which any Payment Blockage Period or Periods may be in
effect during any 360 consecutive day period exceed 179 days in the aggregate.
For the purpose of this provision, no default which existed or was continuing
on the date of commencement by any person of any Payment Blockage Period and
of which such person had knowledge shall be the basis for the commencement of
a second Payment Blockage Period by such person, unless such default shall
have been cured or waived for a period of not less than 90 consecutive days.
Failure to make payments required in respect of the Securities due to the
foregoing, however, will not preclude such failure from constituting an Event
of Default under this Indenture.
(d) With respect to Sections 10.4(b) and (c), the Company may resume
payments on and distributions in respect of the Securities and may acquire them
when:
(i) the default is cured or waived, or
- 69 -
<PAGE>
(ii) in the case of a default referred to in Section 10.4(c), when the
Payment Blockage Period terminates, if this Article otherwise permits the
payment or acquisition at the time of such payment or acquisition.
Section 10.5 Acceleration of Securities.
--------------------------
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Indebtedness of
the acceleration.
Section 10.6 When Distribution Must Be Paid Over.
-----------------------------------
In the event that the Trustee or any Securityholder receives any
payment with respect to the Securities at a time when such payment is
prohibited by Section 10.4 hereof, such payment shall be held by the Trustee
or such Securityholder, in trust for the benefit of, and shall be paid
forthwith over and delivered, upon written request, to the holders of the
Senior Indebtedness or their Representative, as their respective interests may
appear, for application with respect to Senior Indebtedness remaining unpaid
to the extent necessary to pay such Senior Indebtedness in full in accordance
with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article X, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness 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 Indebtedness.
Section 10.7 Notice by Company.
-----------------
The Company shall promptly notify in writing the Trustee and Paying
Agent of any facts known to the Company that would cause a payment with respect
to the Securities to violate this Article, but failure to give such notice
shall not affect the subordination of the Securities to the Senior Indebtedness
provided in this Article.
Section 10.8 Distribution or Notice to Representative.
----------------------------------------
Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to their
Representative.
- 70 -
<PAGE>
Upon any payment or distribution of assets of the Company referred to
in this Article X, the Trustee and the Securityholders shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other person making any distribution to the Trustee or to the
Securityholders for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the Senior Indebtedness 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 Rights of Holders of Senior Indebtedness Not to Be Impaired.
-----------------------------------------------------------
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act in good faith by any such
holder, or by any noncompliance by the Company, with the terms and provisions
and covenants herein regardless of any knowledge thereof any such holder may
have or otherwise be charged with or by any action or failure to act of the
Company.
The provisions of this Article X are intended to be for the benefit
of, and shall be enforceable directly by, the holders of the Senior
Indebtedness, without any act or notice of acceptance hereof or reliance hereon.
Section 10.10 Authorization to Trustee to Take Action to Effectuate
-----------------------------------------------------
Subordination.
-------------
Each Holder of Securities by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate, as between the holders of Senior Indebtedness and the
Holders, the subordination as provided in this Article X and appoints the
Trustee his attorney-in-fact for any and all such purposes.
Section 10.11 Subrogation.
-----------
Upon the payment in full of all amounts payable under or in respect of
the Senior Indebtedness, the Holders shall be subrogated to the rights of the
holders of such Senior Indebtedness to receive payments or distributions of
assets of the Company made on such Senior Indebtedness until the Securities
shall be paid in full; and for the purposes of such subrogation,
- 71 -
<PAGE>
no payments or distributions to holders of such Senior Indebtedness of any cash,
property or securities to which Holders of the Securities would be entitled
except for the provisions of this Article X, and no payment over pursuant to the
provisions of this Article X to holders of such Senior Indebtedness by the
Holders, shall, as between the Company, its creditors other than holders of such
Senior Indebtedness and the Holders, be deemed to be a payment by the Company to
or on account of such Senior Indebtedness, it being understood that the
provisions of this Article X are solely for the purpose of defining the relative
rights of the holders of such Senior Indebtedness, on the one hand, and the
Holders, 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 all
amounts payable under the Senior Indebtedness, then and in such case, the
Holders shall be entitled to receive from the holders of such Senior
Indebtedness at the time outstanding any payments or distributions received by
such holders of Senior Indebtedness in excess of the amount sufficient to pay
all amounts payable under or in respect of the Senior Indebtedness in full.
Section 10.12 Obligations of Company Unconditional.
------------------------------------
Nothing contained in this Article X or elsewhere in this Indenture or
in any Security is intended to or shall impair, as between the Company and the
Holders, the obligations of the Company, which are absolute and unconditional,
to pay to the Holders the principal of and interest on the Securities 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 and creditors of
the Company other than the holders of the Senior Indebtedness and nothing
contained herein or therein shall prevent the Trustee or any Holder from
exercising all remedies otherwise permitted by applicable law upon Default under
this Indenture, subject to the rights, if any, under this Article X of the
holders of such Senior Indebtedness in respect of cash, property or securities
of the Company received upon the exercise of any such remedy.
The failure to make a payment on account of principal of or interest
on the Securities by reason of any provision of this Article X shall not be
construed as preventing the occurrence of an Event of Default under Section 6.1.
- 72 -
<PAGE>
Section 10.13 Trustee Entitled to Assume Payments Not Prohibited in Absence of
----------------------------------------------------------------
Notice.
------
Neither the Trustee nor the Paying Agent shall at any time be charged
with the knowledge of the existence of any facts which would prohibit the making
of any payment to or by the Trustee or the Paying Agent, unless and until a
Responsible Officer of the Trustee or Paying Agent shall have received written
notice thereof from the Company or one or more holders of Senior Indebtedness or
from any Representative therefor; and, prior to the receipt of any such written
notice, the Trustee or Paying Agent shall be entitled to assume conclusively
that no such facts exist. Unless at least three Business Days prior to the date
on which by the terms of this Indenture any moneys are to be deposited by the
Company with the Trustee or any Paying Agent (whether or not in trust) for any
purpose (including, without limitation, the payment of the principal or the
interest on any Security), the Trustee or Paying agent shall have received with
respect to such moneys the written notice provided for in the preceding
sentence, the Trustee or Paying Agent shall have full power and authority to
receive such moneys and to apply the same to the purpose for which they were
received and shall not be affected by any notice to the contrary which may be
received by it on or after such date. Nothing contained in this Section 10.13
shall limit the right of the holders of Senior Indebtedness to recover payments
as contemplated elsewhere in this Article X. The Trustee shall be entitled to
conclusively rely on the delivery to it of a written notice by a Person
representing himself or itself to be a holder of such Senior Indebtedness (or a
trustee on behalf of, or other representative of, such holder) to establish that
such notice has been given by a holder of such Senior Indebtedness or a trustee
on behalf of any such holder.
Section 10.14 Right of Trustee to Hold Senior Indebtedness.
--------------------------------------------
Subject to Sections 310(b) and 311 of the TIA, the Trustee and any
Agent shall be entitled to all of the rights set forth in this Article X in
respect of any Senior Indebtedness at any time held by it to the same extent as
any other holder of such Senior Indebtedness, and nothing in this Indenture
shall be construed to deprive the Trustee or any Agent of any of its rights as
such holder.
- 73 -
<PAGE>
ARTICLE XI
MISCELLANEOUS
Section 11.1 Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provision shall control.
Section 11.2 Notices.
-------
Any notice or communication to the Company or the Trustee is duly
given if in writing and delivered in person or transmitted by first-class mail
(registered or certified, return receipt requested) or by telecopier (confirmed
by first-class mail) or overnight air courier guaranteeing next day delivery to
the address set forth below:
If to the Company:
Alco Health Services Corporation
P.O. Box 959
Valley Forge, PA 19482
Attention: Treasurer
Telecopy No.: (215) 647-0141
with a copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: Craig L. Godshall, Esq.
Telecopy No.: (215) 994-2222
If to the Trustee:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group
Telecopy No.: (212) 250-6961
- 74 -
<PAGE>
If to the Credit Agent:
General Electric Capital Corporation
501 Merritt Seven, Third Floor
Norwalk, Connecticut 06851
Attention: Mr. Charles D. Chiodo
Telecopy No.: (203) 840-4560
with a copy to:
Murphy, Weir & Butler
101 California Street
39th Floor
San Francisco, CA 94111
Attention: Dick M. Okada, Esq.
Telecopier No.: (415) 421-7879
The Company, or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication to a Securityholder shall be mailed by
first-class mail to his address shown on the register kept by the Registrar.
Failure to mail a notice or communication to a Securityholder or any defect in
such notice or communication shall not affect its sufficiency with respect to
other Securityholders.
If a notice or communication is mailed or sent in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it, except that notice to the Trustee or the Company shall only be
effective upon receipt thereof by the Trustee or the Company.
If the Company mails a notice or communication to Securityholders, it
shall mail a copy to the Trustee and each Agent at the same time.
Section 11.3 Communication by Holders with Other Holders.
-------------------------------------------
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
- 75 -
<PAGE>
Section 11.4 Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take
any action or omit to take any action under this Indenture, the Company shall
deliver to the Trustee:
(i) an Officers' Certificate (which shall include the statements set
forth in Section 11.5) stating that, in the opinion of the signers, all
conditions precedent and covenants, compliance with which constitutes a
condition precedent, if any, provided for in this Indenture relating to the
proposed action or inaction, have been complied with; and
(ii) an Opinion of Counsel (which shall include the statements set
forth in Section 11.5) stating that, in the opinion of such counsel, all
such conditions precedent and covenants, compliance with which constitutes
a condition precedent, if any, provided for in this Indenture relating to
the proposed action or inaction have been complied with and that any such
action or inaction is in compliance with all applicable law.
Section 11.5 Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(ii) 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;
(iii) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(iv) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
- 76 -
<PAGE>
Section 11.6 Rules by Trustee and Agents.
---------------------------
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
Section 11.7 Legal Holidays.
--------------
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law,
regulation or executive order to remain closed. If a payment date is a Legal
Holiday at a place of payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
Section 11.8 Duplicate Originals.
-------------------
The parties may sign any number of copies of this Indenture. One
signed copy is enough to prove this Indenture.
Section 11.9 Governing Law.
-------------
The laws of the State of New York shall govern this Indenture and the
Securities, without regard to the conflicts of laws rules thereof. The
Trustee, the Company and the Securityholders agree to submit to the
jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Indenture or the Securities.
Section 11.10 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 Subsidiary. No such indenture, loan or
debt agreement may be used to interpret this Indenture.
Section 11.11 Successors.
----------
All agreements of the Company in this Indenture and the Securities
shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.
Section 11.12 Severability.
------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the
- 77 -
<PAGE>
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 11.13 No Recourse Against Others.
--------------------------
No director, officer, employee, stockholder or affiliate, as such, of
the Company shall have any liability for any obligations of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Securityholder, by accepting
a Security, waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Securities.
Section 11.14 Table of Contents, Headings, etc.
---------------------------------
The Table of Contents, Cross Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
Section 11.15 Counterpart Originals.
---------------------
This Indenture may be signed in two or more counterparts. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 11.16 Benefits of Indenture.
---------------------
Nothing in this Indenture or the Securities, express or implied, shall
give to any person, other than the parties hereto and their successors
hereunder, the holders of Senior Indebtedness and the Holders, any benefit or
any legal or equitable right, remedy or claim under this Indenture.
Section 11.17 Qualification of Indenture.
--------------------------
The Company shall qualify this Indenture under the TIA and shall pay
all costs and expenses (including reasonable attorneys' fees for the Company,
the Trustee and the Holders of the Securities) incurred in connection therewith,
including, but not limited to, costs and expenses of qualification of the
Indenture and the Securities and printing or otherwise preparing this Indenture
and the Securities. In connection with any such qualification of this Indenture
under the TIA, the Trustee shall be entitled to receive from the Company any
such Officers'
- 78 -
<PAGE>
Certificate, Opinions of Counsel or other documentation as it may reasonably
request.
Section 11.18 [Intentionally Omitted.]
------------------------
- 79 -
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly
executed, all as of the date first written above.
ALCO HEALTH SERVICES
CORPORATION
Attest: By: /s/ John A. Kurcik
--------------------------
Name: John A. Kurcik
Title: Vice President
/s/ Teresa T. Ciccotelli
- -------------------------------
Name: Teresa T. Ciccotelli
Title: Secretary
(SEAL)
BANKERS TRUST COMPANY, as
Trustee
Attest: By: /s/ Rossana E. Abueva
-----------------------
Name: Rossana E. Abueva
Title: Assistant Treasurer
/s/ Scott Muirhead
- --------------------
Name: Scott Muirhead
Title: Vice President
(SEAL)
-80-
<PAGE>
EXHIBIT A
---------
(FORM OF FACE OF NOTE)
ALCO HEALTH SERVICES CORPORATION
No. _________________ $____________________
14-1/2% Senior Subordinated Note due 1999, Series A
Alco Health Services Corporation, a Delaware corporation,
promises to pay to _____________________ or registered assigns, the principal
sum of ____________________ Dollars on the date of maturity.
Interest Payment Dates: September 15 and March 15
Record Dates: September 1 and March 1
Date of Maturity: September 15, 1999
ALCO HEALTH SERVICES
CORPORATION
By___________________________
By___________________________
(SEAL)
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Notes
described in the within-mentioned
Indenture.
Bankers Trust Company, as Trustee Original Issuance Date:
By__________________________
Authorized Signature
<PAGE>
(Back of Note)
ALCO HEALTH SERVICES CORPORATION
14-1/2% Senior Subordinated Note due 1999, Series A
1. General. This Note is one of the Notes issued by the Company
-------
under an Indenture dated as of March 31, 1994 (the "Indenture") between the
Company and the Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date
of the Indenture. The Notes are subject to all such terms, and Noteholders are
referred to the Indenture and such Act for a statement of such terms. All
capitalized terms not defined herein shall have the meanings assigned to such
terms in the Indenture. The Notes are general obligations of the Company.
2. Interest. The Company will pay interest semiannually on
--------
September 15 and March 15 of each year or if any such date is not a Business
Day, on the next succeeding Business Day (each an "Interest Payment Date");
provided that the first Interest Payment Date shall be September 15, 1994.
- --------
Interest on this Security will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date that is
one day immediately after the date of issuance of this Security through but
excluding the date on which interest is paid. The Company shall pay interest on
overdue principal and, to the extent lawful, on overdue installments of interest
(without regard to any applicable grace periods) at the rate of interest
specified in the Indenture. Interest will be computed on the basis of twelve
30-day periods in a 360-day year.
3. Method of Payment. The interest so payable, and punctually paid
-----------------
or duly provided for, shall be paid to the person in whose name this Security is
registered at the close of business on the regular record date, which shall be
the September 1 and March 1 (whether or not a Business Day) (each a "regular
record date"), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for, and any interest
payable on such defaulted interest (to the extent lawful), will forthwith cease
to be payable to the Holder on such regular record date and shall be paid on a
date which is a Business Day to the person in whose name this Security is
registered at the close of business on a special record date for the payment of
such defaulted interest to be fixed by the Company, notice of which shall be
given to Holders not less than 15 days prior to such special record date.
Payment of the principal of and interest on this Security will be
-A2-
<PAGE>
made at the offices or agencies of the Company maintained for that purpose;
provided, however, that payment of interest may be made by check mailed to the
- -------- -------
address of the person entitled thereto as such address shall appear in the
Security register maintained by the Registrar or, in certain circumstances, by
wire transfer in accordance with the instruction of the Holder hereof, as
specified in the Indenture. The Company will pay principal (and premium, if
any) and interest in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
4. Paying Agent and Registrar. Initially, the Trustee shall act as
--------------------------
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-registrar without notice to any Holder of a Note ("Noteholder"). The
Company or any of its Subsidiaries or Affiliates may act in any such capacity.
5.(a) Optional Redemption. The Notes are subject to redemption on or
-------------------
after September 15, 1994, at the option of the Company, upon at least 30 days',
but no more than 60 days' prior written notice by mail, in whole or in part, at
the following prices plus accrued and unpaid interest if redeemed during the 12-
month period beginning September 15 of the years indicated below.
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1994 106.00%
1995 104.00%
1996 102.00%
1997 and thereafter 100.00%
</TABLE>
The redemption price of the Securities will be payable together with
accrued interest thereon to the redemption date; provided, however, that
-------- -------
interest installments with respect to which the Interest Payment Date is on or
prior to such redemption date which will be payable to the Holders of record at
the close of business on the relevant record dates referred to herein, all as
provided in the Indenture. On and after the redemption date, interest will
cease to accrue on the Securities or portions thereof called for redemption.
Securities in denominations larger than $1,000 may be redeemed in part
in integral multiples of $1,000. In the event of redemption of this Security in
part only, a new Security or Securities for the unredeemed portion hereof will
be issued in the name of the Holder hereof upon the cancellation hereof.
-A3-
<PAGE>
(b) Mandatory Redemption or Repurchase. If, for the 12-month period
----------------------------------
ending on each of August 31, 1996 and 1997, the Company's Consolidated Fixed
Charge Ratio (as defined) exceeds 1.5 to 1, the Company shall be required,
within 90 days from such August 31 (the "Repurchase Date"), to redeem or
otherwise repurchase in the open market and retire 5% and 10%, respectively,
of the principal amount of Notes offered hereby. Notwithstanding the
requirement of the preceding sentence, the Company shall not be required to
make such redemption or repurchase until such time, and to the extent, funds
become available under the Credit Agreement or any successor or replacement
facility. In addition, the Company shall redeem on August 31, 1998 $87,500,000
in aggregate principal amount of the Notes at a Redemption Price of 100% of
the principal amount plus all accrued and unpaid interest, if any, to the
Redemption Date. The Company may reduce the principal amount of Notes to be
redeemed or otherwise repurchased, as the case may be, pursuant to this
paragraph by subtracting 100% of the principal amount of any Notes that the
Company has previously acquired and surrendered for cancellation or that the
Company has repurchased or redeemed on or prior to the Redemption Date or the
Repurchase Date and, in the case of a mandatory repurchase, which have not
previously been used as a credit against a prior mandatory repurchase. If the
Redemption Date is subsequent to a record date with respect to any Interest
Payment Date and on or prior to such Interest Payment Date, then such accrued
interest, if any, shall be paid to the Person who surrenders the Note for
redemption (and not the Holder as of the record date with respect to such
Interest Payment Date), and no other interest shall be payable thereon. The
Company shall deliver to the Trustee, it least 45 days prior to the Redemption
Date, an Officers' Certificate setting forth the amount of any reductions of
the principal amount of Notes to be redeemed, calculated pursuant to this
paragraph 5(b).
6. Offers to Repurchase. Under certain circumstances if the Company
--------------------
or any Subsidiary sells any Business Segment, the Company may elect to make an
offer to repurchase a portion of the Notes at the redemption date.
7. Change of Control. If, at any time, (i) any issuance of shares of
-----------------
capital stock of Holdings or any sale, transfer or other disposition of any
shares of capital stock of Holdings or the Holdings Debentures by any Person to
any Person (other than an affiliate of CVCL or an officer, director or employee
of CVCL or Alco) results in CVCL, its affiliates and officers, directors and
employees of CVCL and Alco holding less than 50% of either (a) the total common
equity interest in Holdings or the total voting power of all the outstanding
shares of capital stock of Holdings entitled to vote in the election of
-A4-
<PAGE>
directors of Holdings or (b) the aggregate principal amount outstanding of
Holdings Debentures or Refinancing Debentures, as the case may be, or (ii)
Holdings owns less than 80% of the outstanding shares of voting stock of the
Company (each, a "Change of Control"), each holder of Notes shall have the right
to require that the Company repurchase such holder's Notes at a purchase price
in cash equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase, in accordance with the terms
contemplated in Section 4.21(b) of the Indenture; provided, however, that a
-------- -------
Change of Control pursuant to clause (i) of this sentence will be deemed not to
have occurred if, at the time of any such issuance, sale, transfer or
disposition, the Consolidated Fixed Charge Ratio is greater than 1.5 to 1. The
Company hereby covenants that, prior to the mailing of the notice to holders
provided for in Section 4.21(b) of the Indenture, it will repay in full all
Indebtedness under the Credit Agreement or offer to repay in full all such
Indebtedness and to repay the Indebtedness of each lender who has accepted such
offer. The Company shall first comply with the covenant in the preceding
sentence before the Company shall be required to repurchase Notes pursuant to
the above provisions.
8. Denominations, Transfer, Exchange. The Notes are in registered
---------------------------------
form without coupons. The Notes issued on the date hereof shall be issued in
principal amounts of $1,000 and integral multiples thereof. The transfer of
Notes may be registered and Notes may be exchanged as provided in the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not exchange or register
the transfer of any Note or portion of a Note selected for redemption (except
the unredeemed portion of any Note being redeemed in part). Also it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed.
9. Persons Deemed Owners. The registered Holder of a Note may be
---------------------
treated as its owner for all purposes.
10. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent shall
pay the money back to the Company at its written request. After that,
Noteholders entitled to the money must look to the Company for payment unless an
abandoned property law designates another person and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
-A5-
<PAGE>
11. Discharge Prior to Redemption or Maturity. The Company shall
-----------------------------------------
be discharged from the Indenture and the Notes, except for certain sections
thereof, subject to the terms of the Indenture, upon the payment of all of the
Securities or, within six months of the maturity or redemption date of all of
the Securities, upon the irrevocable deposit with the Trustee of funds or U.S.
Government Obligations sufficient for such payment or redemption.
12. Subordination. The Notes will be subordinated in right of
-------------
payment to the prior payment in full of all Senior Indebtedness (as defined in
the Indenture) of the Company. To the extent and in the manner provided in the
Indenture, Senior Indebtedness must be paid before any payment may be made to
any holder of this Note. Any Noteholder by accepting this Note agrees to the
subordination and authorizes the Trustee to give it effect.
13. Defaults and Remedies. Events of Default include:
---------------------
(i) a failure of the Company to pay interest for 30 days after it is
due or principal when due on any Note (whether or not prohibited by the
subordination provision); (ii) a failure of the Company to comply in any
material respect with any of its other agreements or covenants, or provisions
of, the Notes or the Indenture (including, without limitation, the Company's
covenant to repay or offer to repay Indebtedness under the Credit Agreement
under the circumstances described in the Change of Control provisions of Section
4.21 of the Indenture) for 30 days after notice; (iii) the happening of a
default under the terms of an instrument evidencing or securing any Indebtedness
of the Company or a subsidiary of the Company (or the payment of which is
guaranteed by the Company or a Subsidiary of the Company), in an amount or
amounts over $10 million in the aggregate whether such Indebtedness or guarantee
now exists or shall be created hereafter, and such default results in the
acceleration of such Indebtedness which, together with the principal amount of
any such other Indebtedness so accelerated, and then remaining unsatisfied, and
in respect of which such acceleration has not been rescinded, aggregates in
excess of $10 million; (iv) the rendering of a final judgment against the
Company or any Subsidiary in an amount in excess of $10 million, which remains
undischarged, unbonded or unstayed for a period of 60 days; or (v) certain
events of bankruptcy, insolvency or reorganization.
The Indenture provides that the Trustee will, within 30 days after the
occurrence of a Default, give the Noteholders notice of all Defaults known to it
(the term "Default" to include the events specified above, without grace or
notice), provided that, except in the case of a Default in the payment of
principal
-A6-
<PAGE>
of or interest on any of the Notes, the Trustee shall be protected in
withholding such notice if it in good faith determines that the withholding of
such notice is in the interest of the Noteholders.
In case an Event of Default (other than an Event of Default specified
in clause (v) or (vi) of Section 6.1 with respect to the Company) occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding, by notice in writing to the Company (and
to the Trustee if given by the Noteholders), may declare to be due and payable
immediately, the principal amount of the Notes then outstanding and accrued
interest to the date of acceleration and upon any such declaration the same
shall become and shall be immediately due and payable. If an Event of Default
specified in clause (v) or (vi) of Section 6.1 with respect to the Company
occurs, all principal of and accrued but unpaid interest on the Notes then
outstanding 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.
Such declaration may be rescinded by Holders of a majority in
principal amount of then outstanding Notes if all existing Events of Default
have been cured or waived (except non-payment of principal or accrued but unpaid
interest on the Notes that has become due solely because of the acceleration);
if interest on overdue installments of interest and overdue principal, which has
become due otherwise than by acceleration, has been paid (to the extent the
payment of such interest is lawful), if the rescission would not conflict with
any judgment or decree of a court of competent jurisdiction and if certain other
conditions under the Indenture are met.
Defaults and Events of Default (except a Default in payment of
principal of or interest on the Notes) may be waived by the Holders of a
majority in principal amount of outstanding Notes upon the conditions provided
in the Indenture.
The Indenture requires the Company to file periodic reports with the
Trustee as to the absence of Defaults.
14. Amendments and Waivers. Subject to certain exceptions, the
----------------------
Indenture or the Notes may be amended with the written consent of the Holders of
at least 66-2/3% in principal amount of the then outstanding Notes, and any
existing default may be waived with the consent of the Holders of at least 66-
2/3% in principal amount of the then outstanding Notes. Without the consent of
any Noteholder, the Indenture or the Notes may be amended to cure any
ambiguity, defect or inconsistency, to provide for the assumption of the
obligations of the Company
-A7-
<PAGE>
under the Indenture by a successor corporation, to provide for uncertificated
Notes in addition to or in place of certificated Notes or to make any change
that does not adversely affect the rights of any Noteholder.
15. Trustee Dealings with Company. The Trustee, in its individual or
-----------------------------
any other capacity, may become the owner or pledgee of Notes and may otherwise
deal with the Company or its Affiliates, as if it were not Trustee.
16. No Recourse Against Others. A director, officer, employee or
--------------------------
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation.
Each Noteholder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the Notes.
17. Agreement on Issue Price. In addition, by accepting the
------------------------
Security, each holder agrees with the Company for purposes of Section 1273(c)
(2) of the Internal Revenue Code of 1986, as amended, that with respect to the
Securities (A) the discount rate referred to in proposed Treasury Regulation
(S) 1.1273-2(d)(2)(iv) is equal to that discount rate produced by the sale of
the Notes at 100% of their face amount and (B) the issue price determined as
provided in proposed Treasury Regulation (S) 1.1273-2(d)(2)(iv) is equal to
100% of the principal amount thereof.
18. Authentication. This Note shall not be valid until
--------------
authenticated by the manual signature of the Trustee or an authenticating agent.
19. Abbreviations. Customary abbreviations may be used in the name
-------------
of a Noteholder or an assignee, such as: TEN COM (A tenants in common), TEN ENT
(A tenants by the entireties), JT TEN (A joint tenants with right of
survivorship and not as tenants in common), CUST (A Custodian), and U/G/M/A (A
Uniform Gifts to Minors Act).
20. CUSIP Numbers. Pursuant to a recommendation promulgated by the
-------------
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the holders of such
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes, and reliance may be placed only on the other identification
numbers printed hereon.
-A8-
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to
________________________________________________________________________________
(Insert assignee's social security or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Date: ______________ Your Signature: ___________________
________________________________________________________________________________
(Sign exactly as your name appears on
the other side of this Note)
-A9-
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 3.8 of the Indenture, check the box [ ]
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 3.8 of the Indenture, state the amount you elect to
have purchased: $_______________
Date: ______________ Your Signature: _____________________
(Sign exactly as your name appears on the other side of this Note.)
-A10-
<PAGE>
Execution Copy
Exhibit 4.2
AGREEMENT
---------
THIS AGREEMENT (the "Agreement") dated as of April 28, 1994, is entered
into by and among Alco Health Services Corporation, a Delaware corporation (the
"Company"), the holders listed on the signature pages hereto (the "Holders"),
and W. R. Huff Asset Management Co., L.P. ("W. R. Huff").
Background
----------
Each of the Holders either (i) owns beneficially and of record that
aggregate principal amount of the Company's 14.5% Senior Subordinated Notes due
1999 (the "Notes") as is set forth on the signature page for such Holder or (ii)
owns of record that aggregate principal amount of the Notes as is set forth on
the signature page for such Holder as nominee for the respective beneficial
owners (each, a "Beneficial Owner"). Each of the Beneficial Owners is an
investment management client of W.R. Huff. Holders that hold of record as
nominees for Beneficial Owners are sometimes referred to herein as "Huff
Holders". The Notes were originally issued pursuant to the Company's Indenture
dated September 25, 1989, as amended (the "Indenture"). Section 4.14 of the
Indenture requires the Company, in the event it fails to meet the consolidated
net worth test specified therein, to make an offer to all holders of Notes to
purchase an amount of Notes equal to 20% of the principal amount of Notes then
outstanding at a purchase price equal to 100% of the principal amount thereof,
plus accrued interest thereon (a "Section 4.14 Tender Offer"). The Company has
stated to each Holder and W. R. Huff that it may be required to commence one or
more Section 4.14 Tender Offers, including a Section 4.14 Tender Offer during
the Company's current fiscal year. The Company is willing to pay, and each
Holder is willing to receive, a cash amount in exchange for each Holder's
agreement not to tender any of the Notes held by such Holder as of the date of
this Agreement in any Section 4.14 Tender Offer or to exercise any rights it has
or may have with respect to Section 4.14 of the Indenture, all on the terms and
conditions provided herein.
Terms
-----
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
Section 1
GENERAL
Section 1 General. Subject to the terms and conditions herein set
-------
forth the Company agrees to pay to each Holder cash in U.S. dollars in the
amount set forth on the signature page for such Holder (the "Cash
Consideration") in exchange for such Holder's agreement that it will not at any
time (i) tender any Notes owned by such Holder as of the date of this Agreement
pursuant to a Section 4.14 Tender Offer or (ii) exercise any other rights it has
or may have under or in connection with Section 4.14 of the Indenture with
respect to such Notes.
Section 2
COVENANTS
Subject to the terms and conditions herein set forth, effective as of
the opening of business on the Closing Date (as defined below), each Holder,
severally and not jointly, covenants and agrees as follows:
Section 2.1 Tender Offer; Other Rights. Each Holder shall not at any
--------------------------
time (i) tender the Notes owned (beneficially or of record) by such Holder as is
set forth on the signature page for such Holder (and all Notes issued in
exchange therefor or in substitution thereof) pursuant to a Section 4.14 Tender
Offer or (ii) exercise any other rights it has or may have under or in
connection with Section 4.14 of the Indenture with respect to such Notes.
Section 2.2 Legend. Each Holder agrees that the Notes that are owned
------
(beneficially or of record) by such Holder as is set forth on the signature page
for such Holder (and all Notes issued in exchange therefor or in substitution
thereof), from the Closing (as defined below) and until such time as the same is
no longer required under this Agreement, shall bear the following legend:
THE SECURITY EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN AN
UNDERWRITTEN PUBLIC OFFERING REGISTERED UNDER THE SECURITIES ACT
OF 1933. THE SECURITY EVIDENCED HEREBY IS SUBJECT TO THE TERMS
OF A CERTAIN AGREEMENT DATED AS OF APRIL 28, 1994 BY AND AMONG
THE ISSUER AND CERTAIN PERSONS NAMED THEREIN, AND SUCH AGREEMENT
IS BINDING UPON ALL SUCCESSORS AND ASSIGNS OF SUCH PERSONS AND
THE HOLDER HEREOF. A COPY OF THE AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY.
<PAGE>
Section 2.3 Resales and Transfers. In connection with any sale or
---------------------
transfer of the Notes that are owned (beneficially or of record) by such Holder
as is set forth on the signature page for such Holder (and all Notes issued in
exchange therefor or in substitution thereof):
(a) such Notes shall not be traded through The Depository Trust
Company ("DTC") or any other book-entry depositary system or be held in the
record name of Cede & Co., the nominee of DTC, or the record name of any other
nominee of a book-entry depositary system;
(b) all Notes issued in exchange or substitution for such Notes shall
bear the legend specified in Section 2.2 hereof and shall be subject to the
terms of Section 2 and Section 7 of this Agreement; and
(c) prior to any such sale or transfer, such Holder agrees to obtain
from the proposed transferee an executed joinder to this Agreement in the form
attached as Annex I hereto, and such Holder agrees to forward to the Company an
original of each such joinder; provided that if such Holder is a Huff Holder and
--------
sells or transfers its Notes to or through BT Securities Corporation ("BT"), BT
(and not such Holder) agrees to obtain such joinder from the proposed transferee
and BT agrees to forward to the Company an original of each such joinder.
Section 2.4 Undertaking by W. R. Huff. Without limiting any rights
-------------------------
of the Company against any Huff Holders or their respective Beneficial Owners,
W. R. Huff acknowledges that the Company is entering into this Agreement in
reliance on the representations, warranties and undertakings of W.R. Huff
hereunder and agrees that it shall cause each Huff Holder and its respective
Beneficial Owner to perform their respective obligations hereunder.
Section 3
CLOSING
Section 3.1 Closing. The closing of the transactions described in
-------
Section 1 (the "Closing") shall take place at the offices of Dechert Price &
Rhoads, 477 Madison Avenue, New York, New York on or before May 11, 1994 (the
"Closing Date") or on such other date and at such other place as may be mutually
agreed upon by the parties hereto. At the Closing, subject to the satisfaction
or waiver of the conditions to the Closing set forth in Section 4, (a) the
Company shall deliver to each Holder the Cash Consideration in immediately
- 3 -
<PAGE>
available funds in accordance with the instructions set forth on Schedule A
attached hereto, or if the amount of the Cash Consideration to be paid to a
Holder is less than $10,000, the Company shall deliver such Holder's Cash
Consideration by check, (b) each Holder shall deliver to the trustee under the
Indenture (the "Trustee") certificated Notes in the aggregate principal amount
set forth opposite such Holder's name on the signature pages hereto and instruct
the Trustee where to deliver the newly-legended Notes, and (c) the Trustee shall
affix on each such Note the legend specified in Section 2.2 or reissue such Note
in certificated form with such legend affixed. At least five (5) business days
prior to the Closing Date, the Company shall send to each Holder at its address
specified on the Company's books and records a letter of transmittal that each
Holder may send to the Trustee for delivery instructions for the Cash
Consideration and the newly-legended Notes.
Section 4
CONDITIONS TO CLOSING
Section 4.1 Conditions to Closing for each Holder. The obligations
-------------------------------------
of each Holder under this Agreement are subject to the satisfaction, on or
before the Closing Date, of the following conditions:
(a) Representations and Warranties. (i) The representations and
------------------------------
warranties of the Company contained in this Agreement shall be true and correct
in all material respects on the Closing Date and (ii) the Company shall have
performed and complied in all material respects with all agreements or
conditions set forth or contemplated herein which are required to be performed
or complied with by it on or prior to the Closing Date.
(b) Proceedings. All corporate and other proceedings taken or
-----------
to be taken in connection with the transactions contemplated hereby and all
documents incident thereto shall be satisfactory in substance and form to each
Holder, and each Holder shall have received all counterpart originals or
certified or other copies of such documents as it may reasonably request.
(c) No Injunction. The transactions contemplated by this
-------------
Agreement shall not be prohibited by law or enjoined (temporarily or
permanently) on the Closing Date.
Section 4.2 Conditions to Closing for the Company. The obligations
-------------------------------------
of the Company under this Agreement are subject
- 4 -
<PAGE>
to the satisfaction, on or prior to the Closing Date, of the following
conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of each Holder contained in this Agreement shall be true and correct
in all material respects on the Closing Date and each Holder shall have
delivered to the Trustee certificated Notes in the aggregate principal amount
set forth opposite such Holder's name on the signature pages hereto.
(b) No Injunction. The transactions contemplated by this
-------------
Agreement shall not be prohibited by law or enjoined (temporarily or
permanently) on the Closing Date.
(c) Execution and Delivery. Holders owning Notes with an
----------------------
aggregate principal amount of $125,300,000 shall have duly executed and
delivered this Agreement.
(d) Bank Consent. The Company shall have entered into an
------------
amendment of its Credit Agreement dated March 30, 1993 with General Electric
Capital Corporation, as Agent for itself and the benefit of the Lenders named
therein, and the Lenders named therein (as amended to date, the "Credit
Agreement"), in form and substance satisfactory to the Company, consenting to
the transactions contemplated hereunder and providing for certain
modifications to the covenants of the Company under the Credit Agreement.
Section 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Holder:
Section 5.1 Organization and Qualification. The Company is a
------------------------------
corporation validly existing and in good standing under the laws of the State of
Delaware.
Section 5.2 Authorization; Valid and Binding Agreement. The Company
------------------------------------------
has the corporate power and corporate authority to execute and deliver this
Agreement, and to perform all of its obligations and undertakings hereunder and
thereunder. This Agreement constitutes a valid and legally binding obligation
of the Company enforceable against the Company in accordance with its terms.
The Company has taken such corporate action as is necessary or appropriate to
enable it to perform its obligations hereunder.
- 5 -
<PAGE>
Section 5.3 Compliance with Indenture. The Company is in full
-------------------------
compliance with its obligations under the Indenture.
Section 6
REPRESENTATIONS AND WARRANTIES
OF EACH HOLDER AND W. R. HUFF
Section 6.1 Ownership. Each Holder, severally and not jointly,
---------
represents and warrants to the Company:
(a) For Holders that are not Huff Holders, such Holder is the sole
record and beneficial owner of the Notes set forth on its signature page hereto;
(b) For Huff Holders, such Holder is the sole record owner, and its
respective Beneficial Owner is the beneficial owner, of the Notes set forth on
its signature page hereto.
Section 6.2 Due Authorization, Execution and Delivery. Each Holder,
-----------------------------------------
severally and not jointly, represents and warrants to the Company:
(a) For Holders that are not Huff Holders, such Holder has the
corporate power and corporate authority to execute and deliver this Agreement
and to perform its obligations hereunder; the execution, delivery and
performance of this Agreement have been duly authorized by all necessary
corporate or other action of such Holder; and this Agreement constitutes the
valid and binding obligation of such Holder, enforceable against such Holder in
accordance with its terms;
(b) For Huff Holders, W. R. Huff has the power and authority to
execute and deliver this Agreement on behalf of such Holder and its respective
Beneficial Owner and to cause the performance of their obligations hereunder;
and this Agreement constitutes the valid and binding obligation of such Holder
and its respective Beneficial Owner, enforceable against each in accordance with
its terms.
Section 6.3 W. R. Huff. W. R. Huff represents and warrants to the
----------
Company:
(a) W. R. Huff has the power and authority to execute and deliver
this Agreement and to perform its obligations hereunder;
- 6 -
<PAGE>
(b) the execution, delivery and performance of this Agreement have
been duly authorized by all necessary action of W. R. Huff;
(c) this Agreement constitutes the valid and binding obligation of
W. R. Huff in accordance with its terms;
(d) W. R. Huff has the power and authority to execute and deliver
this Agreement on behalf of each Huff Holder and its respective Beneficial
Owner;
(e) W. R. Huff has the power and authority to cause each Huff Holder
and its respective Beneficial Owner to perform their respective obligations
hereunder; and
(f) this Agreement constitutes the valid and binding obligation of
each Huff Holder and its respective Beneficial Owner.
Section 7
MISCELLANEOUS
Section 7.1 Amendment and Modification. No failure or delay on the
--------------------------
part of any party hereto in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies provided for
herein are cumulative and are not exclusive of any remedies that may be
available to the parties hereto at law or in equity or otherwise. No waiver of
or consent to any departure by any party hereto from any provision of this
Agreement shall be effective unless signed in writing by the party waiving
compliance, provided that notice of any such waiver shall be given to each party
hereto as set forth below. Except as otherwise provided herein, no amendment,
modification or termination of any provision of this Agreement shall be
effective unless signed in writing by or on behalf of the parties hereto. Any
waiver of any provision of this Agreement and any consent to any departure by
any party hereto from the terms of any provision of this Agreement, shall be
effective only in the specific instance and for the specific purpose for which
it is made or given.
Section 7.2 Survival of Representations and Warranties. All
------------------------------------------
representations, warranties, covenants and agreements set forth in this
Agreement will survive the execution
- 7 -
<PAGE>
and delivery of this Agreement and the Closing Date and the consummation of the
transactions contemplated hereby.
Section 7.3 Successors and Assigns; Entire Agreement. This Agreement
----------------------------------------
and all of the provisions hereof shall be binding upon and inure to the benefit
of the Company and any successor obligor to the obligations of the Company under
the Indenture pursuant to the provisions of Article V of the Indenture. This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the Holders and W.R. Huff and their respective transferees,
successors and assigns. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter hereof and merges and
supersedes all prior discussions, agreements and understandings of any and every
nature among them as to the subject matter hereof.
Section 7.4 Separability. In the event that any provision of this
------------
Agreement or the application of any provision hereof is declared to be illegal,
invalid or otherwise unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall not be affected except to the extent necessary
to delete such illegal, invalid or unenforceable provision.
Section 7.5 Notices. All notices provided for (other than the letter
-------
of transmittal provided in Section 3.1) or permitted hereunder shall be made in
writing by hand-delivery, registered or certified first-class mail, telex,
telecopier or air courier guaranteeing overnight delivery addressed to the party
at its address as follows:
If to the Company to:
Alco Health Services Corporation
300 Chester Field Parkway
Malvern, Pennsylvania, 19355
Attention: Kurt J. Hilzinger
If to a Holder, at its address on its signature page hereto.
All such notices shall be deemed to have been duly given: when
delivered by hand, if personally delivered; three business days after being
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and on the next business day,
if timely delivered to an air courier guaranteeing overnight delivery.
- 8 -
<PAGE>
Section 7.6 Governing Law. The validity, performance, construction
-------------
and effect of this Agreement shall be governed by and construed in accordance
with the internal law of the State of New York, without giving effect to
principles of conflicts of law.
Section 7.7 Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not constitute a part of this Agreement,
nor shall they affect their meaning, construction or effect.
Section 7.8 Counterparts. This Agreement may be executed in two or
------------
more 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 instrument.
Section 7.9 Further Assurances. Each party shall cooperate and take
------------------
such action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
Section 7.10 Remedies. In the event of a breach or a threatened
--------
breach by any party to this Agreement of its obligations under this Agreement,
any party injured or to be injured by such breach, in addition to being entitled
to exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The
parties agree that the provisions of this Agreement shall be specifically
enforceable, it being agreed by the parties that the remedy at law, including
monetary damages, for breach of such provision will be inadequate compensation
for any loss and that any defense in any action for specific performance that a
remedy at law would be adequate is waived.
Section 7.11 Pronouns. Whenever the context may require, any
--------
pronouns used herein shall be deemed also to include the corresponding neuter,
masculine or feminine forms.
- 9 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers hereunto duly authorized, as of the
date first above written.
ALCO HEALTH SERVICES CORPORATION
By: /s/ Kurt J. Hilzinger
-------------------------
Name: Kurt J. Hilzinger
Title: V.P. Finance, Treasurer
W. R. HUFF ASSET MANAGEMENT
CO., L.P.
By: /s/ Donna B. Charlton
-------------------------
Name: Donna B. Charlton
Title: General Partner
BT SECURITIES CORPORATION/*/
By: /s/ M. W. Kennelley
-----------------------
Name: Mark W. Kennelley
Title: Managing Director
- --------------------
/*/ Solely for the purposes of Section 2.3(c) hereof.
- 10 -
<PAGE>
SIGNATURE PAGE
to Agreement
dated as of April 28, 1994
with Alco Health Services Corporation
Cash Consideration: Name of Holder:
$ 104,357.50
----------------- Bankers Trust New York Corporation
----------------------------------
Address of Holder: Signature of Holder:
130 Liberty Street By: /s/ Duncan Hennes
--------------------- -------------------------
New York, NY 10006 Name: Duncan Hennes
--------------------- --------------------
Title: Senior Vice President
-----------------------
---------------------
Notes Held: /*/
Aggregate Principal Amount
Certificate Number: Represented by Certificate
- ------------------- --------------------------
Total: $41,743,000.00
--------------------
/*/ The foregoing notes are currently held in the DTC for BTNY and prior to
May 11, 1994, a certificate will be issued in the name of BTNY.
- 11 -
<PAGE>
SIGNATURE PAGE
to Agreement
dated as of April 28, 1994
with Alco Health Services Corporation
Cash Consideration: Name of Holder:
$ 2,512.50
-------------- BT Securities Corporation
-----------------------------
Address of Holder: Signature of Holder:
130 Liberty Street By: /s/ M. W. Kennelley
-------------------- --------------------------
30th Floor Name: Mark W. Kennelley
-------------------- --------------------
NY, NY 10006 Title: Managing Director
-------------------- -------------------
Notes Held: /*/
Aggregate Principal Amount
Certificate Number: Represented by Certificate
- ------------------- --------------------------
Total: $1,005,000.00
--------------------
/*/ Such notes were purchased by BT Securities on 4/28/94, which purchase will
settle through DTC on 5/6/94. A certificate for such Notes will be issued to
BT Securities prior to 5/11/94.
- 11a -
<PAGE>
SIGNATURE PAGE
to Agreement
dated as of April 28, 1994
with Alco Health Services Corporation
Cash Consideration: Name of Holder:
See Schedule A Attached
- ----------------------- Cede & Co.*
-----------------------------
Address of Holder: Signature of Holder:
c/o W. R. Huff Asset Management Co. By: Cede & Co.
- ----------------------------------- ------------------------
30 Schuyler Place
- ----------------- By: W. R. Huff Asset
Morristown, N.J. 07960 Management Co., L.P.
- ---------------------- Investment Manager
By: /s/ Donna B. Charlton
-----------------------
Donna B. Charlton
General Partner
Notes Held:
Aggregate Principal Amount
Represented by DTC Global
Certificate Number: Certificate
- ------------------- ----------------------------
N/A - DTC $82,465,000
Global Certificate
Total: 82,465,000
---------------------
* Solely for the accounts at The Depositary Trust Company ("DTC") listed on
the attached Schedule A.
- 12 -
<PAGE>
SIGNATURE PAGE
to Agreement
dated as of April 28, 1994
with Alco Health Services Corporation
Cash Consideration: Name of Holder:
See Schedule A Attached
- ----------------------- Nap & Co.*
----------------------------
Address of Holder: Signature of Holder:
c/o W. R. Huff Asset Management Co. By: Nap & Co.
- ----------------------------------- -----------------------
30 Schuyler Place
- ----------------- By: W. R. Huff Asset
Morristown, N.J. 07960 Management Co., L.P.
- ---------------------- Investment Manager
By: /s/ Donna B. Charlton
-----------------------
Donna B. Charlton
General Partner
Notes Held:
Aggregate Principal Amount
Certificate Number: Represented by Certificate
- ------------------- --------------------------
R3113 65,000
R4391 10,000
RA2265 100,000
Total: 175,000
---------------------
* Solely for the accounts so indicated on the attached Schedule A.
- 13 -
<PAGE>
Annex I
JOINDER
The undersigned transferee of $_______ aggregate principal amount of
Alco Health Services Corporation 14.5% Senior Subordinated Notes due 1999 hereby
joins in and agrees to be bound by Sections 2 and 7 of the Agreement dated as of
April 28, 1994 by and among Alco Health Services Corporation and certain persons
named therein as if the undersigned (i) were an original party to such Agreement
and (ii) owned beneficially and of record the principal amount of Notes set
forth above on April 25, 1994.
Name:________________________
By: ________________________
Title:_______________________
- 14 -
<PAGE>
Exhibit 4.3
AMENDED AND RESTATED SECOND AMENDMENT TO CREDIT AGREEMENT
---------------------------------------------------------
THIS AMENDED AND RESTATED SECOND AMENDMENT TO CREDIT AGREEMENT
("Amendment") is entered into among ALCO HEALTH SERVICES CORPORATION, a
Delaware corporation ("Borrower"), GENERAL ELECTRIC CAPITAL CORPORATION, a
corporation organized under the banking laws of the State of New York ("GE
Capital"), Co-Agent (as defined in the Credit Agreement, as defined below),
and each of the other lenders thereunder (collectively, the "Lenders"), and GE
Capital, as agent for the Lenders (in such capacity, "Agent"), as of March 31,
1994, with reference to the following facts:
RECITALS
--------
A. Borrower, GE Capital, individually and in its capacity as Agent,
Co-Agent, and each of the other Lenders, have entered into that certain Credit
Agreement dated as of March 30, 1993, as amended by that certain First
Amendment to Credit Agreement dated as of December 3, 1993 and that certain
Second Amendment to Credit Agreement dated as of March 31, 1994 (collectively,
the "Credit Agreement"), pursuant to which Lenders agreed to make certain
financial accommodations to or for the benefit of Borrower upon the terms and
conditions contained therein. Unless otherwise defined in this Amendment, (i)
capitalized terms used herein shall have the meanings attributed to them in
the Credit Agreement, and (ii) references to sections and subsections shall
refer to sections or subsections of the Credit Agreement.
B. Section 3.2(b) of the Second Amendment to Credit Agreement dated as
of March 31, 1994 (the "Original Second Amendment") provided that certain
sections of the Original Second Amendment would not become effective unless
and until Borrower had refinanced Existing Subordinated Borrower Notes in an
aggregate principal amount of not less than $146,000,000. Because Existing
Subordinated Borrower Notes in an aggregate amount of less than $146,000,000
were exchanged pursuant to the Note Exchange, Sections 2.4, 2.5, 2.8 and 2.11
of the Original Second Amendment did not become effective.
C. Borrower has requested that (i) Lenders consent to the payment by
Borrower of certain cash amounts pursuant to the provisions of that certain
Agreement dated as of April 28, 1994 (the "Noteholder Agreement"), by and
among Borrower, the holders listed on the signature pages thereto, and W. R.
Huff Asset Management Co., L.P., a copy of which is attached hereto as
Exhibit A, (ii) although a condition of Section 3.2(b) was not satisfied,
- ---------
Lenders implement the changes that were contemplated by Sections 2.4, 2.5, 2.8
and 2.11 of the Original Second Amendment, and (iii) Lenders delete the change
implemented by Section 2.12 or the Original Second Amendment, by amending and
<PAGE>
restating the Original Second Amendment, and Lenders are willing to do so
subject to the terms and conditions set forth in this Amendment.
NOW, THEREFORE, in consideration of the continued performance by
Borrower of its promises and obligations under the Credit Agreement and the
other Loan Documents, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Borrower and Lenders
hereby agree as follows:
A G R E E M E N T
- - - - - - - - -
1. Incorporation of Credit Agreement and Other Loan Documents. Except
----------------------------------------------------------
as expressly modified under this Amendment, all of the terms and conditions
set forth in the Credit Agreement and the other Loan Documents are
incorporated herein by this reference, and the obligations of Borrower under
the Credit Agreement and the other Loan Documents are hereby acknowledged,
confirmed and ratified by Borrower. The terms and provisions of the Original
Second Amendment shall be superseded and replaced by the terms and provisions
of this Amendment.
2. Consent. Lenders hereby consent to the payment by Borrower of the
-------
Cash Consideration, as such term is defined in the Noteholder Agreement.
3. Amendments to Credit Agreement. The Credit Agreement shall be
------------------------------
amended as follows:
3.1 The definition of "Subordinated Borrower Note Indenture" in the
Credit Agreement is hereby deleted in its entirety.
3.2 The following definitions shall be added to the Credit
Agreement:
"Existing Subordinated Borrower Note Indenture" shall mean that
certain Indenture, dated as of September 25, 1989, among Borrower, as issuer,
and Mellon Bank, N.A., as indenture trustee, as the same may be modified,
amended, extended, restated or supplemented, from time to time in accordance
with this Agreement.
"Existing Subordinated Borrower Notes" shall mean those certain
14-1/2% Senior Subordinated Notes due September 15, 1999, issued by Borrower
pursuant to the Existing Subordinated Borrower Note Indenture, as the same may
be modified, amended, extended, restated or supplemented from time to time in
accordance with this Agreement.
<PAGE>
"New Subordinated Borrower Note Indenture" shall mean that certain
Indenture, dated as of March 31, 1994, between Borrower, as issuer, and
Bankers Trust Company, as indenture trustee, as the same may be modified,
amended, extended, restated or supplemented, from time to time in accordance
with this Agreement.
"New Subordinated Borrower Notes" shall mean those certain 14-1/2%
Senior Subordinated Notes due September 15, 1999, Series A, issued by Borrower
pursuant to the New Subordinated Borrower Note Indenture, as the same may be
modified, amended, extended, restated or supplemented from time to time in
accordance with this Agreement.
3.3 The definition of "Ancillary Agreements" in the Credit Agreement
is hereby deleted in it entirety and the following definition is substituted
therefor:
"Ancillary Agreements" shall mean those agreements, documents,
and instruments (other than this Agreement) identified in the Schedule of
Documents and any other supplemental agreement, undertaking, instrument,
document or other writing executed by Borrower or Parent as a condition
to advances or funding under this Agreement or otherwise in connection
herewith, including the Existing Subordinated Borrower Note Indenture,
the New Subordinated Borrower Note Indenture, the Subordinated Borrower
Notes, the Subordinated Parent Notes, the Loan Documents, and all
amendments, modifications or supplements thereto effected in accordance
with this Agreement.
3.4 The definition of "Funded Debt Ratio" in the Credit Agreement is
hereby deleted in its entirety and the following definition is substituted
therefor:
"Funded Debt Ration" shall mean, as of the end of any Rolling
Period, the ratios of (i) Funded Debt other than the Obligations, plus
----
the month-end average of the Obligations for the twelve (12) months
during such Rolling Period, to (ii) EBITDA for such Rolling Period.
3.5 The definition of "Material Adverse Effect" in the Credit
Agreement is hereby deleted in its entirety and the following definition is
substituted therefor:
"Material Adverse Effect" shall mean a material adverse effect
on (i) the financial condition, operations, assets (other than goodwill),
or business or financial prospects of Borrower, (ii) Borrower's ability
to pay the Obligations in accordance with the terms thereof, (iii) the
value of the Collateral taken as a whole or Liens on the Collateral taken
as a whole in favor of Agent, for the benefit of each Lender, or the
priority of any such Lien, or (iv) the practical realization of the
benefits of Lenders'
<PAGE>
rights and remedies under this Agreement and the other Loan Documents
taken as a whole.
3.6 The definition of "Subordinated Borrower Notes" in the Credit
Agreement is hereby deleted in it entirety and the following definition is
substituted therefor:
"Subordinated Borrower Notes" shall mean each of the Existing
Subordinated Borrower Notes and the New Subordinated Borrower Notes.
3.7 The definition of "Subordinated Debt" in the Credit Agreement
is hereby deleted in it entirety and the following definition is substituted
therefor:
"Subordinated Debt" shall mean Indebtedness of Borrower
pursuant to the Existing Subordinated Borrower Note Indenture, New
Subordinated Borrower Note Indenture, and Subordinated Borrower Notes,
each as amended, modified or supplemented from time to time in accordance
with this Agreement.
3.8 The definition of "Tangible Net Worth" in the Credit Agreement
is hereby deleted in its entirety and the following definition is substituted
therefor:
"Tangible Net Worth" shall mean, as of any date, the sum of (i)
Net Worth, plus (ii) cumulative changes in Inventory LIFO Reserve, minus
---- -----
(iii) intangible assets of Borrower, including patents, trademarks, trade
names, organization expense, treasury stock, unamortized debt discount
and expense, deferred charges and other like intangibles, but excluding
goodwill, plus (iv) the amount of any goodwill written off subsequent to
----
the Closing Date, less the amount of such goodwill that normally would
have been amortized but for such write-off, each valued, on a
Consolidated basis, in accordance with GAAP.
3.9 Section 3.2(a) of the Credit Agreement is hereby deleted in its
entirety, and the following is substituted therefor:
(a) All of Borrower's representations and warranties contained
herein or in any of the Loan Documents shall be true and correct on and
as of the Closing Date and the date of each such Advance or the date of
the incurrence of such Letter of Credit Obligation as though made on and
as of such date, except to the extent that any such representation or
warranty expressly relates to an earlier date and for changes therein
permitted or contemplated by this Agreement. Without limiting the
generality of the foregoing, the making of such Advance or Letter of
Credit Obligation shall not cause Borrower to exceed the indebtedness
limitations set forth in either the Existing
<PAGE>
Subordinated Borrower Note Indenture or the New Subordinated Borrower
Note Indenture.
3.10 Section 4.9 of the Credit Agreement is hereby deleted in its
entirety, and the following is substituted therefor:
4.9 No Default. Borrower is not in default under the Existing
----------
Subordinated Borrower Note Indenture, the New Subordinated Borrower Note
Indenture, and the Subordinated Borrower Notes, and to Borrower's
knowledge Parent is not in default (not otherwise cured or waived) under
the Subordinated Parent Notes. Borrower is not in default in any material
respect, and to Borrower's knowledge no third party is in default in any
material respect, under or with respect to any material contract,
agreement, lease, or other instrument to which Borrower is a party. No
Event of Default has occurred and is continuing.
3.11 Section 6.19 of the Credit Agreement is hereby deleted in its
entirety and the following is substituted therefor:
6.19 Funded Debt Ratio. Borrower shall maintain, on a
-----------------
Consolidated basis, a Funded Debt Ratio of not more than the following as
of the end of the Rolling Period corresponding thereto:
<TABLE>
<CAPTION>
Maximum
Funded Debt
Rolling Period Ended At Ratio
----------------------- ---------------
<S> <C>
3/31/94 5.75 to 1.0
6/30/94 5.75 to 1.0
9/30/94 5.75 to 1.0
12/31/94 5.75 to 1.0
3/31/95 5.50 to 1.0
6/30/95 5.50 to 1.0
9/30/95 5.25 to 1.0
The end of each 5.00 to 1.0
Fiscal Quarter
thereafter
</TABLE>
3.12 Section 7.15 of the Credit Agreement is hereby deleted in its
entirety and the following is substituted therefor:
7.15 Payment or Modification of Obligations.
--------------------------------------
(a) Borrower shall not amend, supplement or otherwise modify
any of the provisions of the Existing Subordinated Borrower Note
Indenture, the New Subordinated
<PAGE>
Borrower Note Indenture or the Subordinated Borrower Notes except on terms no
less favorable to Borrower and Lenders and on terms acceptable to Agent;
provided, that Borrower can refinance the Subordinated Borrower Notes as
- --------
permitted by Section 7.14(k).
(b) Borrower shall cause Parent not to amend, supplement or
otherwise modify any of the provisions of the Subordinated Parent Notes except
on terms no less favorable to Parent; provided, that parent would be permitted
--------
to amend the Subordinated Parent Notes to (i) convert CII debt into equity
(common or preferred Stock), (ii) extend the PIK period under the CII
debentures, (iii) repurchase the Subordinated Parent Notes in accordance with
the terms of Section 6.22 or otherwise amend the Subordinated Parent Notes on
terms that are no less favorable to Parent than those in effect prior to the
amendment, or (iv) refinance the Subordinated Parent Notes, so long as (A) the
terms of such refinancing are no less favorable to Parent than those in effect
prior to the refinancing, and the Indebtedness after such refinancing is
subordinated to the Indebtedness under the Guaranty to at least the same
extent as the Subordinated Parent Notes being refinanced, and (B) the
aggregate cash payments under all of the Subordinated Parent Notes, after
giving effect to the refinancing, in any Fiscal Year does not exceed the cash
payments required to be paid in such Fiscal Year under the Merger Debentures,
as in effect on the Closing Date. Notwithstanding the provisions of clause (A)
of the preceding sentence, the terms of such refinancing may include
provisions that restrict or prohibit: (x) Parent dividends; Parent asset sales
(including the Stock of Borrower except to the extent proceeds from the sale
of such Stock are used for capital expenditures and/or payment of debt of
Borrower or Parent); transactions with Affiliates of Parent (other than
Borrower); Parent mergers; Parent consolidations; Parent acquisitions; payments
on junior or pari passu Parent debt; incurrence of Liens on the assets of
Parent (except for a pledge to any senior lender of Borrower of the Stock of
Borrower held by Parent); Parent investments (other than investments in
Borrower); loans and advances by Parent (other than loans and advances to
Borrower); changes in control of Parent; incurrence of debt by Parent; and
changes in Parent's line of business; and (y) the imposition of any further
restrictions on the ability of Borrower and its Subsidiaries to pay dividends
or make other payments to the holders of their respective Stock, if such
restrictions are more restrictive than those under the Loan Documents (or any
renewals, extensions, refundings or refinancings thereof) as in effect at the
time of such refinancing; asset sales by Borrower and its Subsidiaries (except
for sales in the ordinary course of business and except for sales that are for
cash or the assumption of the seller's debt and where the proceeds from such
sales are used for capital
<PAGE>
expenditures and/or repayment of debt of Borrower or such Subsidiaries);
issuance of Stock by Borrower or its Subsidiaries (except to the extent
proceeds from the sale of such Stock are used for capital expenditures
and/or payment of debt of Borrower or such Subsidiaries); transactions by
Borrower and its Subsidiaries with Affiliates; investments, loans and
advances by Borrower and its Subsidiaries; incurrence of Liens on the
assets of Borrower and its Subsidiaries (other than Liens securing senior
indebtedness); incurrence of debt by Borrower and its Subsidiaries (other
than incurrences that do not exceed, in the aggregate, the greater of (I)
the maximum amount permitted under the Existing Subordinated Borrower
Note Indenture as in effect on the Closing Date, and (II) $655,000,000);
and changes in Borrower's line of business; provided, that the
--------
documentation for any such refinancing shall provide that (1) any action,
inaction, or circumstance that is the subject of any of the restrictions
or prohibitions described in clause (y), if permitted under the Loan
Documents (or any renewals, extensions, refundings or refinancings
thereof) as in effect at the time of such refinancing, shall be permitted
under such refinancing, and (2) if any action, inaction or circumstance
restricted or prohibited under any of the restrictions or prohibitions
described in clause (y) is permitted or approved under the Loan Documents
(or any renewals, extensions, refundings or refinancings thereof) as a
result of any amendment to, or any waiver or consent under, the Loan
Documents (or any renewals, extensions, refundings or refinancings
thereof) as in effect at the time of such refinancing, which amendment,
waiver or consent is entered into or given after the time of such
refinancing, then the remedies of the holders of, or trustee with respect
to, such refinanced Indebtedness arising from the violation of such
restriction or prohibition would specifically be limited only to
enforcing any rights that such holders or trustee have against Parent,
and would specifically exclude any right to seek or obtain any damages
(whether sounding in tort, contract, or otherwise) or injunctive relief
from or against Borrower or any creditor of Borrower. The agreement of
Lenders to the rights contemplated to be provided to the prospective
lenders to Parent, as set forth in the preceding sentence, are consented
to in reliance upon and are conditioned upon the limitation of remedies in
favor of Agent and Lenders contained in the foregoing sentence.
4. Conditions of Effectiveness.
---------------------------
This Amendment shall become effective upon satisfaction of each of the
following conditions:
(a) Agent shall have received copies of this Amendment that, when
taken together, bear the signatures of
<PAGE>
Borrower and Lenders sufficient to constitute the Requisite Lenders;
(b) Agent shall have received a copy of the accompanying
Guarantor Consents executed by Parent, Health Services Plus, Inc., and
Health Services Capital Corporation; and
(c) The Noteholder Agreement shall have been executed by
holders owning Existing Subordinated Borrower Notes with an aggregate
principal amount of $125,300,000, and the Closing, as defined in the
Noteholder Agreement, shall have occurred.
5. Entire Agreement. This Amendment, together with the Credit Agreement
----------------
and the other Loan Documents, is the entire agreement between the parties
hereto with respect to the subject matter hereof. This Amendment supersedes
all prior and contemporaneous oral and written agreements and discussions with
respect to the subject matter hereof. Except as otherwise expressly modified
herein, the Loan Documents shall remain in full force and effect.
6. Representations and Warranties. Borrower hereby represents and
------------------------------
warrants that the representations and warranties contained in the Credit
Agreement were true and correct in all material respects when made and, except
to the extent (a) that a particular representation or warranty by its terms
expressly applies only to an earlier date, or (b) Borrower has previously
advised Agent in writing as contemplated under the Credit Agreement, are true
and correct in all material respects as of the date hereof. The Credit
Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof.
7. Miscellaneous.
-------------
7.1 Counterparts. This Amendment may be executed in identical
------------
counterpart copies, each of which shall be an original, but all of which shall
constitute one and the same agreement. Delivery of an executed counterpart of
a signature page to this Amendment by facsimile transmission shall be
effective as delivery of a manually executed counterpart of this Amendment.
Any Lender delivering this Amendment by facsimile shall send the original
manually executed counterpart of this Amendment to Agent's counsel promptly
after such facsimile transmission.
7.2 Headings. Section headings used herein are for convenience of
--------
reference only, are not part of this Amendment, and are not to be taken into
consideration in interpreting this Amendment.
<PAGE>
7.3 Recitals. The recitals set forth at the beginning of this
--------
Amendment are true and correct, and such recitals are incorporated into and are
a part of this Amendment.
7.4 Governing Law. This Amendment shall be governed by, and
-------------
construed and enforced in accordance with, the laws of the State of New York
applicable to contracts made and performed in such state, without regard to
the principles thereof regarding conflict of laws.
7.5 No Novation. Except as specifically set forth in Sections 2
-----------
and 3 of this Amendment, the execution, delivery and effectiveness of this
Amendment shall not (a) waive any breaches or defaults under the Credit
Agreement or the other Loan Documents, whether known or unknown, (b) limit,
impair, constitute a waiver of or otherwise affect any right, power or remedy
by Agent or any Lender under the Credit Agreement or any other Loan Document,
(b) constitute a waiver of any provision in the Credit Agreement or in any of
the other Loan Documents, or under applicable law, or (c) alter, modify, amend
or in any way affect any of the terms, conditions, obligations, covenants or
agreements contained in the Credit Agreement, all of which are ratified and
affirmed in all respects and shall continue in full force and effect.
7.6 Conflict of Terms. In the event of any inconsistency between
-----------------
the provisions of this Amendment and any provision of the Credit Agreement,
the terms and provisions of this Amendment shall govern and control.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
date first written above.
BORROWER:
--------
ALCO HEALTH SERVICES CORPORATION,
a Delaware corporation
By /s/ Kurt J. Hilzinger
-----------------------------
Name Kurt J. Hilzinger
---------------------------
Title V.P. Finance & Treasurer
--------------------------
LENDERS:
-------
GENERAL ELECTRIC CAPITAL CORPORATION,
individually and as Agent
By /s/ Charles D. Chiodo
---------------------------
Charles D. Chiodo
Duly Authorized Signatory
<PAGE>
SECURITY PACIFIC BUSINESS CREDIT INC.,
individually and as Co-Agent
By /s/ G. Markowsky
---------------------------
Name G. Markowsky
--------------------------
Title V.P.
-------------------------
BANK OF NEW YORK COMMERCIAL CORPORATION
By /s/ Anthony Viola
--------------------------
Name Anthony Viola
--------------------------
Title Vice President
-------------------------
BELL ATLANTIC CAPITAL CORP., formerly
known as Bell Atlantic Tricon Commercial
Credit Services, a division of Bell
Atlantic TriCon Leasing Corporation
By /s/ G. Alexander Cole
----------------------------
Name G. Alexander Cole
--------------------------
Title Vice President-Credit
-------------------------
BOT FINANCIAL CORPORATION
By /s/ William York
----------------------------
Name William York
--------------------------
Title S.V.P.
-------------------------
THE CIT GROUP/BUSINESS CREDIT, INC.
By /s/ Cyril Prince
----------------------------
Name Cyril Prince
--------------------------
Title A.V.P.
-------------------------
CORESTATES BANK, N.A.
By /s/ Joseph E. Herbst
----------------------------
Name Joseph E. Herbst
--------------------------
Title Vice President
-------------------------
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By /s/ William C. Purinton
-----------------------------
Name William C. Purinton
---------------------------
Title Vice President
--------------------------
HELLER FINANCIAL, INC.
By /s/ Richard E. Peller
----------------------------
Name Richard E. Peller
--------------------------
Title Sr. Vice President
-------------------------
LASALLE BANK
By
----------------------------
Name
--------------------------
Title
-------------------------
MERIDIAN BANK
By /s/ Keith R. Case
----------------------------
Name Keith R. Case
--------------------------
Title Vice President
-------------------------
MIDLANTIC NATIONAL BANK
By /s/ David L. Raphael
----------------------------
Name David L. Raphael
--------------------------
Title A.V.P.
-------------------------
NATIONSBANK OF GEORGIA, N.A.
By /s/ Betty H. Mills
----------------------------
Name Betty H. Mills
--------------------------
Title Vice President
-------------------------
<PAGE>
PILGRIM PRIME RATE TRUST
By /s/ Kathleen Lenarci
----------------------------
Name Kathleen Lenarci
--------------------------
Title Senior Credit Analyst
-------------------------
SANWA BUSINESS CREDIT CORPORATION
By /s/ Peter L. Skaula
-----------------------------
Name Peter L. Skaula
---------------------------
Title Vice President
--------------------------
<PAGE>
GUARANTOR CONSENTS
------------------
Alco Health Distribution Corporation, a Delaware corporation, hereby
(i) ratifies and reaffirms, as of the date hereof, all of the provisions of
that certain Guaranty and Pledge Agreement dated as of March 30, 1993 in favor
of Agent, (ii) acknowledges receipt of a copy of the Amended and Restated
Second Amendment to Credit Agreement dated as of March 31, 1994 (the
"Amendment"), and (iii) consents to all of the provisions of the Amendment.
Dated: May 2 , 1994 ALCO HEALTH DISTRIBUTION
--------- --- CORPORATION
By: /s/ Kurt J. Hilzinger
------------------------------
Title: V. P. Finance & Treasurer
---------------------------
Health Services Plus, Inc., a Delaware corporation, hereby (i)
ratifies and reaffirms, as of the date hereof, all of the provisions of that
certain Continuing Guaranty dated as of March 30, 1993 in favor of Agent, (ii)
acknowledges receipt of a copy of the Amended and Restated Second Amendment to
Credit Agreement dated as of March 31, 1994 (the "Amendment"), and (iii)
consents to all of the provisions of the Amendment.
Dated: May 2 , 1994 HEALTH SERVICES PLUS, INC.
--------- ---
By: /s/ Kurt J. Hilzinger
------------------------------
Title: V. P. Finance & Treasurer
---------------------------
Health Services Capital Corporation, a Delaware corporation, hereby
(i) ratifies and reaffirms, as of the date hereof, all of the provisions of
that certain Continuing Guaranty dated as of March 30, 1993 in favor of Agent,
(ii) acknowledges receipt of a copy of the Amended and Restated Second
Amendment to Credit Agreement dated as of March 31, 1994 (the "Amendment"),
and (iii) consents to all of the provisions of the Amendment.
Dated: May 2 , 1994 HEALTH SERVICES CAPITAL CORPORATION
--------- ---
By: /s/ Kurt J. Hilzinger
------------------------------
Title: V. P. Finance & Treasurer
---------------------------
