<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[x] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required] For the fiscal year ended December
31, 1994; or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] For the transition period from
______ to ______
Commission File Number 1-10315
HEALTHSOUTH Corporation
----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 63-0860407
-------------------------------- ----------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
Two Perimeter Park South
Birmingham, Alabama 35243
-------------------------------- ---------
(Address of Principal Executive (Zip Code)
Offices)
Registrant's Telephone Number, Including Area Code: (205) 967-7116
--------------
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on which Registered
---------------------------- -----------------------
Common Stock, par value New York Stock Exchange
$.01 per share
9.5% Senior Subordinated New York Stock Exchange
Notes due 2001
5% Convertible Subordinated New York Stock Exchange
Debentures due 2001
Securities Registered Pursuant to Section 12(g) of the Act: NONE
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant as of March 3, 1995:
Common Stock, par value $.01 per share-$1,383,817,854
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 3, 1995
----------------------- ----------------------------
Common Stock, par value
$.01 per share 35,565,387 shares
DOCUMENTS INCORPORATED BY REFERENCE
No documents are incorporated by reference into this
Annual Report on Form 10-K.
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Index to Exhibits Page ___
<PAGE>
PART I
Item 1. Business.
General
HEALTHSOUTH Corporation ("HEALTHSOUTH" or the "Company") is the
nation's largest provider of rehabilitative healthcare services. At December 31,
1994, the Company had 402 locations in 33 states, the District of Columbia and
Ontario, Canada. In its outpatient and inpatient rehabilitation facilities, the
Company has established interdisciplinary programs for the rehabilitation of
patients experiencing disability due to a wide variety of physical conditions,
such as stroke, head injury, orthopaedic problems, neuromuscular disease and
sports-related injuries. The Company's rehabilitation services include physical
therapy, sports medicine, work hardening, neurorehabilitation, occupational
therapy, respiratory therapy, speech-language pathology and rehabilitation
nursing. In addition to rehabilitation services, HEALTHSOUTH's medical center
facilities also provide general and specialty medical and surgical healthcare
services.
The Company was organized as a Delaware corporation in February 1984.
The Company's principal executive offices are located at Two Perimeter Park
South, Birmingham, Alabama 35243, and its telephone number is (205) 967-7116.
Recent Acquisitions
Acquisition of ReLife, Inc.
Effective December 29, 1994, HEALTHSOUTH and its wholly-owned
subsidiary, RRS Acquisitions Company, Inc., a Delaware corporation ("RRS"),
completed the acquisition of ReLife, Inc., a Delaware corporation ("ReLife"),
through the merger of RRS into ReLife. ReLife is the surviving corporation in
the merger, and is wholly-owned by HEALTHSOUTH. ReLife stockholders received
.7053 shares of Common Stock, par value $.01 per share, of HEALTHSOUTH
("HEALTHSOUTH Common Stock") for each share of Common Stock of ReLife held by
them. A total of 5,512,645 shares of HEALTHSOUTH Common Stock were issued in the
transaction. The exchange ratio represents a value of $24.00 per share to
ReLife's former stockholders, resulting in an approximate value of the
transaction of $180,000,000.
ReLife provides a comprehensive system of rehabilitation services for
disabled and injured individuals. As of December 31, 1994, ReLife operated 31
inpatient facilities with an aggregate of 1,102 licensed beds, including nine
free-standing rehabilitation hospitals, nine acute rehabilitation units, five
sub-acute rehabilitation units, seven transitional living units and one
residential facility and provided outpatient rehabilitation services at twelve
outpatient centers. ReLife also provides other services and programs, including
contract staffing of rehabilitation therapists and specialized programs for
spinal cord injury, brain injury and industrial rehabilitation.
NovaCare Rehabilitation Hospitals Acquisition
On February 3, 1995, HEALTHSOUTH entered into a definitive agreement to
purchase the operations of the rehabilitation hospital division of NovaCare,
Inc., consisting of 11 rehabilitation hospitals in seven states, 12 other
facilities and two Certificates of Need (the "NovaCare Rehabilitation
Hospitals"). This transaction will be a cash purchase and involves the payment
of $215,000,000 in cash and the assumption of approximately $20,000,000 in
liabilities, for a total consideration of $235,000,000. The acquisition is to be
funded by an increase in HEALTHSOUTH's existing bank credit facilities. The
transaction is subject to certain regulatory and governmental reviews, including
clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and is expected to be completed early in the second
quarter of 1995.
Acquisition of Surgical Health Corporation
As of January 22, 1995, HEALTHSOUTH entered into an Amended and
Restated Plan and Agreement of Merger, pursuant to which HEALTHSOUTH will
acquire Surgical Health Corporation ("SHC") through the merger of a wholly-owned
subsidiary of the Company into SHC, with SHC being the surviving corporation.
SHC stockholders will receive, for each of their shares of capital stock of SHC
("SHC Shares"), the right to receive a fraction of a share of HEALTHSOUTH Common
Stock of the Company to be determined by multiplying the number of outstanding
SHC Shares owned by each SHC stockholder at the effective time of the merger by
a fraction, the numerator of which is $4.60 and the denominator of which is the
Base Period Trading Price (as defined); provided, however, that for purposes of
such calculations, the Base Period Trading Price shall be deemed to equal (i)
$37.00 in the event the Base Period Trading Price is greater than $37.00 or (ii)
$33.00 in the event that the Base Period Trading Price is less than $33.00. The
exchange ratio will result in an approximate value of the transaction of
$155,000,000.
SHC is the second largest independent operator of free-standing
outpatient surgery centers in the United States. SHC operates a network of 36
free-standing surgery centers and surgery hospitals in eleven states, with an
aggregate of 155 operating and procedures rooms, and is currently developing an
additional three surgery centers in two states. SHC surgery centers provide the
facilities and medical support staff necessary for physicians to perform
non-emergency surgical procedures that do not generally require overnight
hospitalization.
The SHC acquisition represents the entry by the Company into a new line
of the healthcare business, and the Company's Board of Directors believes that
the transaction is desirable for the following reasons, among others: (i) SHC
has facilities in desirable locations, primarily in markets where HEALTHSOUTH
has an existing presence; (ii) SHC has a strong senior management team which is
knowledgeable and experienced in the industry; (iii) SHC's existing
relationships with physicians and payors will be enhanced by affiliation with
the Company's national network; (iv) the merger will further broaden the
continuum of care that HEALTHSOUTH is able to provide and (v) the merger is
expected to be accretive to 1995 earnings per share. The transaction is subject
to certain regulatory and governmental approvals, including clearance under the
HSR Act. It is expected that the transaction will close during April 1995.
Post-Acquisition Status
The Company believes that the acquisition of ReLife, the NovaCare
Rehabilitation Hospitals acquisition and the SHC acquisition will complement its
existing facilities and enhance its market position as well as provide some
diversification. The Company believes that the geographic dispersion of the more
than 450 locations now operated and to be operated by the Company makes it more
attractive to managed care networks, major insurance companies, regional and
national employers and regional provider alliances. In addition, since the
facilities acquired and to be acquired have very limited contractual
relationships with insurance companies, managed care providers, employers or
others, the Company plans to expand its existing payor relationships to include
these facilities. The Company has completed the integration of the former
National Medical Enterprises, Inc. ("NME") facilities which it acquired
effective December 31, 1993 (the "NME Selected Hospitals") with this existing
network and is in the process of doing likewise with the former ReLife
facilities. In these efforts, it is implementing centralized management and
financial controls, utilization of HEALTHSOUTH's clinical programs and protocols
and HEALTHSOUTH's national accounts and marketing programs. HEALTHSOUTH believes
that, as was the case with the NME Selected Hospitals, it will be able to
increase the utilization of the former ReLife facilities by managed care and
commercial payors and thus improve the operating margins of those facilities.
See Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
Industry Background
In 1991 (the most recent year for which data are available), about
4,000,000 people in the United States received rehabilitative healthcare
services. "Rehabilitative healthcare services" refers to the range of skilled
services provided to individuals in order to minimize physical and cognitive
impairments, maximize functional ability and restore lost functional capacity.
The focus of rehabilitative healthcare is to ameliorate physical and cognitive
impairments resulting from illness or injury, and to restore or improve
functional ability so that individuals can return to work and lead independent
and fulfilling lives. Typically, rehabilitative healthcare services are provided
by a variety of healthcare professionals including physiatrists, rehabilitation
nurses, physical therapists, occupational therapists, speech-language
pathologists, respiratory therapists, recreation therapists, social workers,
psychologists, rehabilitation counselors and others. Over 80% of those receiving
rehabilitative healthcare services return to their homes, work, schools or
active retirement.
Demand for rehabilitative healthcare services continues to be driven by
advances in medical technologies, an aging population and the recognition on the
part of the payor community (insurers, self-insured companies, managed care
organizations and federal, state and local governments) that appropriately
administered rehabilitative services can improve quality of life as well as
lower overall healthcare costs. Studies conducted by insurance companies
demonstrate the ability of rehabilitation to significantly reduce the cost of
future care. Estimates of the savings range from $11 to $30 per dollar spent on
rehabilitation. Further, reimbursement changes have encouraged the rapid
discharge of patients from acute-care hospitals while they remain in need of
rehabilitative healthcare services.
<PAGE>
Patient Care Services Locations
At December 31, 1994, the Company operated inpatient and outpatient
rehabilitation facilities and medical centers in the following locations:
<TABLE>
<CAPTION>
Inpatient Medical
Rehabilitation Center Total
Outpatient Locations Locations Locations
State Market(1) Locations(2) (Beds)(3)(4) (Beds)(4) (Beds)(4)
<S> <C> <C> <C> <C> <C>
Alabama Birmingham 9 5 (205) 1 (219) 15 (424)
Florence 2 2
Huntsville 3 1 (50) 4 (50)
Mobile 2 2
Montgomery 1 1 (80) 2 (80)
Dothan 1 (34) 1 (34)
Muscle Shoals 1 1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Inpatient Medical
Rehabilitation Center Total
Outpatient Locations Locations Locations
State Market(1) Locations(2) (Beds)(3)(4) (Beds)(4) (Beds)(4)
<S> <C> <C> <C> <C> <C>
Arizona Tucson 2 2
Phoenix 3 3
Scottsdale 3 3
Arkansas Little Rock 2 2
Ft. Smith 1 (80) 1 (80)
California San Francisco 2 2
Fresno 2 2
San Carlos 1 1
Marina Del Ray 1 1
Woodland Hills 1 1
Redding 1 1
Huntington Beach 2 2
San Diego 2 2
Santa Rosa 2 2
Van Nuys 1 1
Colorado Denver 9 9
Ft. Collins 2 2
Colorado Springs 1 1
Washington DC Washington 1 1
Florida Ocala 2 2
Jacksonville 4 4
Merritt Island 3 3
Boca Raton 2 2
Port St. Lucie 3 3
Lake Worth 1 1
Melbourne 1 1 (80) 2 (80)
Ocoee 2 2
Orlando 5 5
Palm Bay 2 2
Ft. Lauderdale 3 1 (108) 4 (108)
West Palm 2 2
Tampa 4 4
Miami 4 1 (165) 2 (397) 7 (562)
Largo 1 (40) 1 (40)
Tarpon Springs 1 1
Sarasota 2 1 (60) 3 (60)
Tallahassee 1 (70) 1 (70)
Vero Beach 1 (70) 1 (70)
Panama City 2 2
Georgia Atlanta 6 1 (14) 7 (14)
Columbus 1 1
Macon 1 1 (75) 2 (75)
Illinois Chicago 4 4
Columbia 2 2
Carbondale 1 1
Iowa Des Moines 1 1
Kansas Leawood 1 1
Kentucky Louisville 2 2
Edgewood 1 (40) 1 (40)
Louisiana Metairie 2 2
Baton Rouge 1 1 (43) 2 (43)
Maryland Baltimore 10 10
Chevy Chase 1 1
Rockville 1 1
Michigan Detroit 1 1
Mississippi Jackson 2 2
Meridian 1 1
Missouri St. Louis 11 1 (26) 12 (26)
Columbia 3 3
Kansas City 1 2 (21) 3 (21)
Cape Girardeau 3 3
Lake Ozark 1 1
Nebraska Omaha 1 1
Nevada Las Vegas 2 2
New Hampshire Bedford 3 3
Manchester 1 1
Concord 1 (100) 1 (100)
New Jersey East Brunswick 1 1
Manahawkin 1 1
Tinton Falls 1 1
Bridgewater 1 1
Newton 1 1
Linden 2 2
Paramus 2 2
Edison 2 2
Madison 1 1
Washington 1 1
North Bergen 1 1
Upper Saddle River 2 2
Toms River 1 1 (155) 2 (155)
New Mexico Albuquerque 5 1 (60) 6 (60)
New York Syracuse 2 2
North Carolina Charlotte 1 1
Statesville 1 1
Asheville 1 1
Kinston 1 (17) 1 (17)
Ohio Lorain 4 4
Troy 2 (26) 2 (26)
Ashtabula 1 1
Oklahoma Oklahoma City 3 1 (111) 4 (111)
Weatherford 1 1
Tulsa 1 1
Ontario, Canada Etabicoke 1 1
Pennsylvania Harrisburg 3 3
Pittsburgh 6 1 (89) 7 (89)
Pottstown 1 1
Altoona 2 1 (66) 3 (66)
Erie 1 2 (207) 3 (207)
Mechanicsburg 3 2 (201) 5 (201)
Pleasant Gap 4 1 (88) 5 (88)
York 3 1 (88) 4 (88)
South Carolina Columbia 2 1 (89) 3 (89)
Florence 1 1 (88) 2 (88)
Charleston 1 (36) 1 (36)
Lancaster 2 (54) 2 (54)
Tennessee Kingsport 1 (50) 1 (50)
Knoxville 2 2
Chattanooga 2 1 (80) 3 (80)
Nashville 2 4 (164) 6 (164)
Memphis 5 1 (80) 6 (80)
Martin 1 (40) 1 (40)
Texas Dallas 3 3 (173) 1 (96) 7 (269)
Ft. Worth 2 1 (60) 3 (60)
Texarkana 1 1 (60) 2 (60)
Austin 4 1 (80) 5 (80)
San Antonio 7 3 (127) 10 (127)
Waco 1 1
Midland 1 (60) 1 (60)
Houston 8 2 (186) 10 (186)
Arlington 2 2
Utah Sandy 1 1 (86) 2 (86)
Virginia Richmond 2 1 (36) 1 (200) 4 (236)
Virginia Beach 3 3
Roanoke 1 1
Arlington 1 1
Alexandria 1 1
Warrenton 1 1
West Virginia Huntington 1 (40) 1 (40)
Wisconsin Green Bay 1 1
TOTAL 277 66 (4,058) 5 (912) 348 (4,970)
<PAGE>
<FN>
(1) "Markets" are determined by reference to base facility
locations. Satellite facilities may be located in different
geographic markets, but are included with the base facility
location in the table.
(2) Includes base outpatient centers and their satellite centers,
as well as outpatient satellites of inpatient rehabilitation
facilities.
(3) Includes rehabilitation hospitals, subacute, skilled nursing
and transitional living facilities and hospital-based units.
(4) "Beds" refers to the number of beds for which a license or
Certificate of Need has been issued, which may vary materially
from beds available for use.
</TABLE>
<PAGE>
At December 31, 1994, the Company provided other patient care services
(including physician services, diagnostic services, home health services and
impairment evaluation services) at 54 additional locations.
Patient Care Services
General
When a patient is referred to one of the Company's rehabilitation
facilities, he undergoes an initial evaluation and assessment process that
results in the development of a rehabilitation care plan designed specifically
for that patient. Depending upon the patient's disability, this evaluation
process may involve the services of a single discipline, such as physical
therapy for a knee injury, or of multiple disciplines, as in the case of a
complicated stroke patient. The Company has developed numerous rehabilitation
programs, which include stroke, head injury, spinal cord injury, neuromuscular
and work injury, that combine certain services to address the needs of patients
with similar disabilities. In this way, all of the facilities' patients,
regardless of the severity and complexity of their disabilities, can receive the
level and intensity of those services necessary for them to be restored to as
productive, active and independent a lifestyle as possible.
The professional staff at each facility consists of licensed or
credentialed healthcare practitioners. The staff, together with the patient, his
family and the referring physician, form the "team" that assists the patient in
attaining his rehabilitation goals. This interdisciplinary team approach permits
the delivery of coordinated, integrated patient care services.
Outpatient Rehabilitation Services
HEALTHSOUTH operates the largest group of affiliated proprietary
outpatient rehabilitation facilities in the United States. The Company's
outpatient rehabilitation centers offer a comprehensive range of rehabilitative
healthcare services, including physical therapy and occupational therapy, that
are tailored to the individual patient's needs, focusing predominantly on
orthopaedic injuries, sports injuries, work injuries, hand and upper extremity
injuries, back injuries, and various neurological/neuromuscular conditions. As
of December 31, 1994, the Company provided outpatient rehabilitative healthcare
services through 111 outpatient centers and their 127 associated satellite
clinics as well as through the 39 satellite outpatient clinics associated with
its inpatient facilities.
The continuing emphasis on containing the increases in healthcare
costs, as evidenced by Medicare's prospective payment system, the growth in
managed care and the various alternative healthcare reform proposals, results in
the early discharge of patients from acute-care facilities. As a result, many
hospital patients do not receive the intensity of services that may be necessary
for them to achieve a full recovery from their diseases, disorders or traumatic
conditions. The Company's outpatient rehabilitation services play a significant
role in the continuum of care because they provide hospital-level services, in
terms of intensity, quality and frequency, in a more cost-efficient setting.
Patients treated at the Company's outpatient centers will undergo
varying courses of therapy depending upon their needs. Some patients may only
require a few hours of therapy per week for a few weeks, while others may spend
up to five hours per day in therapy for six months or more, depending on the
nature, severity and complexity of their injuries.
In general, the Company initially establishes an outpatient center in a
given market, either by acquiring an existing private therapy practice or
through de novo development, and institutes its clinical protocols and programs
in response to the community's general need for services. The Company will then
establish satellite clinics that are dependent upon the main facility for
management and administrative services. These satellite clinics generally
provide a specific evaluative or specialty service/program, such as hand therapy
or foot and ankle therapy, in response to specific market demands. The Company's
outpatient rehabilitation facilities range in size from 1,200 square feet for
specialty clinics to 20,000 square feet for large, full-service facilities.
Currently, the typical outpatient facility configuration ranges in size from
2,000 to 5,000 square feet and costs less than $500,000 to build and equip.
Outpatient rehabilitation services provided by Medicare-certified
Comprehensive Outpatient Rehabilitation Facilities ("CORFs") or rehabilitation
agencies are exempt from Medicare's prospective payment system. At December 31,
1994, six of the Company's outpatient centers were Medicare-certified CORFs and
79 were Medicare-certified rehabilitation agencies. Applications for Medicare
certification as rehabilitation agencies were pending with respect to 15
additional facilities. In determining whether to seek Medicare certification,
and in determining the type of certification to seek, for a new or existing
outpatient center, the Company assesses the relevant market, the services to be
offered and the projected Medicare patient utilization. Based on this
assessment, the Company may choose to seek certification as either a CORF or a
rehabilitation agency, or may elect not to seek certification. Regardless of
certification status, all of the Company's outpatient centers generally provide
similar rehabilitation services and must satisfy an internal quality standards
program to assure that they are meeting comparable standards of care. Thus, the
Company maintains flexibility for change in certification status. See this Item,
"Business Regulation".
Patient utilization of the Company's outpatient rehabilitation
facilities cannot be measured in the conventional manner applied to acute-care
hospitals, nursing homes and other healthcare providers which have a fixed
number of licensed beds and serve patients on a 24-hour basis. Utilization
patterns in outpatient rehabilitation facilities will be affected by the market
to be served, the types of injuries treated, the patient mix and the number of
available therapists, among other factors. Moreover, because of variations in
size, location, hours of operation, referring physician base and services
provided and other differences among each of the Company's outpatient
facilities, it is not possible to accurately assess patient utilization against
a norm.
Inpatient Services
Inpatient Rehabilitation Facilities. At December 31, 1994, HEALTHSOUTH
operated 66 inpatient rehabilitation facilities with 4,058 beds, representing
the largest group of affiliated proprietary inpatient rehabilitation facilities
in the United States. The Company's inpatient rehabilitation facilities provide
high-quality comprehensive services to patients who require intensive
institutional rehabilitation care.
Inpatient rehabilitation patients are typically those who are
experiencing significant physical disabilities due to various conditions, such
as head injury, spinal cord injury, stroke, certain orthopaedic problems and
neuromuscular disease. The Company's inpatient rehabilitation facilities provide
the medical, nursing, therapy and ancillary services required to comply with
local, state and federal regulations as well as accreditation standards of the
Joint Commission on Accreditation of Healthcare Organizations (the "JCAHO") and
the Commission on Accreditation of Rehabilitation Facilities.
All of the Company's inpatient rehabilitation facilities utilize an
interdisciplinary team approach to the rehabilitation process and involve the
patient and family, as well as the payor, in the determination of the goals for
the patient. Internal case managers monitor each patient's progress and provide
documentation of patient status, achievement of goals, functional outcomes and
efficiency.
The Company acquires or develops inpatient rehabilitation facilities in
those communities where it believes there is a demonstrated need for
comprehensive inpatient rehabilitation services. Depending upon the specific
market opportunity, these facilities may be licensed as rehabilitation hospitals
or skilled nursing facilities. The Company believes that it can provide
high-quality rehabilitation services in either type of facility, but prefers to
utilize the rehabilitation hospital form.
In certain markets where the Company does not provide free-standing
outpatient facilities, the Company's rehabilitation hospitals may provide
outpatient rehabilitation services as a complement to their inpatient services.
Typically, this opportunity arises when patients complete their inpatient course
of treatment but remain in need of additional therapy that can be accomplished
on an outpatient basis. Depending upon the demand for outpatient services and
physical space constraints, the rehabilitation hospital may establish the
services either within its building or in a satellite location. In either case,
the clinical protocols and programs developed for use in the free-standing
outpatient centers will be utilized by these facilities.
The Company's recently developed start-up rehabilitation hospital
projects, the Nashville, Tennessee (Vanderbilt University), Memphis, Tennessee
(Methodist Hospitals), Dothan, Alabama (Southeast Alabama Medical Center) and
Charleston, South Carolina (North Trident Regional Medical Center) facilities,
have been developed in conjunction with local tertiary-care facilities. This
strategy of developing effective referral and service networks prior to opening
results in improved operating efficiencies for the new facilities. The Company
has established limited partnerships to own and operate its Nashville and
Memphis, Tennessee rehabilitation hospitals. The Company has a 50% ownership
interest in the Vanderbilt partnership and a 70% ownership interest in the
Memphis partnership. The Company may utilize this same concept in certain of its
other rehabilitation hospitals in the future.
Medical Centers. The Company operates five medical centers with 912
licensed beds in four distinct markets. These facilities provide general and
specialty medical and surgical healthcare services, emphasizing orthopaedics,
sports medicine and rehabilitation.
<PAGE>
The Company acquired its five medical centers as outgrowths of its
rehabilitative healthcare services. Often, patients require medical and surgical
interventions prior to the initiation of their rehabilitative care. In each of
the markets in which the Company has acquired a medical center, the Company had
well-established relationships with the medical communities servicing each
facility. As a result of these relationships, the Company was able to respond to
opportunities to enhance its capabilities to better serve the patients and
physicians in those markets. In addition, each of the facilities enjoyed
well-established reputations in orthopaedics and/or sports medicine prior to
their acquisition by the Company.
Following the acquisition of each of the Company's medical centers, the
Company has provided the resources to improve upon the physical plant and expand
services through the introduction of new technology. The Company has also
developed additional relationships between these facilities and certain
university facilities, including the University of Miami, Auburn University and
the University of Alabama at Birmingham. Through these relationships, the influx
of celebrity athletes and personalities and the acquisition of new technology,
all five institutions have improved their operating efficiencies and enhanced
census.
Each of the five medical center facilities is licensed as an acute-care
hospital, is accredited by the JCAHO and participates in the Medicare
prospective payment system. See this Item, "Business -- Regulation".
Inpatient Facility Utilization. In measuring patient utilization of the
Company's inpatient facilities, various factors must be considered. Due to
market demand, demographics, start-up status, renovation, patient mix and other
factors, the Company may not treat all licensed beds in a particular facility as
available beds, which sometimes results in a material variance between licensed
beds and beds actually available for utilization at any specific time. The
Company is in a position to increase the number of available beds at such
facilities as market conditions dictate. During the year ended December 31,
1994, the Company's inpatient facilities achieved an overall utilization, based
on patient days and available beds, of 61.0%.
Other Patient Care Services
In certain of its markets, the Company provides other patient care
services, including home healthcare, diagnostic services, physician services and
contract management of hospital-based rehabilitative healthcare services. The
Company evaluates market opportunities on a case-by-case basis in determining
whether to provide additional services of these types, which may be
complementary to facility-based services provided by the Company or stand-alone
businesses.
Marketing of Facilities and Services
The Company markets its facilities, and their services and programs, on
local, regional and national levels. Local and regional marketing activities are
typically coordinated by facility-based marketing personnel, whereas large-scale
regional and national efforts are coordinated by corporate-based personnel.
In general, the Company develops a marketing plan for each facility
based on a variety of factors, including population characteristics, physician
characteristics and incidence of disability statistics, in order to identify
specific service opportunities. Facility-oriented marketing programs are focused
on increasing the volume of patient referrals to the specific facility and
involve the development of ongoing relationships with area schools, businesses
and industries as well as physicians, health maintenance organizations and
preferred provider organizations.
The Company's larger-scale marketing activities are focused more
broadly on efforts to generate patient referrals to multiple facilities and the
creation of new business opportunities. Such activities include the development
and maintenance of contractual relationships or national pricing agreements with
large third-party payors, such as CIGNA, Metrahealth (MetLife/Travelers) or
other national insurance companies, with national HMO/PPO companies, such as
Healthcare-COMPARE/AFFORDABLE Hospital Network of America and Multiplan, with
national case management companies, such as INTRACORP and Crawford & Co., and
with national employers, such as Georgia-Pacific Corporation, Dillard Department
Stores, Goodyear Tire & Rubber and Winn-Dixie.
The Company carries out broader programs designed to further enhance
its public image. Among these is the HEALTHSOUTH Sports Medicine Council, headed
by Bo Jackson, which is dedicated to developing educational programs focused on
athletics for use in high schools. The Company has ongoing relationships with
the Ladies Professional Golf Association, the Southeastern Conference and more
than 400 universities, colleges and high schools to provide sports medicine
coverage of events and rehabilitative healthcare services for injured athletes.
In addition, the Company has established relationships with or provided
treatment services for athletes from some 35 to 40 major professional sports
teams, as well as providing sports medicine services for Olympic and amateur
athletes.
<PAGE>
HEALTHSOUTH is a national sponsor of the United Cerebral Palsy
Association and the National Arthritis Foundation and supports many other
charitable organizations on national and local levels. Through these endeavors,
the Company provides its employees with opportunities to support their
communities.
Sources of Revenues
Private pay revenue sources represent the majority of the Company's
revenues. The following table sets forth the percentages of the Company's
revenues from various sources for the periods indicated:
<TABLE>
<CAPTION>
Year Ended Year Ended
Source December 31, 1993 December 31, 1994
------ ----------------- -----------------
<S> <C> <C>
Medicare............................ 30.6% 41.0%
Commercial (1)...................... 36.3% 34.1%
Workers' Compensation............... 16.4% 10.9%
All Other Payors (2)................ 16.7% 14.0%
----- -----
100.0% 100.0%
<FN>
- --------------------
(1) Includes commercial insurance, HMOs, PPOs and other managed care plans.
(2) Medicaid is included in this category, but is insignificant in amount.
</TABLE>
The above table does not reflect the NME Selected Hospitals or the
ReLife facilities for 1993. The NME Selected Hospitals are included in the 1994
figures. Comparable information for the ReLife facilities is not available and
is not reflected in either year in the table. The Company has expanded its
existing payor relationships to include the former NME and ReLife facilities;
however, the percentage of revenues derived from Medicare increased in 1994.
See this Item, "Business-Regulation-Medicare Participation and
Reimbursement" for a description of the reimbursement regulations applicable to
the Company's facilities.
Competition
The Company competes in the geographic markets in which its facilities
are located. In addition, the Company competes on a regional and national basis
with other providers of specialized services such as sports medicine and work
hardening, and specific concentrations such as head injury rehabilitation and
orthopaedic surgery. The competition faced in each of these markets is similar,
with variations arising from the number of healthcare providers in the given
metropolitan area. The primary competitive factors in the rehabilitation
services business are quality of services, projected patient outcomes, charges
for services, responsiveness to the needs of the patients, community and
physicians, and ability to tailor programs and services to meet specific needs
of the patients. Competitors and potential competitors include hospitals,
private practice therapists, rehabilitation agencies and others. Some of these
competitors may have greater patient referral support and financial and
personnel resources in particular markets than the Company. Management believes
that the Company competes successfully within the marketplace based upon its
reputation for quality, competitive prices, positive rehabilitation outcomes,
innovative programs, clean and bright facilities and responsiveness to needs.
HEALTHSOUTH's medical centers are located in four urban areas of the
country, all with well-established healthcare services provided by a number of
proprietary, not-for-profit, and municipal hospital facilities. The Company's
facilities compete directly with these local hospitals as well as various
nationally recognized centers of excellence in orthopaedics, sports medicine and
other specialties. Because HEALTHSOUTH's facilities enjoy a national and
international reputation for orthopaedic surgery and sports medicine, the
Company believes that its medical centers' level of service and continuum of
care enable them to compete successfully, both locally and nationally.
Upon completion of the acquisition of SHC, the Company will operate 36
outpatient surgery centers in eleven states. Such surgery centers will compete
primarily with hospitals and other operators of freestanding surgery centers in
attracting physicians and patients, and developing new centers and in acquiring
existing centers. The primary competitive factors in the outpatient surgery
business are convenience, cost, quality of service, physician loyalty and
reputation. Hospitals have many competitive advantages in attracting physicians
and patients, including established standing in a community, historical
physician loyalty and convenience for physicians making rounds or performing
inpatient surgery in the hospital. However, the Company believes that its
national market system and its historical presence in many of the markets where
the SHC facilities are located will enhance the Company's ability to operate
these facilities successfully.
<PAGE>
The Company potentially faces competition any time it initiates a
Certificate of Need ("CON") project or seeks to acquire an existing facility or
CON. See this Item, "Business Regulation". This competition may arise either
from competing companies, national or regional, or from local hospitals which
file competing applications or oppose the proposed CON project. The necessity
for these approvals serves as a barrier to entry and has the potential to limit
competition by creating a franchise to provide services to a given area. To date
the Company has been successful in obtaining each of the CONs or similar
approvals which it has sought, although there can be no assurance that it will
achieve similar success in the future.
Regulation
The healthcare industry is subject to regulation by federal, state and
local governments. The various levels of regulatory activity affect the
Company's business activities by controlling its growth, requiring licensure or
certification of its facilities, regulating the use of its properties and
controlling the reimbursement to the Company for services provided.
Licensure, Certification and Certificate of Need Regulations
Capital expenditures for the construction of new facilities, the
addition of beds or the acquisition of existing facilities may be reviewable by
state regulators under a statutory scheme which is sometimes referred to as a
Certificate of Need program. States with CON programs place limits on the
construction and acquisition of healthcare facilities and the expansion of
existing facilities and services. For example, in such states approvals are
required for capital expenditures exceeding certain amounts which involve
inpatient rehabilitation facilities or services. At December 31, 1994, 54 of the
Company's inpatient facilities (including four of the Company's medical centers)
were located in CON states. Outpatient rehabilitation facilities and services do
not require such approvals in a majority of states.
State CON statutes generally provide that, prior to the addition of new
beds, the construction of new facilities or the introduction of new services, a
state health planning designated agency (a "SHPDA") must determine that a need
exists for those beds, facilities or services. The CON process is intended to
promote comprehensive healthcare planning, assist in providing high quality
healthcare at the lowest possible cost and avoid unnecessary duplication by
ensuring that only those healthcare facilities that are needed will be built.
Typically, the provider of services submits an application to the
appropriate SHPDA with information concerning the area and population to be
served, the anticipated demand for the facility or service to be provided, the
amount of capital expenditure, the estimated annual operating costs, the
relationship of the proposed facility or service to the overall state health
plan and the cost per patient day for the type of care contemplated. Whether the
CON is granted is based upon a finding of need by the SHPDA in accordance with
criteria set forth in CON statutes and state and regional health facilities
plans. If the proposed facility or service is found to be necessary and the
applicant to be the appropriate provider, the SHPDA will issue a CON containing
a maximum amount of expenditure and a specific time period for the holder of the
CON to implement the approved project.
Licensure and certification are separate, but related, regulatory
activities. The former is usually a state or local requirement and the latter is
a federal requirement. In almost all instances, licensure and certification will
follow specific standards and requirements that are set forth in readily
available public documents. Compliance with the requirements is monitored by
annual on-site inspections by representatives of various government agencies.
All of the Company's inpatient facilities are currently required to be licensed,
but only the outpatient rehabilitation facilities located in Alabama, Arizona,
Maryland and New Hampshire currently must satisfy such a licensing requirement.
Medicare Participation and Reimbursement
In order to participate in the Medicare program and receive Medicare
reimbursement, each facility must comply with the applicable regulations of the
United States Department of Health and Human Services relating to, among other
things, the type of facility, its equipment, its personnel and its standards of
medical care, as well as compliance with all state and local laws and
regulations. All of the Company's inpatient facilities, except for the St. Louis
head injury center, participate in the Medicare program. One hundred of the
Company's outpatient facilities currently participate in, or are awaiting the
assignment of a provider number to participate in, the Medicare program. The
Company's Medicare-certified facilities, inpatient and outpatient, undergo
annual on-site Medicare certification surveys in order to maintain their
certification status. All such facilities have been deemed to be in satisfactory
compliance on all applicable surveys. The Company has developed its operational
systems to assure compliance with the various standards and requirements and has
established ongoing quality assurance activities to monitor compliance. The
Company believes that all of such facilities currently meet all applicable
Medicare requirements.
As a result of the Social Security Act Amendments of 1983, Congress
adopted a prospective payment system ("PPS") to cover the routine and ancillary
operating costs of most Medicare inpatient hospital services. Under this system,
the Secretary of Health and Human Services has established fixed payment amounts
per discharge based on diagnosis-related groups ("DRGs"). With limited
exceptions, a hospital's payment for Medicare inpatients is limited to the DRG
rate, regardless of the number of services provided to the patient or the length
of the patient's hospital stay. Under PPS, a hospital may retain the difference,
if any, between its DRG rate and its operating costs incurred in furnishing
inpatient services, and is at risk for any operating costs that exceed its DRG
rate. HEALTHSOUTH's medical center facilities are generally subject to PPS with
respect to Medicare inpatient services.
The PPS program has been beneficial for the rehabilitation segment of
the healthcare industry because of the economic pressure on acute-care hospitals
to discharge patients as soon as possible. The result has been increased demand
for rehabilitation services for those patients discharged early from acute-care
hospitals. Outpatient rehabilitation services and free-standing inpatient
rehabilitation facilities are currently exempt from PPS, and inpatient
rehabilitation units within acute-care hospitals are eligible to obtain an
exemption from PPS upon satisfaction of certain federal criteria.
Currently, six of the Company's outpatient centers are
Medicare-certified CORFs and 79 are Medicare-certified rehabilitation agencies.
CORFs have been designated cost-reimbursed Medicare providers since 1982. Under
the regulations, CORFs are reimbursed reasonable costs (subject to certain
limits) for services provided to Medicare beneficiaries. Outpatient
rehabilitation facilities certified by Medicare as rehabilitation agencies are
reimbursed on the basis of the lower of reasonable costs for services provided
to Medicare beneficiaries or charges for such services. Outpatient
rehabilitation facilities which are physician-directed clinics are reimbursed by
Medicare on a fee screen basis; that is, they receive a fixed fee, which is
determined by the geographical area in which the facility is located, for each
procedure performed. The Company's outpatient facilities submit monthly bills to
their fiscal intermediaries for services provided to Medicare beneficiaries, and
the Company files annual cost reports with the intermediaries for each such
facility. Adjustments are then made if costs have exceeded payments from the
fiscal intermediary or vice versa.
Inpatient rehabilitation facilities, including the Company's inpatient
facilities (other than the medical center facilities), either are not currently
covered by PPS or are exempt from PPS, and are also cost-reimbursed, receiving
the lower of reasonable costs or charges. Typically, the fiscal intermediary
pays a set rate based on the prior year's costs for each facility. As with
outpatient facilities subject to cost-based reimbursement, annual cost reports
are filed with the Company's fiscal intermediary and payment adjustments are
made, if necessary.
Congress has directed the United States Department of Health and Human
Services to develop regulations, which could subject inpatient rehabilitation
hospitals to PPS in place of the current "reasonable cost within limits" system
of reimbursement. In addition, informal proposals have been made for a
prospective payment system for Medicare outpatient care. Other proposals for a
prospective payment system for rehabilitation hospitals are also being
considered by the federal government. Therefore, the Company cannot predict at
this time the effect that any such changes may have on its operations.
Regulations relating to prospective payment or other aspects of reimbursement
may be developed in the future which could adversely affect reimbursement for
services provided by the Company.
Over the past several years an increasing number of healthcare
providers have been accused of violating the federal False Claims Act. That Act
prohibits the knowing presentation of a false claim to the United States
government. Because the Company performs thousands of similar procedures a year
for which it is reimbursed by Medicare and there is a relatively long statute of
limitations, a billing error could result in significant civil penalties. The
Company does not believe that it is or has been in violation of the False Claims
Act.
Relationships with Physicians and Other Providers
Various state and federal laws regulate relationships among providers
of healthcare services, including employment or service contracts and investment
relationships. These restrictions include a federal criminal law prohibiting the
offer, payment, solicitation or receipt of remuneration by individuals or
entities, to induce referrals of patients for services reimbursed under the
Medicare or Medicaid programs (the "Fraud and Abuse Law"). In addition to
federal criminal sanctions, violators of the Fraud and Abuse Law may be subject
to significant civil sanctions, including fines and/or exclusion from the
Medicare and/or Medicaid programs.
In 1991, the Office of the Inspector General ("OIG") of the United
States Department of Health and Human Services promulgated regulations
describing compensation arrangements which are not viewed as illegal
remuneration under the Fraud and Abuse Law (the "Safe Harbor Rules"). The Safe
Harbor Rules create certain standards ("Safe Harbors") for identified types of
compensation arrangements, which, if fully complied with, assure participants in
the particular arrangement that the OIG will not treat such participation as a
criminal offense under the Fraud and Abuse Law or as the basis for an exclusion
from the Medicare and Medicaid programs or an imposition of civil sanctions.
The Company operates five of its rehabilitation hospitals and almost
all of its outpatient facilities as limited partnerships. Three of the
rehabilitation hospital partnerships involve physician investors, and two of the
rehabilitation hospital partnerships involve other institutional healthcare
providers. Eight of the outpatient partnerships currently have a total of 26
physician limited partners, some of whom refer patients to the partnerships.
Those partnerships which are providers of services under the Medicare program,
and their limited partners, are subject to the Fraud and Abuse Law. A number of
the relationships established by the Company with physicians and other
healthcare providers do not fit within any of the Safe Harbors. The Safe Harbor
Rules do not expand the scope of activities that the Fraud and Abuse Law
prohibits, nor do they provide that failure to fall within a Safe Harbor
constitutes a violation of the Fraud and Abuse Law; however, the OIG has
informally indicated that failure to fall within a Safe Harbor may subject an
arrangement to increased scrutiny. While several federal court decisions have
aggressively applied the restrictions of the Fraud and Abuse Law, they provide
little guidance as to the application of the Fraud and Abuse Law to the
Company's limited partnerships. The Company believes that it is in compliance
with the current requirements of applicable federal and state law, but no
assurances can be given that a federal or state agency charged with enforcement
of the Fraud and Abuse Law and similar laws might not assert a contrary position
or that new federal or state laws, or new interpretations of existing laws,
might not adversely affect relationships established by the Company with
physicians or other healthcare providers or result in the imposition of
penalties on the Company or certain of its facilities. Even the assertion of a
violation could have a material adverse effect upon the Company.
The Omnibus Budget Reconciliation Act of 1993 amends the federal
Medicare statute to prohibit the making by a physician of referrals for
"designated health services" (including physical therapy and occupational
therapy) to an entity in which the physician has an investment interest or other
financial relationship, subject to certain exceptions. Such prohibition took
effect on January 1, 1995 and applies to all of the Company's outpatient
partnerships with physician limited partners. Additional regulation at the
federal level is possible. In addition, a number of states have passed or are
considering statutes which prohibit or limit physicians from referring patients
to facilities in which they have an investment interest. In response to these
regulatory activities, the Company has restructured most of its partnerships
which involve physician investors, in order to eliminate physician ownership
interests not permitted by applicable law. The Company intends to take such
actions as may be required to cause the remaining partnerships to be in
compliance with applicable laws and regulations, including, if necessary, the
prohibition of physician partners from referring patients. The Company believes
that this restructuring has not adversely affected and will not adversely affect
the operations of its facilities. The Company cannot predict whether other
regulatory or statutory provisions will be enacted by federal or state
authorities which would prohibit or otherwise regulate relationships which the
Company has established or may establish with other healthcare providers or the
possibility of materially adverse effects on its business or revenues arising
from such future actions. Management of the Company believes, however, that the
Company will be able to adjust its operations so as to be in compliance with any
regulatory or statutory provision as may be applicable. See this Item, "Business
Sources of Revenues" and "Business Patient Care Services".
Insurance
Beginning December 1, 1993, the Company became self-insured for
professional liability and comprehensive general liability. The Company
purchased coverage for all claims incurred prior to December 1, 1993. In
addition, the Company purchased underlying insurance which would cover all
claims once established limits have been exceeded. It is the opinion of
management that at December 31, 1994, the Company has adequate reserves to cover
losses on asserted and unasserted claims. See Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations".
Employees
As of December 31, 1994, giving effect to the acquisition of ReLife,
the Company employed 18,423 persons, of whom 12,966 were full-time employees and
5,457 were part-time employees. Of the above employees, 306 are employed at the
Company's headquarters in Birmingham, Alabama. Except for approximately 100
employees at one rehabilitation hospital (about 20% of that facility's
workforce), none of the Company's employees is represented by a labor union, and
the Company is not aware of any current activities to organize its employees at
other facilities. Management of the Company considers the relationship between
the Company and its employees to be good.
Item 2. Properties.
The Company's executive offices currently occupy approximately 62,000
square feet in Birmingham, Alabama, under a lease which expires in 1996. In
early 1995, the Company entered into an agreement with its landlord for a new
lease, which will increase the size of its executive offices to approximately
120,000 square feet. The expanded executive offices are expected to be fully
available by early 1996. Certain of the Company's other physical properties are
listed in the table of facilities and businesses set forth under Item 1,
"Business-Patient Care Services", which table is hereby incorporated herein by
reference. All of the Company's outpatient services operations are carried out
in leased facilities, except for its outpatient facilities located in Birmingham
and Montgomery, Alabama, Orlando, Florida and one of its facilities in
Baltimore, Maryland. The Company owns 31 of its inpatient rehabilitation
facilities and leases or operates under management contracts 35 of its inpatient
rehabilitation facilities. The Company constructed its rehabilitation hospitals
in Florence and Columbia, South Carolina, Kingsport and Nashville, Tennessee,
Concord, New Hampshire, and Dothan, Alabama on property leased under long-term
ground leases. The property on which the Company's Memphis, Tennessee
rehabilitation hospital is located is owned in partnership by the Company and
Methodist Hospitals of Memphis. The Company owns its four medical center
facilities in Birmingham, Alabama, Richmond, Virginia and Miami, Florida and
leases its medical center facility in Dallas, Texas. The Company currently owns,
and from time to time may acquire, certain other improved and unimproved real
properties in connection with its business. See Notes 5 and 7 of "Notes to
Consolidated Financial Statements" for information with respect to the
properties owned by the Company and certain indebtedness related thereto.
In Management's opinion, the Company's physical properties are adequate
for the Company's needs for the foreseeable future, and are consistent with the
Company's expansion plans described elsewhere in this Annual Report on Form
10-K. See Item 1, "Business" and Item 7, "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
Item 3. Legal Proceedings.
In the ordinary course of its business, the Company may be subject,
from time to time, to claims and legal actions by patients and others. No
material actions are currently pending against the Company. See this Item,
"Business Insurance" and Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a description of the
Company's insurance coverage arrangements.
From time to time, the Company appeals decisions of various rate-making
authorities with respect to Medicare rates established for the Company's
facilities. These appeals are initiated in the ordinary course of business.
Management believes that adequate reserves have been established for possible
adverse decisions on any pending appeals and that the outcomes of currently
pending appeals, either individually or in the aggregate, will have no material
adverse effect on the Company's operations.
Item 4. Submission of Matters to a Vote of Security Holders.
On December 6, 1994, a Special Meeting of Stockholders of the
Company was held, at which the following actions were taken:
1. The shares of Common Stock represented at the Special
Meeting were voted for the change of the name of the Company to "HEALTHSOUTH
Corporation" as follows:
<TABLE>
<CAPTION>
NUMBER
VOTING FOR AGAINST ABSTAIN
<C> <C> <C> <C>
25,744,101 25,672,157 16,320 55,624
</TABLE>
2. The shares of Common Stock represented at the Special Meeting were
voted for the approval of an Amendment to the Restated Certificate of
Incorporation of the Company to increase the authorized shares of Common Stock
to 100,000,000 shares as follows:
<TABLE>
<CAPTION>
NUMBER
VOTING FOR AGAINST ABSTAIN
<C> <C> <C> <C>
25,744,101 23,987,654 1,650,474 105,975
</TABLE>
3. The shares of Common Stock represented at the Special Meeting were
voted against the approval of the 1994 Stock Option Plan of the Company as
follows:
<TABLE>
<CAPTION>
NUMBER
VOTING FOR AGAINST ABSTAIN
<C> <C> <C> <C>
23,764,868 8,941,586 14,674,736 148,546
</TABLE>
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
HEALTHSOUTH's Common Stock is listed for trading on the New York Stock
Exchange (Symbol: HRC). The following table sets forth for the fiscal periods
indicated the high and low reported sale prices for the Company's Common Stock.
<TABLE>
<CAPTION>
Reported
Sale Price (1)
High Low
1993
<S> <C> <C>
First Quarter................................................................ $ 26.38 $ 14.25
Second Quarter............................................................... 18.63 13.00
Third Quarter................................................................ 16.75 12.13
Fourth Quarter............................................................... 25.63 15.25
1994
First Quarter................................................................ $ 32.25 $ 23.38
Second Quarter............................................................... 34.63 25.25
Third Quarter................................................................ 39.38 25.75
Fourth Quarter............................................................... 38.63 32.25
-------------------------
</TABLE>
The closing price for the Common Stock on the New York Stock Exchange
on March 3, 1995, was $39.13.
There were approximately 1,281 holders of record of the Common Stock as
of March 3, 1995, excluding those shares held by depository companies for
certain beneficial owners.
The Company has never paid cash dividends on its Common Stock and does
not anticipate the payment of cash dividends in the foreseeable future. The
Company currently anticipates that any future earnings will be retained to
finance the Company's operations.
Item 6. Selected Financial Data.
Set forth below is a summary of selected consolidated financial data
for the Company for the years indicated. All amounts have been restated to
reflect the effects of the 1994 ReLife acquisition, which was accounted for as a
pooling of interests.
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
(in thousands, except per share data)
Income Statement Data:
<S> <C> <C> <C> <C> <C>
Revenues $ 198,087 $ 267,346 $ 464,288 $ 575,346 $ 1,127,441
Operating expenses:
Operating units 144,358 191,208 347,073 418,981 835,888
Corporate general and administrative 7,025 10,631 14,418 20,018 37,139
Provision for doubtful accounts 5,441 6,030 11,842 13,875 20,583
Depreciation and amortization 11,388 15,115 26,737 39,376 75,588
Interest expense 11,857 10,412 11,295 14,261 57,255
Interest income (4,136) (5,804) (5,121) (3,698) (4,224)
ReLife merger expense (1) 2,949
Loss on impairment of assets (2) 0 0 0 0 10,500
Loss on abandonment of computer project (2) 0 0 0 0 4,500
NME Selected Hospitals Acquisition
related expense (3) 0 0 0 49,742 0
Terminated merger expense (4) 0 0 3,665 0 0
------- ------- ------- ------- ---------
175,933 227,592 409,909 552,555 1,040,178
Income before income taxes and
minority expenses 22,154 39,754 54,379 22,791 87,263
Provision for income taxes 7,638 13,284 18,383 9,009 33,835
----- ------ ------ ----- ------
Income before minority interests 14,516 26,470 35,996 13,782 53,428
Minority interests 929 1,272 1,402 190 203
--- ----- ----- --- ---
Net income $ 13,587 $ 25,198 $ 34,594 $ 13,592 $ 53,225
= ====== = ====== = ====== = ====== = ======
Weighted average common and common
equivalent shares outstanding (5)(6) 20,325 28,074 34,418 34,717 37,938
====== ====== ====== ====== ======
Net income per common and common
equivalent share (5) $ 0.67 $ 0.90 $ 1.01 $ 0.39 $ 1.40
= ==== = ==== = ==== = ==== = ====
Net income per common share
assuming full dilution (5)(6) $ 0.59 $ 0.83 $ N/A $ N/A $ 1.39
= ==== = ==== = === = === = ====
</TABLE>
<TABLE>
<CAPTION>
December 31,
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
(In Thousands)
Balance Sheet Data:
<S> <C> <C> <C> <C> <C>
Cash and marketable securities $ 74,480 $ 125,252 $ 104,381 $ 77,299 $ 82,577
Working capital 114,513 183,023 195,016 198,352 218,681
Total assets 316,594 491,004 701,210 1,281,522 1,552,334
Long-term debt (7) 156,560 170,175 306,082 818,349 944,774
Stockholders' equity 128,898 288,434 340,466 352,396 426,134
- --------------------
<FN>
(1) Expense related to the ReLife acquisition. See Note 2 of "Notes to
Consolidated Financial Statements" and Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
(2) Expenses related to impairment of long-term assets. See Note 16 of "Notes to
Consolidated Financial Statements" and Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
(3) Expense related to the NME Selected Hospitals Acquisition. See Note 10 of
"Notes to Consolidated Financial Statements" and Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
(4) Expense related to the termination of a proposed merger in the first quarter
of 1992. See Note 14 of "Notes to Consolidated Financial Statements".
(5) Adjusted to reflect a three-for-two stock split affected in the form of a
50 percent stock dividend paid on December 31, 1991.
(6) Fully-diluted earnings per share in 1990 and 1991 reflect shares reserved
for issuance upon exercise of dilutive stock options and shares reserved for
issuance upon conversion of the Company's 7-3/4% Convertible Subordinated
Debentures due 2014, all of which were converted into Common Stock prior to
June 3, 1991. Fully-diluted earnings per share in 1994 reflect shares
reserved for issuance upon exercise of dilutive stock options and shares
reserved for issuance upon conversion of the Company's 5% Convertible
Subordinated Debentures due 2001. See Note 7 of "Notes to Consolidated
Financial Statements".
(7) Includes current portion of long-term debt.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
The following discussion is intended to facilitate the understanding
and assessment of significant changes and trends related to the results of
operations and financial condition of the Company, including certain factors
related to the acquisition by the Company of 28 inpatient rehabilitation
facilities and 45 associated outpatient rehabilitation locations from NME,
effective December 31, 1993 (the "NME Selected Hospitals Acquisition"), as well
as factors related to the acquisition transaction between the Company and
ReLife, Inc., which was effective December 29, 1994 (the "ReLife Acquisition").
The ReLife Acquisition was accounted for as a pooling of interests, and, unless
otherwise indicated, all amounts shown in the following discussion have been
restated to reflect the effect of the Relife Acquisition. This discussion and
analysis should be read in conjunction with the Company's consolidated financial
statements and notes thereto included elsewhere in this Annual Report on Form
10-K.
During the periods discussed below, governmental, commercial and
private payors have increasingly recognized the need to contain their costs for
healthcare services. These payors are turning to closer monitoring of services,
prior authorization requirements, utilization review and increased utilization
of outpatient services. The Company has experienced an increased effort by these
payors to contain costs through negotiated discount pricing for health
maintenance organizations and similar patient referral services. The Company
views these efforts as an opportunity to demonstrate the effectiveness of its
clinical programs and its ability to provide its rehabilitative healthcare
services efficiently. The Company has entered into a number of contracts with
payors to provide services and has realized an increased volume of patients as a
result.
The Company provides rehabilitative healthcare services through its
inpatient and outpatient rehabilitation facilities and medical centers. The
Company has expanded its operations through the acquisition or opening of new
facilities and satellite locations and by enhancing its existing operations. The
Company's revenues increased from $464,288,000 in 1992 to $1,127,441,000 in
1994, an increase of 143%. As of December 31, 1994, the Company has 402
locations in 33 states, the District of Columbia and Ontario, Canada, including
238 outpatient rehabilitation locations (including 111 outpatient rehabilitation
centers and 127 associated satellite clinics), 66 inpatient rehabilitation
locations with 39 associated satellite outpatient clinics, five medical centers,
and 54 locations providing other patient care services.
The Company's revenues include net patient service revenues and other
operating revenues. Net patient service revenues are reported at estimated net
realizable amounts from patients, insurance companies, third-party payors
(primarily Medicare and Medicaid) and others for services rendered. Revenues
from third-party payors also include estimated retroactive adjustments under
reimbursement agreements which are subject to final review and settlement by
appropriate authorities. Management determines allowances for doubtful accounts
and contractual adjustments based on historical experience and the terms of
payor contracts. Net accounts receivable include only those amounts estimated by
management to be collectible.
The Company, in many cases, operates more than one site within a
market. In such markets, there is customarily an outpatient center or inpatient
facility with associated satellite outpatient locations. For purposes of the
following discussion and analysis, same store operations are measured on
locations within markets in which similar operations existed at the end of the
period and include the operations of additional locations opened within the same
market. New store operations are measured on locations within new markets.
Effective December 31, 1993, the Company acquired 28 inpatient
rehabilitation facilities and 45 associated outpatient rehabilitation locations
from NME. After giving effect to the NME Selected Hospitals Acquisition, the
Company's pro forma revenues were $979,456,000 and $1,030,215,000 for the years
ended December 31, 1992 and 1993, respectively.
Effective December 29, 1994, the Company consummated the ReLife
Acquisition as a merger accounted for as a pooling of interests. In connection
with the ReLife Acquisition, the Company acquired 31 inpatient rehabilitation
facilities and 12 outpatient rehabilitation centers. The ReLife operations
generated operating revenues of $118,874,000 for the fiscal year ending
September 30, 1994, compared to $93,042,000 for the fiscal year ending September
30, 1993, an increase of 27.8%. The results for HEALTHSOUTH described below are
based on a combination of HEALTHSOUTH's results for its December 31 fiscal year
and ReLife's results for its September 30 fiscal year for all periods presented.
All data set forth relating to revenues derived from Medicare and Medicaid do
not take into account revenues of the ReLife facilities.
<PAGE>
Results of Operations of the Company
Twelve-Month Periods Ended December 31, 1992 and 1993
The Company operated 171 outpatient rehabilitation locations at
December 31, 1993, compared to 126 outpatient rehabilitation locations at
December 31, 1992. In addition, the Company operated 39 inpatient facilities and
four medical centers at December 31, 1993, compared to 22 inpatient facilities
and four medical centers at December 31, 1992. In 1993, the Company opened the
Vanderbilt Stallworth Rehabilitation Hospital in Nashville, Tennessee, and
acquired 13 inpatient facilities from Rebound, Inc. The foregoing information
does not give effect to the facilities acquired effective December 31, 1993 in
the NME Selected Hospitals Acquisition.
The Company's operations generated revenues of $575,346,000 in 1993, an
increase of $111,058,000, or 23.9%, as compared to 1992 revenues. Same store
revenues for the twelve months ended December 31, 1993 were $539,377,000 an
increase of $75,089,000, or 16.1%, as compared to the same period in 1992. New
store revenues for 1993 were $35,969,000. The increase in revenues is primarily
attributable to increases in patient volume and the addition of 45 outpatient
rehabilitation locations and 13 inpatient locations. Revenues generated from
patients under Medicare and Medicaid plans respectively accounted for 30.6% and
1.0% of revenues for 1993, compared to 29.3% and 1.3% of revenues for 1992.
Revenues from any other single third-party payor were not significant in
relation to the Company's revenues. During 1993, same store outpatient visits
and inpatient days increased 19.9% and 8.2%, respectively. Revenue per
outpatient visit and revenue per inpatient day for same store operations
increased by 0.6% and 6.3%, respectively.
Operating expenses, at the operating unit level, were $418,981,000, or
72.8% of revenues, for 1993, compared to 74.8% of revenues for 1992. Same store
operating expenses for 1993 were $391,409,000, or 72.6% of related revenues. New
store operating expenses were $27,572,000, or 76.7% of related revenues. The
decrease in operating expenses as a percentage of revenues is primarily
attributable to increased patient volume and controlled expenses. Corporate
general and administrative expenses increased from $14,418,000 in 1992 to
$20,018,000 in 1993. As a percentage of revenues, corporate general and
administrative expenses increased from 3.1% in 1992 to 3.5% in 1993. Total
operating expenses were $438,999,000, or 76.3% of revenues, for 1993, compared
to $361,491,000, or 77.9% of revenues, for 1992. The provision for doubtful
accounts was $13,875,000, or 2.4% of revenues, for 1993, compared to
$11,842,000, or 2.6% of revenues, for 1992.
Depreciation and amortization expense was $39,376,000 for 1993,
compared to $26,737,000 for 1992. The increase represents the investment in
additional assets by the Company. Interest expense increased to $14,261,000 in
1993 compared to $11,295,000 for 1992 primarily because of the increased
borrowings during the year under the Company's revolving line of credit. For
1993, interest income was $3,698,000, compared to $5,121,000 for 1992. The
reduction in interest income is primarily attributable to the reduction in rates
received on invested funds and a decrease in the cash balance.
As a result of the NME Selected Hospitals Acquisition, the Company
recognized an expense of approximately $49,742,000 during the year ended
December 31, 1993. By recognizing this expense, the Company accrued
approximately $3,000,000 for costs related to certain employee separations and
relocations. The Company expects the plan of consolidation to take up to 24
months. The $3,000,000 accrual, which is the only cash expense included in the
acquisition-related expense, will be paid over that same period. In addition,
the Company has provided approximately $39,000,000 for the write-down of certain
assets to net realizable value as the result of planned facility consolidations,
and approximately $7,700,000 for the write-off of certain capitalized
development projects. The consolidations are applicable in selected markets
where the Company's services overlap with those of the acquired facilities. The
costs of development projects in certain target markets that were previously
capitalized were written off due to the acquisition of NME facilities in or near
those markets. For further discussion, see Note 10 of "Notes to Consolidated
Financial Statements".
Income before minority interests and income taxes for 1993 was
$22,791,000, compared to $54,379,000 for 1992. The provision for income taxes
for 1993 was $9,009,000, compared to $18,383,000 for 1992, resulting in
effective tax rates of 39.9% for 1993 and 34.7% for 1992. Net income for 1993
was $13,592,000.
Twelve-Month Periods Ended December 31, 1993 and 1994
The Company operated 238 outpatient rehabilitation locations (excluding
outpatient satellites of inpatient facilities) at December 31, 1994, compared to
171 outpatient rehabilitation locations at December 31, 1993. In addition, the
Company operated 66 inpatient facilities and five medical centers at December
31, 1994, compared to 39 inpatient facilities and four medical centers at
December 31, 1993.
The Company's operations generated revenues of $1,127,441,000 in 1994,
an increase of $552,095,000, or 96.0%, as compared to 1993 revenues. Same store
revenues for the twelve months ended December 31, 1994 were $660,973,000, an
increase of $85,627,000, or 14.9%, as compared to the same period in 1993. New
store revenues for 1994 were $466,468,000. New store revenues reflect (1) the 28
inpatient rehabilitation facilities and 45 associated outpatient rehabilitation
locations associated with the NME Selected Hospitals Acquisition, (2) the
acquisition of a specialty medial center in Dallas, Texas, (3) the opening of
three new inpatient rehabilitation facilities, (4) the acquisition of outpatient
locations in 28 new markets, (5) the acquisition of a contract therapist
provider, and (6) the acquisition of a diagnostic imaging company. See Note 10
of "Notes to Consolidated Financial Statements". The increase in revenues is
primarily attributable to the addition of these operations and increases in
patient volume. Revenues generated from patients under Medicare and Medicaid
plans respectively accounted for 41.0% and 3.2% of total revenues for 1994,
compared to 30.6% and 1.0% of total revenues for 1993. Revenues from any other
single third-party payor were not significant in relation to the Company's total
revenues. The increase in Medicare revenues is primarily attributable to the NME
Selected Hospitals Acquisition, since the acquired facilities had a greater
proportion of Medicare patients than the Company's historical experience in its
existing facilities. During 1994, same store outpatient visits and inpatient
days increased 21.8% and 23.0%, respectively. Revenue per outpatient visit and
revenue per inpatient day for the same store operations decreased by 7.8% and
8.4%, respectively. These decreases were offset by increased volume from managed
care and national accounts and by control of expenses.
Operating expenses, at the operating unit level, were $835,888,000, or
74.1% of revenues, for 1994, compared to 72.8% of revenues for 1993. Same store
operating expenses for 1994 were $496,870,000, or 75.2% of related revenues. New
store operating expenses were $339,018,000, or 72.7% of related revenues.
Corporate general and administrative expenses increased from $20,018,000 in 1993
to $37,139,000 in 1994. As a percentage of revenues, corporate general and
administrative expenses decreased from 3.5% in 1993 to 3.3% in 1994. Total
operating expenses were $873,027,000, or 77.4% of revenues, for 1994, compared
to $438,999,000, or 76.3% of revenues, for 1993. The provision for doubtful
accounts was $20,583,000, or 1.8% of revenues, for 1994, compared to
$13,875,000, or 2.4% of revenues, for 1993.
Depreciation and amortization expense was $75,588,000 for 1994,
compared to $39,376,000 for 1993. The increase represents the investment in
additional assets by the Company. Interest expense increased to $57,255,000 in
1994, compared to $14,261,000 for 1993, primarily because of the increased
borrowings during the year under the Company's revolving line of credit, the
issuance of $250,000,000 principal amount of 9.5% Senior Subordinated Notes due
2001 and the issuance of $115,000,000 principal amount of 5% Convertible
Subordinated Debentures due 2001. See Note 7 of "Notes to Consolidated Financial
Statements". For 1994, interest income was $4,224,000 compared to $3,698,000 for
1993. The increase in interest income is primarily attributable to the increase
in the Company's cash position during the year.
During 1994, the Comapany began implementation of the plan of
consolidation related to the NME Selected Hospitals Acquisition. The $3,000,000
accrual for costs related to employee separations and relocations was reduced by
approximately $758,000. A total of 208 employees were affected during 1994. In
addition, assets with a net book value $17,911,000 were written off against the
$39,000,000 provided for discontinued operations. Finanlly, the Company wrote
off all of the $7,700,000 in capitalized development projects. The Company will
complete the plan of consolidation during 1995. It is management's opinion that
the remaining accrual of $23,669,000 is adequate to complete the plan. See Note
10 of "Notes to Consolidated Financial Statements".
As a result of the ReLife Acquisition in the fourth quarter of 1994,
the Company has recognized $2,949,000 in ReLife merger expenses during 1994.
This amount represents costs and expenses incurred or accrued in connection with
completing the ReLife Acquisition. See Note 2 of "Notes to Consolidated
Financial Statements".
During 1994, the Company recognized a $10,500,000 loss on impairment of
assets. This amount relates to the termination of a ReLife management contract
and a permanently damaged ReLife facility. Also during 1994, the Company
recognized a $4,500,000 loss on abandonment of a ReLife computer project. See
Note 16 of "Notes to Consolidated Financial Statements".
Income before minority interests and income taxes for 1994 was
$87,263,000, compared to $22,791,000 for 1993. Minority interests reduced income
before income taxes by $203,000, compared to $190,000 for 1993. The provision
for income taxes for 1994 was $33,835,000, compared to $9,009,000 for 1993,
resulting in effective tax rate of 38.9% for 1994 and 39.9% for 1993. Net income
for 1994 was $53,225,000.
Liquidity and Capital Resources
At December 31, 1994, the Company had working capital of $218,681,000,
including cash and marketable securities of $82,577,000. Working capital at
December 31, 1993 was $198,352,000, including cash and marketable securities of
$77,299,000. For 1994, cash provided by operations was $132,050,000, compared to
$59,787,000 for 1993. The Company used $234,816,000 for investing activities
during 1994, compared to $570,916,000 for 1993. Additions to property, plant and
equipment and acquisitions accounted for $123,575,000 and $85,967,000,
respectively, during 1994. Those same investing activities accounted for
$113,161,000 and $428,307,000, respectively, in 1993. Financing activities
provided $100,384,000 and $493,095,000 during 1994 and 1993, respectively. Net
borrowing proceeds (borrowing less principal reductions) for 1994 and 1993 were
$87,603,000 and $494,979,000, respectively.
Net Accounts receivable were $222,720,000 at December 31, 1994,
compared to $165,586,000 at December 31, 1993. The number of days of average
revenues in average receivables was 69.9 at December 31, 1994, compared to 69.5
at December 31, 1993 (excluding the receivables acquired from NME at December
31, 1993). The concentration of net accounts receivable from patients,
third-party payors, insurance companies and others at December 31, 1994 is
consistent with the related concentration of revenues for the period then ended.
Beginning December 1, 1993, the Company became self-insured for
professional liability and comprehensive general liability. The Company
purchased coverage for all claims incurred prior to December 1, 1993.
Additionally, the Company purchased underlying insurance which will cover all
claims once established limits have been exceeded. The funding requirements for
the self-insurance plan will be based on an independent actuarial determination.
The funding requirements are not expected to have a material impact on the
Company's liquidity and capital positions.
The Company has a $550,000,000 revolving line of credit with
NationsBank of North Carolina and 15 other participating banks. Interest is paid
quarterly based on LIBOR plus a predetermined margin, prime, or competitively
bid rates from the participating banks. This credit facility revolves until June
1, 1997, at which time the outstanding principal balance converts to a term loan
to be repaid in 15 quarterly payments beginning June 30, 1997. The Company
provided a negative pledge on all assets and granted the banks a first priority
security interest in all shares of stock of its subsidiaries and rights and
interests in its controlled partnerships. The effective interest rate on the
average outstanding balance under the revolving line of credit was 5.94% for the
year ended December 31, 1994, compared to the average prime rate of 7.15% during
the same period. At December 31, 1994, the Company had drawn $510,000,000 under
its revolving line of credit. The Company has received a fully-underwritten
commitment to amend and restate the credit agreement, which will increase the
size of the facility to $1,000,000,000.
The Company intends to pursue the acquisition or development of
additional healthcare operations, including comprehensive outpatient
rehabilitation facilities, inpatient rehabilitation facilities and companies
engaged in the provision of rehabilitation-related services, and to expand
certain of its existing facilities. While it is not possible to estimate
precisely the amounts which will actually be expended in the foregoing areas,
the Company anticipates that over the next twelve months it will spend
approximately $50,000,000 for the acquisition and/or development of new
comprehensive outpatient rehabilitation facilities and approximately $70,000,000
for inpatient facility projects and the construction and equipping of additions
to existing inpatient facilities.
As of January 22, 1995, the Company entered into an Amended and
Restated Plan and Agreement of Merger with Surgical Health Corporation ("SHC"),
pursuant to which the Company has agreed to acquire SHC through a
stock-for-stock merger to be accounted for as a pooling of interests. SHC
operates 36 outpatient surgery centers. Under the terms of the Plan and
Agreement of Merger, the Company will issue shares of its Common Stock to all
holders of SHC's Common Stock pursuant to an exchange ratio calculated to
provide $4.60 in value of HEALTHSOUTH Common Stock for each share of SHC's
capital stock, subject to adjustment in certain circumstances. The transaction
is subject to the satisfaction of various conditions, including the receipt of
all required regulatory approvals and the termination or expiration of the
waiting period under the HSR Act. The Company currently expects the transaction
to be consummated during the second quarter of 1995 and is working toward the
satisfaction of all such conditions and the obtaining of all regulatory
approvals.
In addition, on February 3, 1995, the Company entered into a Stock
Purchase Agreement with NovaCare, Inc. and NC Resources, Inc., pursuant to which
the Company has agreed to acquire the operations of NovaCare, Inc.'s
rehabilitation hospital division. In connection with that transaction, the
Company will pay a cash purchase price of $215,000,000, and will assume
liabilities of approximately $20,000,000. The transaction is subject to various
conditions, including the expiration or termination of the waiting period under
the HSR Act. The Company expects the transaction to be consummated early in the
second quarter of 1995.
Although the Company is continually considering and evaluating
acquisitions and opportunities for future growth, the Company has not entered
into any agreements with respect to material future acquisitions other than the
transactions with SHC and NovaCare. The Company believes that existing cash,
cash flow from operations, and borrowings under the revolving line of credit, as
increased pursuant to the new commitment, will be sufficient to satisfy the
Company's estimated cash requirements for the next twelve months, and for the
reasonably foreseeable future.
Inflation in recent years has not had a significant effect on the
Company's business, and is not expected to adversely affect the Company in the
future unless it increases significantly.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
Consolidated financial statements of the Company meeting the
requirements of Regulation S-X are filed on the succeeding pages of this Item 8
of this Annual Report on Form 10-K, as listed below:
Page
Report of Independent Auditors
Consolidated Balance Sheets as of December 31, 1993 and 1994
Consolidated Statements of Income for the Years Ended
December 31, 1992, 1993 and 1994
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1992, 1993 and 1994
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1992, 1993 and 1994
Notes to Consolidated Financial Statements
Other financial statements and schedules required under Regulation S-X
are listed in Item 14(a)2, and filed under Item 14(d), of this Annual Report on
Form 10-K.
<PAGE>
Report of Independent Auditors
The Board of Directors
HEALTHSOUTH Corporation
We have audited the accompanying consolidated balance sheets of HEALTHSOUTH
Corporation and Subsidiaries as of December 31, 1993 and 1994, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1994. Our audits also
included the financial statement schedule listed in the Index at Item 14 (a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of HEALTHSOUTH
Corporation and Subsidiaries at December 31, 1993 and 1994, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Birmingham, Alabama
February 24, 1995
<PAGE>
HEALTHSOUTH Corporation and Subsidiaries
Consolidated Balance Sheets
</TABLE>
<TABLE>
<CAPTION>
December 31
--------------------
1993 1994
--------------------
(In thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents (Note 3) $ 68,331 $ 65,949
Other marketable securities (Note 3) 8,968 16,628
Accounts receivable, net of allowances for doubtful
accounts and contractual adjustments of $118,746,000 in
1993 and $141,859,000 in 1994 165,586 222,720
Inventories 21,139 22,262
Prepaid expenses and other current assets 41,814 68,401
--------------------
Total current assets 305,838 395,960
Other assets:
Loans to officers 1,488 1,240
Other (Note 4) 21,950 40,692
--------------------
23,438 41,932
Property, plant and equipment, net (Note 5) 744,084 789,538
Intangible assets, net (Note 6) 208,162 324,904
----------------------
Total assets $1,281,522 $1,552,334
----------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31
-----------------------
1993 1994
-----------------------
(In thousands)
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 45,737 $ 83,180
Salaries and wages payable 26,877 32,672
Accrued interest payable and other liabilities 29,857 46,714
Current portion of long-term debt and leases (Note 7 5,015 14,713
-----------------------
Total current liabilities 107,486 177,279
Long-term debt (Note 7) 813,334 930,061
Deferred income taxes (Note 11) 9,647 7,882
Deferred revenue (Note 15) - 7,526
Other long-term liabilities (Note 16) 458 5,655
Minority interests--limited partnerships (Note 9) (1,799) (2,203)
Commitments and contingent liabilities (Notes 12 and 17)
Stockholders' equity:
Preferred Stock, $.10 par value--1,500,000 shares
authorized; issued and outstanding-none - -
Common Stock, $.01 par value--100,000,000 shares
authorized; issued-33,195,000 in 1993 and 34,230,000
in 1994 332 342
Additional paid-in capital 285,679 306,565
Retained earnings 85,640 137,027
Treasury stock, at cost (91,000 shares) (323) (323)
Receivable from Employee Stock Ownership Plan (Note 13) (18,932) (17,477)
-----------------------
Total stockholders' equity 352,396 426,134
-----------------------
Total liabilities and stockholders' equity $ 1,281,522 $ 1,552,334
-----------------------
</TABLE>
See accompanying notes.
<PAGE>
HEALTHSOUTH Corporation and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------------------
1992 1993 1994
-------------------------------------------
(In thousands, except for per share amounts)
<S> <C> <C> <C>
Revenues $ 464,288 $ 575,346 $ 1,127,441
Operating expenses:
Operating units 347,073 418,981 835,888
Corporate general and administrative 14,418 20,018 37,139
Provision for doubtful accounts 11,842 13,875 20,583
Depreciation and amortization 26,737 39,376 75,588
Interest expense 11,295 14,261 57,255
Interest income (5,121) (3,698) (4,224)
ReLife merger expense (Note 2) - - 2,949
Loss on impairment of assets (Note 16) - - 10,500
Loss on abandonment of computer
project (Note 16) - - 4,500
NME Selected Hospitals Acquisition
related expense (Note 10) - 49,742 -
Terminated merger expense (Note 14) 3,665 - -
-------------------------------------------
409,909 552,555 1,040,178
-------------------------------------------
Income before income taxes and
minority interests 54,379 22,791 87,263
Provision for income taxes (Note 11) 18,383 9,009 33,835
-------------------------------------------
35,996 13,782 53,428
Minority interests 1,402 190 203
-------------------------------------------
Net income $ 34,594 $ 13,592 $ 53,225
-------------------------------------------
Weighted average common and common
equivalent shares outstanding 34,418 34,717 37,938
-------------------------------------------
Net income per common and common
equivalent share $ 1.01 $ .39 $ 1.40
-------------------------------------------
Net income per common share--assuming
full dilution $ N/A $ N/A $ 1.39
-------------------------------------------
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
HEALTHSOUTH Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity
Additional Total
Common Common Paid-In Retained Treasury Receivable Stockholders'
Shares Stock Capital Earnings Stock from ESOP Equity
--------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991 30,978 $ 310.4 $246,105.4 $52,079.0 $ (60.0) $(10,000.0) $288,434.8
Proceeds from issuance of
common shares 949 9.5 24,341.5 -- -- -- 24,351.0
Proceeds from exercise of
options 956 9.6 6,873.6 -- -- -- 6,883.2
Income tax benefits related to
Incentive Stock Options -- -- 5,634.7 -- -- -- 5,634.7
Common shares exchanged in the
exercise of options (4) -- (95.6) -- -- -- (95.6)
Loan to Employee Stock
Ownership Plan -- -- -- -- -- (10,000.0) (10,000.0)
Reduction in Receivable from
Employee Stock Ownership
Plan -- -- -- -- -- 358.0 358.0
Purchase of limited
partnership units 21 .2 499.8 (10,193.4) -- -- (9,693.4)
Net income -- -- -- 34,594.0 -- -- 34,594.0
-----------------------------------------------------------------------------------
Balance at December 31, 1992 32,900 329.7 283,359.4 76,479.6 (60.0) (19,642.0) 340,466.7
Proceeds from exercise of
options 224 2.2 1,734.4 -- -- -- 1,736.6
Income tax benefits related to
Incentive Stock Options -- -- 584.7 -- -- -- 584.7
Reduction in Receivable from
Employee Stock Ownership
Plan -- -- -- -- -- 710.1 710.1
Purchase of limited
partnership units -- -- -- (4,431.7) -- -- (4,431.7)
Purchase of treasury stock (20) -- -- -- (263.0) -- (263.0)
Net income -- -- -- 13,592.1 -- -- 13,592.1
-----------------------------------------------------------------------------------
Balance at December 31, 1993 33,104 331.9 285,678.5 85,640.0 (323.0) (18,931.9) 352,395.5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HEALTHSOUTH Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity (continued)
Additional Total
Common Common Paid-In Retained Treasury Receivable Stockholders'
Shares Stock Capital Earnings Stock from ESOP Equity
---------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Proceeds from issuance of
common shares at $27.17
per share 19 $ .2 $ 532.8 $ -- $ -- $ -- $ 533.0
Proceeds from exercise of
options 1,027 10.3 14,205.4 -- -- -- 14,215.7
Income tax benefits related to
Incentive Stock Options -- -- 6,469.6 -- -- -- 6,469.6
Common shares exchanged in the
exercise of options (11) (.1) (321.3) -- -- -- (321.4)
Reduction in receivable from
Employee Stock Ownership
Plan -- -- -- -- -- 1,455.0 1,455.0
Purchase of limited
partnership units -- -- -- (1,838.0) -- -- (1,838.0)
Net income -- -- -- 53,225.0 -- -- 53,225.0
---------------------------------------------------------------------------------------
Balance at December 31, 1994 34,139 $342.3 $306,565.0 $137,027.0 $(323.0) $(17,476.9) $426,134.4
---------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
HEALTHSOUTH Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Year ended December 31
----------------------------------
1992 1993 1994
----------------------------------
(In thousands)
<S> <C> <C> <C>
Operating activities
Net income $ 34,594 $ 13,592 $ 53,225
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 26,737 39,376 75,588
Provision for doubtful accounts 11,842 13,875 20,583
Provision for losses on impairment of assets - - 10,500
Provision for losses on abandonment of computer
project - - 4,500
NME Selected Hospitals Acquisition related
expense - 49,742 -
Income applicable to minority interests of
limited partnerships 1,402 190 203
Provision (benefit) for deferred income taxes 4,501 (6,554) (1,199)
Provision for deferred revenue (279) (49) (164)
Gain on sale of property, plant and equipment - - (627)
Changes in operating assets and liabilities,
net of effects of acquisitions:
Accounts receivable (32,894) (24,195) (66,781)
Inventories, prepaid expenses and other current
assets (12,956) (15,639) (21,166)
Accounts payable and accrued expenses 6,245 (10,551) 57,388
----------------------------------
Net cash provided by operating activities 39,192 59,787 132,050
Investing activities
Purchases of property, plant and equipment (88,503) (113,161) (123,575)
Proceeds from sale of property, plant and equipment - - 59,025
Additions to intangible assets, net of effects of
acquisitions (25,206) (39,156) (59,307)
Assets obtained through acquisitions, net of
liabilities assumed (53,961) (428,307) (85,967)
Changes in other assets 1,834 (4,846) (17,526)
Proceeds received on sale of other marketable
securities 14,041 20,554 1,660
Investments in other marketable securities (13,000) (6,000) (9,126)
----------------------------------
Net cash used in investing activities (164,795) (570,916) (234,816)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HEALTHSOUTH Corporation and Subsidiaries
Consolidated Statements of Cash Flows (continued)
Year ended December 31
----------------------------------------------------
1992 1993 1994
----------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Financing activities
Proceeds from borrowings $ 169,800 $ 512,710 $ 550,084
Principal payments on long-term debt and leases (61,313) (17,731) (462,481)
Proceeds from exercise of options 6,788 1,736 13,895
Proceeds from issuance of common stock 19,004 -- 533
Purchase of treasury stock -- (263) --
Loans to Employee Stock Ownership Plan (10,000) -- --
Reduction in Receivable from Employee Stock
Ownership Plan 358 710 1,455
Proceeds from investment by minority interests 971 614 44
Purchase of limited partnership interests (11,495) (3,784) (1,090)
Payment of cash distributions to limited partners (2,833) (897) (2,056)
----------------------------------------------------
Net cash provided by financing activities 111,280 493,095 100,384
----------------------------------------------------
Decrease in cash and cash equivalents (14,323) (18,034) (2,382)
Cash and cash equivalents at beginning of year 100,688 86,365 68,331
----------------------------------------------------
Cash and cash equivalents at end of year $ 86,365 $ 68,331 $ 65,949
----------------------------------------------------
Supplemental disclosures of cash flow
information
Cash paid during the year for:
Interest $ 12,899 $ 12,344 $ 48,668
Income taxes 10,466 20,326 28,029
</TABLE>
Non-cash financing activities:
The Company received a tax benefit from the disqualifying disposition of
incentive stock options of $5,635,000, $585,000 and $6,470,000 for the
years ended December 31, 1992, 1993 and 1994, respectively.
See accompanying notes.
<PAGE>
HEALTHSOUTH Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
1. Significant Accounting Policies
The significant accounting policies followed by HEALTHSOUTH Corporation
(formerly HEALTHSOUTH Rehabilitation Corporation) and its subsidiaries (the
Company) are presented as an integral part of the consolidated financial
statements.
Principles of Consolidation
The consolidated financial statements include the accounts of HEALTHSOUTH
Corporation (HEALTHSOUTH) and its wholly-owned subsidiaries, as well as its
limited partnerships (see Note 9). All significant intercompany accounts and
transactions have been eliminated in consolidation.
HEALTHSOUTH Corporation is engaged in the business of providing comprehensive
rehabilitative and clinical healthcare services on an inpatient and outpatient
basis.
Marketable Securities
Marketable equity securities and debt securities are classified as
available-for-sale. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses, if material, reported as a separate
component of stockholders' equity, net of tax. The adjusted cost of the specific
security sold method is used to compute gain or loss on the sale of securities.
Interest and dividends on securities classified as available-for-sale are
included in investment income. Marketable equity securities and debt securities
of the Company have maturities of less than one year.
Accounts Receivable and Third-Party Reimbursement Activities
Receivables from patients, insurance companies and third-party contractual
insured accounts (Medicare and Medicaid) are based on payment agreements which
generally result in the Company collecting an amount different from the
established rates. Final determination of the settlement is subject to review by
appropriate authorities. Adequate allowances are provided for doubtful accounts
and contractual adjustments. Uncollectible accounts are written off against the
allowance for doubtful accounts after adequate collection efforts are made. Net
accounts receivable include only those amounts estimated by management to be
collectible.
<PAGE>
HEALTHSOUTH Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (continued)
The concentration of net accounts receivable from third-party contractual payors
and others, as a percentage of total net accounts receivable, was as follows:
December 31
-------------------------------
1993 1994
-------------------------------
Medicare 33% 36%
Medicaid 4% 6%
Other 63% 58%
-------------------------------
100% 100%
-------------------------------
Inventories
Inventories are stated at the lower of cost or market using the specific
identification method.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Upon sale or retirement of
property, plant or equipment, the cost and related accumulated depreciation are
eliminated from the respective account and the resulting gain or loss is
included in the results of operations.
Interest cost incurred during the construction of a facility is capitalized. The
Company incurred interest of $13,274,000, $16,645,000 and $59,014,000 of which
$1,979,000, $2,384,000 and $1,759,000 was capitalized during 1992, 1993 and
1994, respectively.
Depreciation and amortization is computed using the straight-line method over
the estimated useful lives of the assets or the term of the lease, as
appropriate. The estimated useful life of buildings is 30-40 years and the
general range of useful lives for leasehold improvements, furniture, fixtures
and equipment is 10-15 years.
Intangible Assets
Cost in excess of net asset value of purchased facilities is amortized over 20
to 40 years using the straight-line method. Organization and start-up costs
incurred prior to opening a new facility and partnership formation costs are
deferred and amortized on a straight-line basis over a period of 36 months.
Organization, partnership formation and start-up costs for a project that is
subsequently abandoned are charged to operations in that period. Debt issue
costs are amortized over the term of the debt. Noncompete agreements are
amortized using the straight-line method over the term of the agreements.
Minority Interests
The equity of minority investors in limited partnerships of the Company is
reported on the balance sheet as minority interests. Minority interests reported
in the income statement reflect the respective shares of income or loss of the
limited partnerships attributable to the minority investors, the effect of which
is removed from the results of operations of the Company.
Revenues
Revenues include net patient service revenues and other operating revenues. Net
patient service revenues are reported at the estimated net realizable amounts
from patients, third-party payors and others for services rendered, including
estimated retroactive adjustments under reimbursement agreements with
third-party payors.
Income Per Common and Common Equivalent Share
Income per common and common equivalent share is computed based on the weighted
average number of common shares and common equivalent shares outstanding during
the periods. Common equivalent shares include dilutive employees' stock options,
less the number of treasury shares assumed to be purchased from the proceeds
using the average market price of the Company's common stock. Fully diluted
earnings per share (based on 40,299,000 shares in 1994) assumes conversion of
the 5% Convertible Subordinated Debentures due 2001 (see Note 7).
<PAGE>
1. Significant Accounting Policies (continued)
Impairment of Assets
Long-lived assets, such as property, plant and equipment and identifiable
intangible assets are reviewed for impairment losses when certain impairment
indicators exist. If an impairment exists, the related asset is adjusted to the
lower of book value or estimated future cash flows from the use and eventual
disposal of the asset.
2. Merger
Effective December 29, 1994, the Company merged with ReLife, Inc. ("ReLife") and
in connection therewith issued 5,512,645 shares of its Common Stock for all of
ReLife's outstanding common stock. ReLife provides a system of rehabilitation
services and operates 31 inpatient facilities with an aggregate of approximately
1,100 licensed beds, including nine free-standing rehabilitation hospitals, nine
acute rehabilitation units, five sub-acute rehabilitation units, seven
transitional living units and one residential facility and provides outpatient
rehabilitation services at twelve outpatient centers.
The merger was accounted for as a pooling of interests and, accordingly, the
Company's financial statements have been restated to include the results of
ReLife for all periods presented. Prior to the merger, ReLife reported on a
fiscal year ending on September 30. The accompanying financial statements are
based on a combination of the Company's results for its December 31 fiscal year
and ReLife's results for its September 30 fiscal year for all periods presented.
Costs and expenses of $2.9 million incurred by HEALTHSOUTH in connection with
the merger have been recorded in operations in 1994 and reported as ReLife
merger expenses in the accompanying consolidated statements of income.
Combined and separate results of the Company and ReLife are as follows (in
thousands):
<TABLE>
<CAPTION>
HEALTHSOUTH ReLife Combined
------------------------------------------------------------
<S> <C> <C> <C>
Year ended December 31, 1992
Revenues $ 406,968 $ 57,320 $ 464,288
Net income 29,738 4,856 34,594
Year ended December 31, 1993
Revenues 482,304 93,042 575,346
Net income 6,687 6,905 13,592
Year ended December 31, 1994
Revenues 1,008,567 118,874 1,127,441
Net income (loss) 54,047 (822) 53,225
</TABLE>
<PAGE>
There were no transactions between the Company and ReLife prior to the merger.
The effects of conforming the accounting policies of the two companies are not
material.
3. Cash, Cash Equivalents and Other Marketable Securities (Including Funds
Subject to Withdrawal Restrictions)
Cash, cash equivalents and other marketable securities consisted of the
following:
<TABLE>
<CAPTION>
December 31
--------------------------
1993 1994
--------------------------
(In thousands)
<S> <C> <C>
Cash $ 39,916 $ 56,849
Municipal put bonds 9,800 2,100
Tax advantaged auction preferred stocks 4,000 7,000
Municipal put bond mutual funds 2,000 -
Money market funds 8,410 -
United States Treasury bills 4,205 -
--------------------------
Total cash and cash equivalents 68,331 65,949
--------------------------
United States Treasury notes - 1,004
Certificates of deposit 1,108 2,135
Municipal put bonds 1,860 3,975
Municipal put bond mutual funds 5,000 8,514
Collateralized mortgage obligations 1,000 1,000
--------------------------
Total other marketable securities 8,968 16,628
--------------------------
Total cash, cash equivalents and other marketable
securities (approximates market value) $ 77,299 $ 82,577
--------------------------
</TABLE>
For purposes of the consolidated balance sheets and statements of cash flows,
marketable securities purchased with an original maturity of ninety days or less
are considered cash equivalents.
4. Other Assets
Other assets consisted of the following:
<TABLE>
<CAPTION>
December 31
--------------------------
1993 1994
--------------------------
(In thousands)
<S> <C> <C>
Notes and accounts receivable $ 3,280 $ 15,104
Investment in Caretenders Health Corp. 7,382 7,370
Investments in other unconsolidated subsidiaries 3,991 6,007
Real estate investments 3,023 10,022
Escrow funds 394 -
Other 3,880 2,189
--------------------------
$ 21,950 $ 40,692
--------------------------
</TABLE>
The Company has a 24% ownership interest in Caretenders Health Corp.
(Caretenders). Accordingly, the Company's investment is being accounted for
using the equity method of accounting. The investment was initially valued at
$7,250,000. The Company's equity in earnings of Caretenders for the years ended
December 31, 1992, 1993 and 1994 was not material to the Company's results of
operations.
It was not practicable to estimate the fair value of the Company's various
investments in other unconsolidated subsidiaries (involved in operations similar
to those of the Company) because of the lack of a quoted market price and the
inability to estimate fair value without incurring excessive costs. The carrying
amount at December 31, 1994 represents the original cost of the investments,
which management believes is not impaired.
<PAGE>
5. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31
-----------------------------------
1993 1994
-----------------------------------
(In thousands)
<S> <C> <C>
Land $ 61,822 $ 52,250
Buildings 470,181 476,620
Leasehold improvements 17,616 28,352
Furniture, fixtures and equipment 223,271 288,067
Construction in progress 29,274 43,374
-----------------------------------
802,164 888,663
Less accumulated depreciation and amortization 58,080 99,125
-----------------------------------
$ 744,084 $ 789,538
-----------------------------------
</TABLE>
6. Intangible Assets
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
December 31
---------------------------
1993 1994
---------------------------
(In thousands)
<S> <C> <C>
Organization, partnership formation and start-up costs $ 42,919 $ 77,882
Debt issue costs 1,653 18,848
Noncompete agreements 24,862 35,253
Cost in excess of net asset value of purchased facilities 169,106 245,008
--------------------------
238,540 376,991
Less accumulated amortization 30,378 52,087
--------------------------
$ 208,162 $ 324,904
--------------------------
</TABLE>
<PAGE>
7. Long-Term Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 31
--------------------------------
1993 1994
--------------------------------
(In thousands)
<S> <C> <C>
Notes and bonds payable:
Advances under a $390,000,000 credit agreement with a bank $ 370,000 $ -
Advances under a $550,000,000 credit agreement with a bank - 510,000
9.5% Senior Subordinated Notes due 2001 - 250,000
5% Convertible Subordinated Debentures due 2001 - 115,000
Due to National Medical Enterprises, Inc. 361,164 -
Notes payable to banks and various other notes payable,
at interest rates from 5.5% to 9.0% 37,572 25,680
Noncompete agreements payable with payments due at varying
intervals through December 2004 12,050 17,610
Hospital revenue bonds payable 24,862 24,763
Other 12,701 1,721
--------------------------------
818,349 944,774
Less amounts due within one year 5,015 14,713
--------------------------------
$ 813,334 $ 930,061
--------------------------------
</TABLE>
The fair value of total long-term debt approximates book value at December 31,
1994 and 1993.
During 1994, the Company entered into a Credit Agreement with NationsBank of
North Carolina, N.A. and other participating banks (the 1994 Credit Agreement)
which consists of a $550,000,000 revolving facility and term loan. The 1994
Credit Agreement replaced a previous $390,000,000 Credit Agreement with
NationsBank. Interest is paid quarterly based on LIBOR rates plus a
predetermined margin, a base rate, or competitively bid rates from the
participating banks. The Company is required to pay a fee on the unused portion
of the 1994 revolving credit facility ranging from 0.25% to 0.5%, depending on
certain defined ratios. The principal amount is payable in 15 equal quarterly
installments beginning on June 30, 1997. The Company has provided a negative
pledge of all its assets and has granted a first priority security interest in
and lien on all shares of stock of its subsidiaries and rights and interests in
its partnerships.
<PAGE>
The amount shown as Due to National Medical Enterprises, Inc. at December 31,
1993 was subsequently repaid from proceeds of other notes and bonds.
On March 24, 1994, the Company issued $250,000,000 principal amount of 9.5%
Senior Subordinated Notes due 2001 (the "Notes"). Interest is payable on April 1
and October 1. The Notes are senior subordinated obligations of the Company and
as such will be subordinated to all existing and future senior indebtedness of
the Company, and also will be effectively subordinated to all existing and
future liabilities of the Company's subsidiaries and partnerships. The Notes
rank senior to all subordinated indebtedness of the Company, including the 5%
Convertible Subordinated Debentures due 2001 described below. The Notes mature
on April 1, 2001.
Also on March 24, 1994, the Company issued $100,000,000 principal amount of 5%
Convertible Subordinated Debentures due 2001 (the "Convertible Debentures"). An
additional $15,000,000 principal amount of Convertible Debentures was issued in
April 1994 to cover underwriters' over allotments. Interest is payable on April
1 and October 1. The Convertible Debentures are convertible into Common Stock of
the Company at the option of the holder at a conversion price of $37.625 per
share, subject to adjustment in the occurrence of certain events.
The net proceeds from the issuance of the Notes and Convertible Debentures were
used by the Company to pay down indebtedness outstanding under its other
existing credit facilities.
<PAGE>
7. Long-Term Debt (continued)
Principal maturities of long-term debt are as follows:
Year ending December 31 (In thousands)
- ------------------------ ----------------
1995 $ 14,713
1996 12,246
1997 112,233
1998 143,334
1999 140,605
After 1999 521,643
----------------
$ 944,774
----------------
8. Stock Options
The Company has various stockholder-approved stock option plans which provide
for the grant of options to Directors, officers and other key employees to
purchase common stock at 100% of the fair market value as of the date of grant.
The Board of Directors administers the stock option plans. Options may be
granted as incentive stock options or as non-qualified stock options. Incentive
stock options vest 25% annually, commencing upon completion of one year of
employment subsequent to the date of grant. Non-qualified stock options
generally are not subject to any vesting provisions. The options expire at dates
ranging from five to ten years from the date of grant.
The following table summarizes activity in the stock option plans:
1992 1993 1994
------------------------------------
Options outstanding January 1: 3,368,571 5,339,742 6,875,786
Granted 2,762,000 1,770,000 330,000
Exercised 765,328 180,455 981,286
Cancelled 25,501 53,501 202,563
------------------------------------
Options outstanding at
December 31 5,339,742 6,875,786 6,021,937
------------------------------------
<PAGE>
8. Stock Options (continued)
<TABLE>
<CAPTION>
1992 1993 1994
----------------------------------------------------------
<S> <C> <C> <C>
Option price range for options granted
during the period $15.25-$19.88 $13.50-$16.88 $28.38-$36.50
Option price range for options
exercised during the period $5.67-$21.41 $5.91-$19.17 $8.67-$16.88
Options exercisable at
December 31 4,155,817 5,332,940 5,186,809
Options available for grant at
December 31 546,050 324,550 365,204
</TABLE>
9. Limited Partnerships
HEALTHSOUTH operates a number of rehabilitation centers as limited partnerships.
HEALTHSOUTH serves as the general partner and operates the partnerships as
comprehensive outpatient rehabilitation facilities or inpatient rehabilitation
facilities. These limited partnerships are included in the consolidated
financial statements (as more fully described in Note 1 under "Minority
Interests"). The limited partners share in the profit or loss of the
partnerships based on their respective ownership percentage (ranging from 1% to
50% at December 31, 1994) during their ownership period.
Beginning in 1992, due to federal and state regulatory requirements, the Company
began the process of buying back the partnership interests of its physician
limited partners. The buyback prices for the interests were in general based on
a predetermined multiple of projected cash flows of the partnerships. The
excess of the buyback price over the book value of the limited partners' capital
amounts was charged to the Company's retained earnings.
10. Acquisitions
At various dates during 1994, the Company acquired 53 separate outpatient
operations located throughout the United States. The combined purchase price of
these acquired outpatient operations was approximately $53,947,000. The Company
also acquired a specialty medical center in Dallas, Texas, a contract therapist
provider and a diagnostic imaging company. The combined purchase price of these
three operations was approximately $25,861,000. In connection with these
transactions, the Company entered into non-compete agreements totaling
$10,814,000.
The fair value of the total net assets relating to the 1994 acquisitions
described above was approximately $11,087,000. The total cost for 1994
acquisitions exceeded the fair value of the net assets acquired by approximately
$68,721,000. This excess is being amortized over a forty-year period on a
straight-line basis.
All of the acquisitions described above were accounted for as purchases and,
accordingly, the results of operations of the acquired businesses (not material
individually or in the aggregate) are included in the accompanying consolidated
financial statements from their respective dates of acquisition.
Effective December 31, 1993, the Company completed an acquisition from National
Medical Enterprises, Inc. (NME) of 28 inpatient rehabilitation facilities and 45
outpatient rehabilitation centers, which constituted substantially all of NME's
rehabilitation services division (the NME Selected Hospitals Acquisition). The
purchase price was approximately $296,661,000 cash, plus net working capital of
$64,503,000, subject to certain adjustments, the assumption of approximately
$16,313,000 of current liabilities and the assumption of approximately
$17,111,000 in long-term debt.
The pro forma effect of this acquisition on 1993 operations and net income per
common and common equivalent share is reflected in the pro forma summary in Note
17.
As a result of the NME Selected Hospitals Acquisition, HEALTHSOUTH recognized an
expense of approximately $49,742,000 during the year ended December 31, 1993.
This expense represents management's estimate of the cost to consolidate
operations of thirteen existing HEALTHSOUTH facilities (three inpatient
facilities and ten outpatient facilities) into the operations of certain
facilities acquired from NME. This plan was formulated by HEALTHSOUTH management
in order to more efficiently provide services in markets where multiple
locations now exist as a result of the acquisition. The plan of consolidation
calls for the affected operations to be merged into the operations of the
acquired facilities over a period of twelve to twenty-four months from the date
of the NME Selected Hospitals Acquisition. Due to the single-use nature of these
properties, the consolidation plan does not provide for the sale of these
facilities.
The total expense of $49,742,000 consists of several components. First,
approximately $39,000,000 relates to the writedown of the assets of the affected
HEALTHSOUTH facilities to their estimated net realizable value. Of this
$39,000,000, approximately $31,500,000 relates to the assets of the three
inpatient facilities and approximately $7,500,000 relates to the assets of the
ten outpatient facilities. The $39,000,000 is broken down into the following
asset categories (net of any related accumulated depreciation or amortization):
<TABLE>
<CAPTION>
Inpatient Outpatient
Facilities Facilities Total
----------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Land $ 2,898 $ - $ 2,898
Buildings 16,168 - 16,168
Equipment 4,326 2,920 7,246
Intangible assets 6,111 3,455 9,566
Other assets 1,997 1,125 3,122
----------------------------------------------------------
$ 31,500 $ 7,500 $ 39,000
----------------------------------------------------------
</TABLE>
During the year ended December 31, 1994, management discontinued operations in
two of the inpatient facilities and three of the outpatient facilities affected
by the plan and merged them into the operations of the acquired facilities.
Accordingly, assets with a net book value of approximately $17,911,000 were
written off in 1994 against the reserves established at December 31, 1993. The
two inpatient facilities and three outpatient facilities affected by the plan in
1994 had revenues of approximately $11,441,000, $8,640,000 and $9,125,000 for
the years ended December 31, 1992, 1993 and 1994, respectively. These same
facilities had net operating income (loss) before income taxes of $(489,000),
$(844,000) and $67,000 for the years ended December 31, 1992, 1993 and 1994,
respectively. Operations at the remaining inpatient facility and the remaining
seven outpatient facilities identified in the plan will be discontinued during
1995.
Second, $7,700,000 relates to the write-off of certain capitalized development
projects. These projects relate to planned facilities that, if completed, would
be in direct competition with certain of the acquired NME facilities. These
development projects were written off in 1994 against the reserves established
at December 31, 1993.
Finally, approximately $3,000,000 was accrued for costs of employee separations,
relocations and other direct costs related to the planned consolidation of the
affected operations. During the second quarter of 1994, management revised its
estimate of the cost of the employee separations and relocations. The revised
estimate calls for approximately 150 employees to be affected by separations and
approximately 400 to be affected by relocations. Separation benefits under the
revised plan range from one month's to one year's compensation and total
approximately $2,188,000. Relocation benefits are estimated to be $2,000 per
employee and total $800,000. An additional $350,000 has been provided for
additional direct administrative costs associated with the implementation of the
plan, including outplacement services, travel and legal fees. Accordingly, the
total revised estimated cost of employee separations and relocations is
$3,338,000. The difference between the initial estimate and the revised estimate
was treated as a change in accounting estimate and charged to operations in the
second quarter of 1994.
During the year ended 1994, a total of 208 employees were affected by
terminations and relocations at a cost of approximately $758,000. This cost is
the only cash expense included in the acquisition-related expense.
It is management's opinion that remaining accrual at December 31, 1994 of
$23,669,000 is adequate to complete the plan of consolidation of the affected
operations.
11. Income Taxes
HEALTHSOUTH and its subsidiaries file a consolidated federal income tax return.
The limited partnerships file separate income tax returns. HEALTHSOUTH's
allocable portion of each partnership's income or loss is included in the
taxable income of the Company. The remaining income or loss of each partnership
is allocated to the limited partners.
Effective January 1, 1993, the Company changed its method of accounting for
income taxes to the liability method required by Financial Accounting Standards
Board (FASB) Statement No. 109, "Accounting for Income Taxes". The cumulative
effect of adopting Statement No. 109 was not material. Previously, the Company
had used the liability method as prescribed by FASB Statement No. 96.
<PAGE>
Deferred income taxes reflect the net effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets as of December 31, 1993 are as
follows:
<TABLE>
<CAPTION>
Current Noncurrent Total
----------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Deferred tax liabilities:
Depreciation and amortization -- $31,117 $31,117
Other 340 - 340
-------------------------------------------------
Total deferred tax liabilities 340 31,117 31,457
Deferred tax assets:
NME Selected Hospitals
Acquisition related expense -- 19,399 19,399
Other 3,549 2,071 5,620
---------------------------------------------------
Total deferred tax assets 3,549 21,470 25,019
----------------------------------------------------
Net deferred tax (assets)
liabilities $(3,209) $ 9,647 $ 6,438
----------------------------------------------------
</TABLE>
Significant components of the Company's deferred tax liabilities and assets as
of December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Current Noncurrent Total
----------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Deferred tax liabilities:
Depreciation and amortization -- $24,068 $24,068
----------------------------------------------------
Total deferred tax liabilities -- 24,068 24,068
Deferred tax assets:
NME Selected Hospitals Acquisition related
expense -- 15,241 15,241
Other 2,643 945 3,588
----------------------------------------------------
Total deferred tax assets 2,643 16,186 18,829
----------------------------------------------------
Net deferred tax (assets) liabilities $(2,643) $ 7,882 $ 5,239
----------------------------------------------------
</TABLE>
The current portion of the Company's deferred tax asset is included with prepaid
expenses and other current assets on the accompanying balance sheet.
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------------------------------
1992 1993 1994
--------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Currently payable:
Federal $ 12,255 $ 13,876 $ 30,593
State 1,627 1,687 4,441
--------------------------------------------------------
13,882 15,563 35,034
Deferred expense (benefit):
Federal 4,010 (5,884) (983)
State 491 (670) (216)
--------------------------------------------------------
4,501 (6,554) (1,199)
--------------------------------------------------------
Total provision $ 18,383 $ 9,009 $ 33,835
--------------------------------------------------------
</TABLE>
<PAGE>
11. Income Taxes (continued)
The components of the provision for deferred income taxes for the year ended
DecemberE31, 1992 are as follows:
(In thousands)
----------------
Depreciation and amortization $ 5,599
Bad debts (1,119)
Other 21
--------
$ 4,501
--------
The difference between the provision for income taxes and the amount computed by
applying the statutory federal income tax rate to income before taxes was as
follows:
Year ended December 31
----------------------------------------
1992 1993 1994
----------------------------------------
(In thousands)
Federal taxes at statutory rates $ 18,013 $ 7,910 $ 30,471
Add (deduct):
State income taxes, net of federal
tax benefit 1,054 1,121 $2,671
Tax-exempt interest income (1,076) (454) (276)
Other 392 432 969
----------------------------------------
$ 18,383 $ 9,009 $ 33,835
----------------------------------------
12. Commitments and Contingencies
At December 31, 1994, anticipated capital expenditures for the next twelve
months approximate $120,000,000. This amount includes expenditures for the
construction and equipping of additions to existing facilities, the construction
of two inpatient rehabilitation facilities for which regulatory approval is
being obtained and the acquisition or development of comprehensive outpatient
rehabilitation facilities.
<PAGE>
12. Commitments and Contingencies (continued)
Beginning December 1, 1993, the Company became self-insured for professional
liability and comprehensive general liability. The Company purchased coverage
for all claims incurred prior to December 1, 1993. In addition, the Company
purchased underlying insurance which would cover all claims once established
limits have been exceeded. It is the opinion of management that at December 31,
1994 the Company has adequate reserves to cover losses on asserted and
unasserted claims.
Operating leases
Operating leases generally consist of short-term lease agreements for buildings
where facilities are located. These leases generally have 5-year terms, with one
or more renewal options, with terms to be negotiated at the time of renewal.
Total rental expense for all operating leases was $15,902,000, $23,417,000 and
$58,529,000 for the years ended December 31, 1992, 1993 and 1994, respectively.
The following is a schedule of future minimum lease payments under all operating
leases having initial or remaining non-cancelable lease terms in excess of one
year:
Year ending December 31 (In thousands)
- ------------------------- ---------------
1995 $ 50,173
1996 46,383
1997 42,493
1998 38,554
1999 33,618
After 1999 96,667
--------------
Total minimum payments required $ 307,888
--------------
13. Employee Benefit Plans
The Company has a 401(k) savings plan which matches 15% of the first 4% of
earnings that an employee contributes. All contributions are in the form of
cash. All employees who have completed one year of service with a minimum of
1,000 hours worked are eligible to participate in the plan. Company
contributions are gradually vested over a seven-year service period.
Contributions to the plan by the Company were approximately $521,000, $490,000
and $1,094,000 in 1992, 1993 and 1994, respectively.
In 1991, the Company established an Employee Stock Ownership Plan (ESOP) for the
purpose of providing substantially all employees of the Company the opportunity
to save for their retirement and acquire a proprietary interest in the Company.
The ESOP currently owns approximately 830,000 shares of the Company's Common
Stock, which were purchased with funds borrowed from the Company, $10,000,000 in
1991 (the 1991 ESOP Loan) and $10,000,000 in 1992 (the 1992 ESOP Loan). At
December 31, 1994, the combined ESOP Loans had a balance of $17,477,000. The
1991 ESOP Loan, which bears an interest rate of 10%, is payable in annual
installments covering interest and principal over a ten-year period beginning in
1992. The 1992 ESOP Loan, which bears an interest rate of 8.5%, is payable in
annual installments covering interest and principal over a ten-year period
beginning in 1993. Company contributions to the ESOP began in 1992 and shall at
least equal the amount required to make all ESOP Loan amortization payments for
each plan year. The Company recognizes compensation expense based on the shares
allocated method. The total compensation expense related to the ESOP recognized
by the Company was $1,701,000, $3,198,000 and $3,673,000 in 1992, 1993 and 1994,
respectively. Interest incurred on the ESOP Loans was approximately $964,000,
$1,743,000 and $1,608,000 in 1992, 1993 and 1994, respectively. Approximately
213,000 shares owned by the ESOP have been allocated to participants at December
31, 1994.
During 1993 the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 93-6, "Employers Accounting for Employee Stock
Ownership Plans." Among other provisions, SOP 93-6 requires that compensation
expense relating to employee stock ownership plans be measured based on the fair
market value of the shares when allocated to the employees. The provisions of
SOP 93-6 apply only to leveraged ESOPs formed after December 31, 1992, or shares
newly acquired by an existing leveraged ESOP after December 31, 1992. Because
all shares owned by the Company's ESOP were acquired prior to December 31, 1992,
the Company's accounting policies for the shares currently owned by the ESOP are
not affected by SOP 93-6.
14. Terminated Merger
On January 2, 1992, the Company and Continental Medical System, Inc. (CMS)
jointly announced an agreement to combine their business operations as provided
in an Agreement and Plan of Reorganization (the Plan). On May 6, 1992, the
Company and CMS jointly announced the termination of the Plan. Accordingly, all
costs and expenses incurred in connection with the Plan were charged to
operations in 1992 and reported as terminated merger expense in the accompanying
statements of income.
15. Sale of Assets
During the second quarter of 1994, the Company consummated the sale of selected
properties to Capstone Capital Corporation ("Capstone"), a real estate
investment trust. These properties include six ancillary hospital facilities,
three outpatient rehabilitation facilities, and one research facility. The net
proceeds to the Company as a result of this transaction was approximately
$49,025,000. The net book value of the properties was approximately $41,335,000.
Because the Company is leasing back substantially all of the properties from
Capstone and guarantees the associated operating leases, payments under which
aggregate approximately $5.7 million annually, the resulting gain on sale of
approximately $7,690,000 has been recorded on the accompanying consolidated
balance sheet as deferred revenue and will be amortized into income over the
initial lease terms of the properties. The Company and certain Company officers
own approximately 3.9% of the outstanding common stock of Capstone.
16. Impairment of Long-Term Assets
During 1994, certain events have occurred impairing the value of specific
long-term assets of ReLife (see Note 2). A hospital in Missouri with a distinct
part unit which ReLife was managing was purchased in 1994 by an acute care
provider which terminated the contract with ReLife. Remaining goodwill of
$1,700,000 and costs allocated to the management contract of $1,300,000 were
written off as there is no value remaining for the terminated contract.
A ReLife facility in central Florida incurred tornado damage and has not been
operating since September 1993. During 1994, management of ReLife has determined
that it is probable that this facility will not reopen. Start-up costs of
$1,600,000 were written off. This facility is leased under an operating lease as
described in Note 12. The lease payments related to this facility were
determined to be $5,900,000 based on the net projected cash flows of all the
facilities under the lease. This value was written off resulting in a current
accrued liability of $600,000 and other long-term liabilities of $5,300,000.
During 1994, ReLife entered into an agreement to upgrade its computer system.
Lease payments and other costs have been capitalized during the conversion phase
of implementing the new computer system which were to be amortized over the
remaining lease term after implementation was completed. After the agreement to
merge with HEALTHSOUTH was entered into (see Note 2), the computer project was
abandoned resulting in a write-off of capitalized cost of $4,500,000.
The above amounts are shown as operating expenses in the consolidated statement
of income.
17. Subsequent Events
On January 24, 1995, the Company signed an agreement to merge with Surgical
Health Corporation ("SHC"). SHC operates 36 outpatient surgery centers in eleven
states. Under the terms of the agreement, all shares of common and preferred
stock of SHC will be exchanged for shares of the Company's Common Stock pursuant
to an exchange ratio that will yield an aggregate value of approximately
$155,000,000 to SHC shareholders. The transaction will be accounted for as a
pooling of interests and is subject to certain regulatory and governmental
reviews, and to approval by the shareholders of both companies. The transaction
is expected to be completed early in the second quarter of 1995. The effects of
conforming the accounting policies of the two companies is not expected to be
material.
The following table summarizes the unaudited consolidated pro forma results of
operations, assuming the SHC acquisition described above had occurred at the
beginning of each of the following periods. This pro forma summary does not
necessarily reflect the results of operations as they would have been had the
Company and the acquired entities constituted a single entity during such
periods. HEALTHSOUTH 1993 amounts reflect the pro forma effect of the NME
Selected Hospital Acquisition (see Note 10).
Year ended December 31
1992 1993 1994
------------------------------------------------
(In thousands, except for per share amounts)
Revenues $ 501,046 $1,111,198 $1,236,190
Net income 34,929 25,076 49,961
Net income per common and common
equivalent share 0.95 0.65 1.19
On February 3, 1995, the Company entered into a definitive agreement to purchase
the operations of the rehabilitation hospital division of NovaCare, Inc.,
consisting of 11 rehabilitation hospitals in seven states, 12 other facilities
and certificates of need to build two additional facilities. The purchase price
will be approximately $215,000,000 in cash and the assumption of $20,000,000 in
liabilities for a total consideration of $235,000,000. The transaction is
expected to be completed in the second quarter of 1995.
Subsequent to December 31, 1994, the Company received a fully underwritten
commitment to amend and restate the 1994 Credit Agreement (see Note 7) which
will increase the size of the facility to $1 billion.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
The Company has not changed independent accountants within the
twenty-four months prior to December 31, 1994.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Directors
The following table sets forth certain information with respect to the
Company's Directors.
<TABLE>
<CAPTION>
Principal Occupation
and All Positions A Director
Name Age With the Company Since
---- ---- -------------------- ----------
<S> <C> <C> <C>
Richard M. Scrushy 42 Chairman of the Board, President 1984
and Chief Executive Officer and
Director
Phillip C. Watkins, M.D. 53 Physician, Birmingham, Alabama, 1984
and Director
George H. Strong 68 Private Investor, Locust, New Jersey, 1984
and Director
C. Sage Givens 38 General Partner, 1985
First Century Partners, and Director
Charles W. Newhall III 50 Partner, New Enterprise 1985
Associates Limited Partnerships,
and Director
Aaron Beam, Jr. 51 Executive Vice President and 1993
Chief Financial Officer
and Director
James P. Bennett 37 President -- HEALTHSOUTH 1993
Inpatient Operations
and Director
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation
and All Positions A Director
Name Age With the Company Since
----- --- ------------------ ----------
<S> <C> <C> <C>
Larry R. House 51 Chairman of the Board, President 1993
and Chief Executive Officer,
MedPartners, Inc., and Director
Anthony J. Tanner 46 Executive Vice President 1993
Administration and Secretary
and Director
John S. Chamberlin 66 Private Investor, 1993
Princeton, New Jersey,
and Director
Richard F. Celeste 57 Principal of Celeste and Sabaty, Ltd. 1991
and Director
</TABLE>
Richard M. Scrushy, one of the Company's management founders, has
served as Chairman of the Board, President and Chief Executive Officer of the
Company since 1984. From 1979 to 1984, Mr. Scrushy was with Lifemark
Corporation, a publicly-owned healthcare corporation, serving in various
operational and management positions. Mr. Scrushy is also a director of
Integrated Health Services, Inc. and MedPartners, Inc., both publicly-traded
healthcare corporations, and serves on the boards of directors of several
privately-held healthcare corporations.
Phillip C. Watkins, M.D., FACC, is and has been in private practice for
more than five years with Cardiovascular Associates, P.C. in Birmingham,
Alabama. A graduate of The Medical College of Alabama, Dr. Watkins is a
Diplomate of the American Board of Internal Medicine. He is also a Fellow of the
American College of Cardiology and the Subspecialty Board of Cardiovascular
Disease.
George H. Strong retired as senior vice president and chief financial
officer of Universal Health Services, Inc. in December 1984, a position he held
for more than six years. Mr. Strong is a private investor and a director of
Universal Health Services, Inc., a publicly-owned hospital management
corporation. Mr. Strong is also a director of The Viking Group of Funds, a
public mutual fund group.
C. Sage Givens is a general partner of First Century Partners, a
private venture capital fund capitalized at $100,000,000. Ms. Givens joined
First Century Partners in 1983, where she manages the fund's healthcare
investments. Ms. Givens serves on the boards of directors of PhyCor, Inc., a
publicly-owned healthcare corporation, and several privately-held healthcare
companies.
Charles W. Newhall III is a general partner and founder of New
Enterprise Associates Limited Partnerships, Baltimore, Maryland, where he has
been engaged in the venture capital business since 1978. Mr. Newhall is also a
director of Integrated Health Services, Inc., Genetic Therapy, Inc., Opta Food
Ingredients, Inc. and Sepracor, Inc., all of which are publicly-traded
corporations.
Aaron Beam, Jr., C.P.A., a management founder, serves as Executive Vice
President and Chief Financial Officer of the Company and was elected a Director
in February 1993. From 1980 to 1984, Mr. Beam was employed by Lifemark
Corporation in several financial and operational management positions for the
Shared Services Division, including division controller. Mr. Beam is a director
of Ramsey Healthcare, Inc., a publicly-traded healthcare corporation.
James P. Bennett joined the Company in May 1991 as Director of
Inpatient Operations, was promoted to Group Vice President Inpatient
Rehabilitation Operations in September 1991, again to President and Chief
Operating Officer -- HEALTHSOUTH Rehabilitation Hospitals in June 1992 and to
President -- HEALTHSOUTH Inpatient Operations in February 1993. Mr. Bennett also
was elected a Director in February 1993. From August 1987 to May 1991, Mr.
Bennett was employed by Russ Pharmaceuticals, Inc., Birmingham, Alabama, as Vice
President Operations, Chief Financial Officer, Secretary and director. Mr.
Bennett served as certified public accountant on the audit staff of the
Birmingham, Alabama office of Ernst & Whinney (now Ernst & Young LLP) from
October 1980 to August 1987.
Larry R. House is Chairman of the Board, President and Chief Executive
Officer of MedPartners, Inc. a publicly-held physician practice management firm,
a position he assumed as his principal occupation in August 1993. Mr. House was
elected a Director of the Company in February 1993. At the same time he became
President -- HEALTHSOUTH International, Inc. and New Business Ventures, a
position which he held until August 31, 1994, when he terminated his employment
with the Company to concentrate on his duties at MedPartners. Mr. House joined
the Company in September 1985 as Director of Marketing, subsequently served as
Senior Vice President and Chief Operating Officer of the Company, and in June
1992 became President and Chief Operating Officer -- HEALTHSOUTH Medical
Centers. Prior to joining the Company, Mr. House was president and chief
executive officer of a provider of clinical contract management services for
more than ten years.
Anthony J. Tanner, Sc.D., a management founder, serves as Executive
Vice President -- Administration and Secretary of the Company and was elected a
Director in February 1993. From 1980 to 1984, Mr. Tanner was with Lifemark
Corporation in the Shared Services Division as director, clinical and
professional programs (1982-1984) and director, quality assurance and education
(1980-1982), where he was responsible for the development of clinical programs
and marketing programs.
John S. Chamberlin retired in 1988 as president and chief operating
officer of Avon Products, Inc., a position he had held since 1985. From 1976
until 1985, he served as chairman and chief executive officer of Lenox,
Incorporated, after 22 years in various assignments for General Electric. From
1990 to 1991, he served as chairman and chief executive officer of New Jersey
Publishing Co. Mr. Chamberlin is chairman of the board of Life Fitness Company
and WNS, Inc., and is a director of The Scotts Company. He is a member of the
Board of Trustees of the Medical Center at Princeton and the Board of Overseers
of Parsons School of Design and is a trustee of the Woodrow Wilson National
Fellowship Foundation.
Richard F. Celeste originally joined the Board of Directors in 1991,
took a leave of absence from the Board of Directors in August 1993 to head the
Democratic National Committee's healthcare reform campaign, and rejoined the
Board in May 1995. He is a principal of Celeste and Sabaty, Ltd., a business
advisory firm located in Columbus, Ohio, which assists United States companies
to build strategic business alliances in Europe, Africa, South Asia and the
Pacific Rim. He served as Governor of Ohio from 1983 to 1991, during which time
he chaired the National Governors' Association Committee on Science and
Technology, and directed the United States Peace Corps from 1979 to 1981. He is
a member of the Advisory Council of the Carnegie Commission on Science,
Technology and Government, and chairs Carnegie's Task Force on Science,
Technology and the States. He is a director of Navistar International, Inc. and
Republic Engineered Steels, Inc., both of which are publicly-traded companies.
Executive Officers
The following table sets forth certain information with respect to the
Company's executive officers.
<TABLE>
<CAPTION>
All Positions An Officer
Name Age With the Company Since
---- --- ----------------
<S> <C> <C> <C>
Richard M. Scrushy 42 Chairman of the Board, President 1984
and Chief Executive Officer and
Director
Aaron Beam, Jr. 51 Executive Vice President and Chief 1984
Financial Officer and Director
Anthony J. Tanner 46 Executive Vice President -- Administration 1984
and Secretary and Director
Thomas W. Carman 43 Executive Vice President -- 1985
Corporate Development
P. Daryl Brown 40 President -- HEALTHSOUTH 1986
Outpatient Centers
James P. Bennett 37 President -- HEALTHSOUTH 1991
Inpatient Operations and Director
Denis J. Devane 57 Executive Vice President -- 1993
Medical Center Operations
William T. Owens 36 Senior Vice President -- 1986
Finance and Controller
Michael D. Martin 34 Senior Vice President -- 1989
Finance and Treasurer
William W. Horton 35 Group Vice President -- 1994
Legal Services and
Assistant Secretary
Richard M. Scrushy, one of the Company's management founders, has
served as Chairman of the Board, President and Chief Executive Officer of the
Company since 1984. From 1979 to 1984, Mr. Scrushy was with Lifemark
Corporation, a publicly-owned healthcare corporation, serving in various
operational and management positions. Mr. Scrushy is also a director of
Integrated Health Services, Inc. and Caretenders Health Corp.
Aaron Beam, Jr., C.P.A., a management founder, serves as Executive Vice
President and Chief Financial Officer of the Company and was elected a Director
in February 1993. From 1980 to 1984, Mr. Beam was employed by Lifemark
Corporation in several financial and operational management positions for the
Shared Services Division, including division controller. Mr. Beam is a director
of Ramsey Healthcare, Inc.
Anthony J. Tanner, Sc.D., a management founder, serves as Executive
Vice President -- Administration and Secretary of the Company and was elected a
Director in February 1993. From 1980 to 1984, Mr. Tanner was with Lifemark
Corporation in the Shared Services Division as director, clinical and
professional programs (1982-1984) and director, quality assurance and education
(1980-1982), where he was responsible for the development of clinical programs
and marketing programs.
Thomas W. Carman joined the Company in 1985 as Regional Director --
Corporate Development, and now serves as Executive Vice President -- Corporate
Development. From 1983 to 1985, Mr. Carman was director of development for
Medical Care International. From 1981 to 1983, Mr. Carman was assistant
administrator at the Children's Hospital of Birmingham, Alabama.
P. Daryl Brown, President and Chief Operating Officer -- HEALTHSOUTH
Outpatient Centers, joined the Company in April 1986 and served until June 1992
as Group Vice President -- Outpatient Operations. From 1977 to 1986, Mr. Brown
served with the American Red Cross, Alabama Region, in several positions,
including chief operating officer, administrative director for finance and
administration and controller.
James P. Bennett joined the Company in May 1991 as Director of
Inpatient Operations, was promoted to Group Vice President -- Inpatient
Rehabilitation Operations in September 1991, again to President and Chief
Operating Officer -- HEALTHSOUTH Rehabilitation Hospitals in June 1992 and to
President HEALTHSOUTH -- Inpatient Operations in February 1993. Mr. Bennett also
was elected a Director in February 1993. From August 1987 to May 1991, Mr.
Bennett was employed by Russ Pharmaceuticals, Inc., Birmingham, Alabama, as Vice
President Operations, Chief Financial Officer, Secretary and director. Mr.
Bennett served as certified public accountant on the audit staff of the
Birmingham, Alabama office of Ernst & Whinney (now Ernst & Young LLP) from
October 1980 to August 1987.
Denis J. Devane joined the Company in October 1993 as Executive Vice
President -- Medical Center Operations. Mr. Devane served as Chairman and Chief
Executive Officer and a director of Rebound, Inc., a head injury rehabilitation
company, from July 1989 until joining the Company. From 1987 through 1988, he
was President and Chief Executive Officer of American Rehabilitation Services,
and he previously held executive positions with Healthdyne, Inc. and Lifemark
Corporation, including serving as President of Lifemark's Hospital Division.
William T. Owens, C.P.A., joined the Company in March 1986 as
Controller and was appointed Vice President and Controller in December 1986. He
was appointed Group Vice President -- Finance and Controller in June 1992 and
became Senior Vice President -- Finance and Controller in February 1994. Prior
to joining the Company, Mr. Owens served as a certified public accountant on the
audit staff of the Birmingham, Alabama office of Ernst & Whinney (now Ernst &
Young LLP) from 1981 to 1986.
Michael D. Martin joined the Company in October 1989 as Vice President
and Treasurer, and was named Senior Vice President -- Finance and Treasurer in
February 1994. From 1983 through September 1989, Mr. Martin specialized in
healthcare lending with AmSouth Bank N.A., Birmingham, Alabama, where he was a
vice president immediately prior to joining the Company.
William W. Horton joined the Company in July 1994 as Group Vice
President -- Legal Services. From August 1986 through June 1994, Mr. Horton
practiced corporate, securities and healthcare law with the Birmingham,
Alabama-based firm of Haskell Slaughter Young & Johnston, Professional
Association, where he served as Chairman of the Healthcare Practice Group.
General
Directors of the Company hold office until the next Annual Meeting of
Stockholders of the Company and until their successors are elected and
qualified. Executive officers of the Company are elected annually by, and serve
at the discretion of the Board of Directors. There are no arrangements or
understandings known to the Company between any of the Directors, nominees for
Director or executive officers of the Company and any other person pursuant to
which any of such persons was elected as a Director or an executive officer,
except the Employment Agreement between the Company and Richard M. Scrushy.
There are no family relationships between any Directors, nominees for Director
or executive officers of the Company.
Compliance With Section 16(a) of the
Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and Directors, and persons who beneficially own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. Officers, Directors and beneficial owners of
more than 10% of the Company's Common Stock are required by Securities and
Exchange Commission regulations to furnish the Company with copies of all
Section 16(a) forms that they file. Based solely on review of the copies of such
forms furnished to the Company, or written representations that no reports on
Form 5 were required, the Company believes that for the period from January 1,
1994, through December 31, 1994, all of its officers, Directors and
greater-than-10% beneficial owners complied with all Section 16(a) filing
requirements applicable to them.
<PAGE>
Item 11. Executive Compensation.
Executive Compensation General
The following table sets forth compensation paid or awarded to the
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company (the "Named Executive Officers") for all
services rendered to the Company and its subsidiaries in 1992, 1993 and 1994.
</TABLE>
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long-Term Compensation
--------------------------------- ----------------------
Bonus/Annual Stock Long-Term All
Incentive Option Incentive Other Com-
Name and Principal Position Year Salary Award Awards Payouts pensation (1)
- --------------------------- ---- ------- --------- --------- ------ -------------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Scrushy 1992 730,666 509,904 1,725,000 -- 8,794
Chairman of the Board, President 1993 820,768 1,900,000 271,000 -- 10,796
and Chief Executive Officer 1994 1,207,228 2,000,000 -- 12,991
James P. Bennett 1992 158,862 75,000 95,000 -- 4,650
President -- HEALTHSOUTH 1993 250,514 130,000 40,000 -- 6,640
Inpatient Operations 1994 357,740 250,000 -- 10,760
Aaron Beam, Jr. 1992 241,709 90,000 100,000 -- 6,811
Executive Vice President 1993 252,039 100,000 25,000 -- 9,342
and Chief Financial Officer 1994 298,223 175,000 -- 11,272
Anthony J. Tanner 1992 196,066 100,000 100,000 -- 6,693
Executive Vice President -- 1993 194,341 105,000 25,000 -- 8,401
Administration and Secretary 1994 277,985 175,000 -- 10,329
P. Daryl Brown 1992 164,538 100,000 95,000 -- 6,765
President -- HEALTHSOUTH 1993 182,707 160,000 20,000 -- 7,701
Outpatient Centers 1994 272,573 200,000 -- 10,226
- --------------------
<FN>
(1) Includes car allowances of $500 per month for Mr. Scrushy and
$350 per month for the other named officers. Also includes (a)
matching contributions under the Company's Retirement
Investment Plan for 1992, 1993 and 1994, respectively, of:
$598, $393 and $318 to Mr. Scrushy; $415, $380 and $355 to Mr.
Beam; $450, $453 and $625 to Mr. Bennett; $426, $275 and $334
to Mr. Tanner; and $817, $473 and $274 to Mr. Brown; (b)
awards under the Company's Employee Stock Benefit Plan for
1993 and 1994, respectively, of $3,123 and $4,910 to Mr.
Scrushy; $3,123 and $4,910 to Mr. Beam; $1,102 and $4,910 to
Mr. Bennett; $3,123 and $4,910 to Mr. Tanner; and $2,846 and
$4,910 to Mr. Brown; and (c) split-dollar life insurance
premiums paid in 1993 and 1994 of $1,280 and $1,723 with
respect to Mr. Scrushy; $1,639 and $1,807 with respect to Mr.
Beam; $885 and $1,025 with respect to Mr. Bennett; $804 and
$885 with respect to Mr. Tanner; and $182 and $842 with
respect to Mr. Brown. See this Item, "Executive Compensation
Retirement Investment Plan" and "Executive Compensation
Employee Stock Benefit Plan".
</TABLE>
Stock Option Grants in 1994
No stock option grants to the Named Executive Officers were made in
1994.
Stock Option Exercises in 1994 and Option Values at December 31, 1994
<TABLE>
<CAPTION>
Number
Shares Value of Unexercised
Acquired Number of Unexercised Options In-the-Money Options
on Value at December 31, 1994 at December 31, 1994
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Scrushy...... 2,839,840 $61,765,800 $
James P. Bennett........ 22,500 330,825 98,750 18,750 2,105,646 399,806
Aaron Beam, Jr..........100,325 1,705,904 86,550 13,125 1,863,881 279,864
Anthony J. Tanner....... 216,875 13,125 4,773,675 279,864
P. Daryl Brown.......... 144,250 18,750 3,172,968 399,806
- --------------------
<FN>
(1) Does not reflect any options granted and/or exercised after
December 31, 1994. The net effect of any such grants and exercises
is reflected in the table appearing under Item 12, "Security
Ownership of Certain Beneficial Owners and Management".
(2) Represents difference between market price of the Company's Common
Stock and the respective exercise prices of the options at
December 31, 1994. Such amounts may not necessarily be realized.
Actual values which may be realized, if any, upon any exercise of
such options will be based on the market price of the Common Stock
at the time of any such exercise and thus are dependent upon
future performance of the Common Stock.
</TABLE>
Stock Option Plans
Set forth below is information concerning the various stock option
plans of the Company at December 31, 1994.
1984 Incentive Stock Option Plan
The Company had a 1984 Incentive Stock Option Plan (the "ISO Plan"),
intended to qualify under Section 422(b) of the Internal Revenue Code of 1986,
as amended (the "Code"), covering an aggregate of 1,200,000 shares of Common
Stock. The ISO Plan expired on February 28, 1994, in accordance with its terms.
As of December 31, 1994, there were outstanding under the ISO Plan options to
purchase 14,733 shares of the Company's Common Stock at prices ranging from
$10.08 to $15.13 per share. All such options remain in full force and effect in
accordance with their terms and the ISO Plan. Under the ISO Plan, which was
administered by the Board of Directors, key employees could be granted options
to purchase shares of Common Stock at 100% of fair market value on the date of
grant (or 110% of fair market value in the case of a 10% stockholder/grantee).
The outstanding options granted under the ISO Plan must be exercised within ten
years from the date of grant, are cumulatively exercisable with respect to 25%
of the shares covered thereby after the expiration of each of the first through
the fourth years following the date of grant, are nontransferable except by will
or pursuant to the laws of descent and distribution, are protected against
dilution and expire within three months after termination of employment, unless
such termination is by reason of death.
1988 Non-Qualified Stock Option Plan
The Company also has a 1988 Non-Qualified Stock Option Plan (the "NQSO
Plan") covering a maximum of 1,200,000 shares of Common Stock. As of December
31, 1994, there were outstanding under the NQSO Plan options to purchase 86,340
shares of the Company's Common Stock at prices ranging from $6.25 to $13.17 per
share. The NQSO Plan, which is administered by the Board of Directors (except
with respect to options granted to Directors, as to which it is administered by
an Independent Stock Option Committee), provides that Directors, executive
officers and other key employees may be granted options to purchase shares of
Common Stock at 100% of fair market value on the date of grant. The NQSO Plan
terminates on the earliest of (a) February 28, 1998, (b) such time as all shares
of Common Stock reserved for issuance under the NQSO Plan have been acquired
through the exercise of options granted thereunder or (c) such earlier time as
the Board of Directors of the Company may determine. Except for options covering
33,500 shares, which contain vesting provisions similar to those contained in
options granted under the ISO Plan, options granted pursuant to the NQSO Plan
have a five-year term (except for options covering 172,500 shares which have a
ten-year term), are exercisable at any time during such period, are
nontransferable except by will or pursuant to the laws of descent and
distribution, are protected against dilution and expire within three months of
termination of association with the Company as a Director or termination of
employment, unless such termination is by reason of death.
1989, 1990, 1992, 1992 and 1993 Stock Option Plans
The Company also has a 1989 Stock Option Plan (the "1989 Plan"), a 1990
Stock Option Plan (the "1990 Plan"), a 1991 Stock Option Plan (the "1991 Plan"),
a 1992 Stock Option Plan (the "1992 Plan"), and a 1993 Stock Option Plan (the
"1993 Plan"), under each of which incentive stock options ("ISOs") and
non-qualified stock options ("NQSOs") may be granted. The 1989, 1990, 1991, 1992
and 1992 Plans cover a maximum of 600,000 shares, 900,000 shares, 2,800,000
shares, 1,400,000 shares and 1,400,000 shares, respectively, of the Company's
Common Stock. As of December 31, 1994, there were outstanding options to
purchase 218,692 shares of Common Stock at prices ranging from $10.08 to $15.13
per share under the 1989 Plan, 678,763 shares of Common Stock at prices ranging
from $11.55 to $15.13 per share under the 1990 Plan, 2,356,079 shares of Common
Stock at an exercise price of $15.13 per share under the 1991 Plan, 1,224,625
shares of Common Stock at exercise prices ranging from $15.13 to $15.25 per
share under the 1992 Plan, and 1,070,205 shares of Common Stock at prices
ranging from $13.50 to $36.50 per share under the 1993 Plan. Each of the 1989,
1990, 1991, 1992 and 1993 Plans is administered in the same manner as the NQSO
Plan and provides that Directors, executive officers and other key employees may
be granted options to purchase shares of Common Stock at 100% of fair market
value on the date of grant. Each of the 1989, 1990, 1991, 1992 and 1993 Plans
terminate on the earliest of (a) October 25, 1999, October 15, 2000, June 19,
2001, June 16, 2002, and April 19, 2003, respectively, (b) such time as all
shares of Common Stock reserved for issuance under the respective Plan have been
acquired through the exercise of options granted thereunder, or (c) such earlier
times as the Board of Directors of the Company may determine. Options granted
under these Plans which are designated as ISOs contain vesting provisions
similar to those contained in options granted under the ISO Plan and have a
ten-year term. NQSOs granted under these Plans, if any, will have a ten-year
term. Options granted under these Plans are nontransferable except by will or
pursuant to the laws of descent and distribution, are protected against dilution
and will expire within three months of termination of association with the
Company as a Director or termination of employment, unless such termination is
by reason of death.
1993 Consultants' Stock Option Plan
The Company also has a 1993 Consultants' Stock Option Plan (the "1993
Consultants' Plan"), under which NQSOs may be granted, covering a maximum of
750,000 shares of Common Stock. As of December 31, 1994, there were outstanding
under the 1993 Consultants' Plan options to purchase 372,500 shares of Common
Stock at prices ranging from $13.50 to $36.50 per share. The 1993 Consultants'
Plan, which is administered in the same manner as the NQSO Plan, provides that
certain non-employee consultants who provide significant services to the Company
may be granted options to purchase shares of Common Stock at such prices as are
determined by the Board of Directors or the appropriate committee. The 1993
Consultants' Plan terminates on the earliest of (a) February 25, 2003, (b) such
time as all shares of Common Stock reserved for issuance under the 1993
Consultants' Plan have been acquired through the exercise of options granted
thereunder, or (c) such earlier time as the Board of Directors of the Company
may determine. Options granted under the 1993 Consultants' Plan have a ten-year
term. Options granted under the 1993 Consultants' Plan are nontransferable
except by will or pursuant to the laws of descent and distribution, are
protected against dilution and expire within three months of termination of
association with the Company as a consultant, unless such termination is by
reason of death.
Executive Loans
In order to enhance equity ownership by senior management, in 1989 the
Company adopted a program of making loans to officers holding the position of
Group Vice President and above to facilitate the exercise of stock options held
by such persons. Each loan bears interest at the prime rate announced from time
to time by AmSouth Bank N.A., Birmingham, Alabama and is secured by a first lien
on the shares of Common Stock acquired with the proceeds of the loan. Each loan
has a ten-year term, and the Company's lien on the shares of Common Stock is
released as the indebtedness is repaid at the rate of one share per the weighted
average option exercise price repaid. The only loan currently outstanding under
such program is a loan made on May 7, 1992, to P. Daryl Brown, President --
HEALTHSOUTH Outpatient Centers, which had an original principal balance of
$213,613 and of which $190,000 remained outstanding at December 31, 1994.
Retirement Investment Plan
Effective January 1, 1990, the Company adopted the HEALTHSOUTH
Retirement Investment Plan (the "401(k) Plan"), a retirement plan intended to
qualify under Section 401(k) of the Internal Revenue Code of 1986, as amended.
The 401(k) Plan is open to all full-time and part-time employees of the Company
who are over the age of 21, have one full year of service with the Company and
have at least 1,000 hours of service in the year in which they enter the 401(k)
Plan. Eligible employees may elect to participate in the Plan on January 1 and
July 1 in each year.
Under the 401(k) Plan, participants may elect to defer up to 20% of
their annual compensation (subject to nondiscrimination rules under the Internal
Revenue Code). The deferred amounts may be invested among four options, at the
participant's direction: a money market fund, a bond fund, a guaranteed
insurance contract or an equity fund. The Company will match a minimum of 10% of
the amount deferred by each participant, up to 4% of such participant's total
compensation, with the matched amount also directed by the participant. See Note
12 of "Notes to Consolidated Financial Statements".
Aaron Beam, Jr., Executive Vice President and Chief Financial Officer
of the Company, and Anthony J. Tanner, Executive Vice President --
Administration and Secretary of the Company, serve as Trustees of the 401(k)
Plan, which is administered by the Company.
Employee Stock Benefit Plan
Effective January 1, 1991, the Company adopted the HEALTHSOUTH
Rehabilitation Corporation and Subsidiaries Employee Stock Benefit Plan (the
"ESOP"), a retirement plan intended to qualify under sections 401(a) and
4975(e)(7) of the Internal Revenue Code of 1986, as amended. The ESOP is open to
all full-time and part-time employees of the Company who are over the age of 21,
have one full year of service with the Company and have at least 1,000 hours of
service in the year in which they begin participation in the ESOP on the next
January 1 or July 1 after the date on which such employee satisfies the
aforementioned conditions.
The ESOP was established with a $10,000,000 loan from the Company, the
proceeds of which were used to purchase 413,793 shares of the Company's Common
Stock. In 1992, an additional $10,000,000 loan was made to the ESOP, which was
used to purchase an additional 416,666 shares of Common Stock. Under the ESOP, a
Company Common Stock account (a "company stock account") is established and
maintained for each eligible employee who participates in the ESOP. In each plan
year, such account is credited with such employee's allocable share of the
Common Stock held by the ESOP and allocated with respect to such plan year. Each
employee's allocable share for any given plan year is determined according to
the ratio which such employee's compensation for such plan year bears to the
compensation of all eligible participating employees for the same plan year.
Under the ESOP, eligible employees who participate in the ESOP and who
have attained age 55 and have completed 10 years of participation in the ESOP
may elect to diversify the assets in their company stock account by directing
the plan administrator to transfer to the 401(k) Plan a portion of their company
stock account to be invested, as the eligible employee directs, in one or more
of the investment options available under the 401(k) Plan. See Note 12 of "Notes
to Consolidated Financial Statements".
Richard M. Scrushy, Chairman of the Board, President and Chief
Executive Officer of the Company, Aaron Beam, Jr., Executive Vice President and
Chief Financial Officer of the Company, and Anthony J. Tanner, Executive Vice
President -- Administration and Secretary of the Company, serve as Trustees of
the ESOP, which is administered by the Company.
Stock Purchase Plan
In order to further encourage employees to obtain equity ownership in
the Company, the Company's Board of Directors adopted an Employee Stock Purchase
Plan (the "Stock Purchase Plan") effective January 1, 1994. Under the Stock
Purchase Plan, participating employees may contribute $10 to $200 per pay period
toward the purchase of the Company's Common Stock in open-market transactions.
The Stock Purchase Plan is open to regular full-time or part-time employees who
have been employed for six months and are at least 21 years old. After six
months of participation in the Stock Purchase Plan, the Company will provide a
10% matching contribution to be applied to purchases under the Stock Purchase
Plan. The Company also pays all fees and brokerage commissions associated with
the purchase of the stock. The Stock Purchase Plan is administered by a
broker-dealer firm not affiliated with the Company.
Board Compensation
Directors who are not also employed by the Company are paid Directors'
fees of $10,000 per annum, plus $3,000 for each meeting of the Board of
Directors and $1,000 for each Committee meeting attended. In addition, Directors
are reimbursed for all out-of-pocket expenses incurred in connection with their
duties as Directors. The Directors of the Company, including Mr. Scrushy, have
been granted non-qualified stock options to purchase shares of the Company's
Common Stock. See this Item, "Executive Compensation Stock Option Plans" above.
Chief Executive Officer Employment Agreement
The Company is a party to an Employment Agreement with Richard M.
Scrushy, pursuant to which Mr. Scrushy is employed as Chairman of the Board,
President and Chief Executive Officer of the Company for a five-year term which
ends December 31, 1999. Such term is automatically extended for an additional
year on December 31 of each year. In addition, the Company has agreed to use its
best efforts to cause Mr. Scrushy to be elected as a Director of the Company
during the term of the Agreement. Under the Agreement, Mr. Scrushy received a
base salary of $900,000, including incentive compensation of up to $400,000, in
1994 and is to receive the same base salary in 1995 and each year thereafter,
with incentive compensation of up to $900,000, subject to annual review by the
Board of Directors, and is entitled to participate in any bonus plan approved by
the Board of Directors for the Company's management. The incentive compensation
is earned at $75,000 per month in 1995, contingent upon the Company's success in
meeting certain monthly budgeted earnings per share targets. Mr. Scrushy earned
the entire $400,000 incentive component of his corporation in 1994, as all such
targets were met. In addition, Mr. Scrushy was awarded $2,000,000 under the
management bonus plan. Such additional bonus was based on the Audit and
Compensation Committee's assessment of Mr. Scrushy's contribution to the
establishment of the Company as the industry leader in rehabilitative healthcare
services, including his role in the integration of the NME Selected Hospitals
and his role in the negotiation and consummation of the ReLife acquisition. Mr.
Scrushy is also provided with a car allowance in the amount of $500 per month
and disability insurance through a Company-wide plan or otherwise. Under the
Agreement, Mr. Scrushy may be terminated for cause or if he should become
disabled. Termination of Mr. Scrushy's employment under the Agreement will
result in certain severance pay arrangements. In the event that the Company
shall be acquired, merged or reorganized in such a manner as to result in a
change of control of the Company, Mr. Scrushy has the right to terminate his
employment under the Agreement, in which case he will receive a lump sum payment
equal to three years' annual base salary (including the gross incentive portion
<PAGE>
thereof) under the Agreement. Mr. Scrushy has agreed not to compete with the
Company during any period to which any such severance pay relates. Mr. Scrushy
may terminate the Agreement at any time upon 180 days' notice, in which case he
will receive one year's base salary as severance pay.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 3, 1995, (a) by each person
who is known by the Company to own beneficially more than 5% of the Company's
Common Stock, (b) by each of the Company's Directors and (c) by the Company's
five most highly compensated executive officers and all executive officers and
Directors as a group.
<TABLE>
<CAPTION>
Percentage
Name and Number of Shares of
Address of Owner Beneficially Owned (1) Common Stock
---------------- ---------------------- ------------
<S> <C> <C> <C>
Richard M. Scrushy 2,897,391 (2) 7.53%
Two Perimeter Park South
Birmingham, Alabama 35243
John S. Chamberlin 40,000 (3) *
C. Sage Givens 100,000 (3) *
Charles W. Newhall III 140,360 (4) *
George H. Strong 141,679 (5) *
Phillip C. Watkins, M.D. 179,199 (6) *
Aaron Beam, Jr. 102,775 (7) *
James P. Bennett 117,500 (8) *
Larry R. House 198,963 (9) *
Anthony J. Tanner 248,000 (10) *
Richard F. Celeste 30,000 (3) *
P. Daryl Brown 182,500 (11) *
Forstmann-Leff Associates, Inc. 2,035,761 (12) 5.72%
55 East 52nd Street
New York, New York 10055
The Travelers Inc. 1,824,514 (13) 5.13%
65 East 55th Street
New York, New York 10022
American Express Company 1,883,000 (14) 5.29%
American Express Tower
World Financial Center
New York, New York 10285
All Executive Officers and Directors as a Group 4,712,905 (15) 11.76%
(16 persons)
- -------------------------
<FN>
(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
except as otherwise indicated.
(2) Includes 2,889,840 shares subject to currently exercisable non-qualified
stock options. See Item 11, "Executive Compensation Stock Options".
(3) All of the shares are subject to currently exercisable non-qualified stock
options.
(4) Includes 210 shares owned by members of Mr. Newhall's immediate family, and
140,000 shares are subject to currently exercisable non-qualified stock
options.
(5) Includes 100,000 shares subject to currently exercisable non-qualified
stock options.
(6) Includes 137,500 shares subject to currently exercisable non-qualified
stock options and 499 shares held in trust for his children.
(7) Includes 92,175 shares subject to currently exercisable stock options and
100 shares owned by his spouse. See "Executive Compensation Stock Options"
in Item 11.
(8) Includes 98,750 shares which are subject to currently exercisable stock
options. See "Executive Compensation Stock Options" in Item 11.
(9) Includes 138,442 shares subject to currently exercisable stock options. See
"Executive Compensation Stock Options" in Item 11.
(10) Includes 230,000 shares subject to currently exercisable stock options,
18,000 held in trust by Mr. Tanner for his children. See "Executive
Compensation Stock Options" in Item 11.
(11) Includes 163,000 shares subject to currently exercisable stock options. See
"Executive Compensation Stock Options" in Item 11.
(12) Shares held of record for various investment funds for which Forstmann-Leff
Associates Inc. ("FLA") acts as investment advisor. Includes 1,058,663
shares as to which FLA claims sole voting power, 993,098 shares as to which
FLA claims shared voting power, 1,514,779 shares as to which FLA claims
sole investment power and 520,982 shares as to which FLA claims shared
investment power.
(13) Assumes conversion of convertible debentures held of record by The
Travelers and its subsidiaries as broker-dealer. The Travelers and its
subsidiaries Smith Barney Holdings Inc. and Smith Barney Inc. claim shared
voting and dispositive power with respect to all such shares.
(14) Shares held of record for investment funds for which American Express
Financial Advisors Inc. (together with its parent, American Express
Company, "American Express") acts as investment advisor. Includes 574,600
shares as to which American Express claims shared voting power and
1,883,000 shares as to which American Express claims shared dispositive
power.
(15) Includes 4,512,145 shares subject to currently exercisable stock options
held by officers and Directors.
* Less than 1%
Item 13. Certain Relationships and Related Transactions.
During 1994, the Company paid $7,962,000 for the purchase of new NCR
computer equipment from GG Enterprises, a value-added reseller of computer
equipment which is owned by Grace Scrushy, the mother of Richard M. Scrushy,
Chairman of the Board, President and Chief Executive Officer of the Company, and
Gerald P. Scrushy, Senior Vice President -- Physical Resources of the Company.
Such purchases were made in the ordinary course of the Company's business. The
price paid for this equipment was more favorable to the Company than that which
could have been obtained from an independent third party seller.
During 1994, the Company paid $670,000 to Caretenders Health Corp., a
provider of home healthcare services and related services, for services provided
by Caretenders to the Company. Richard M. Scrushy, Chairman of the Board,
President and Chief Executive Officer of the Company, and Michael D. Martin,
Senior Vice President and Treasurer of the Company, served until August 1994 as
directors of Caretenders Health Corp. In addition, the Company beneficially owns
approximately 30% of the issued and outstanding shares of common stock of
Caretenders. Such purchaser were made in the ordinary course of the Company's
business. The Company believes that the price paid for the services provided by
Caretenders was no less favorable to the Company than that which could have been
obtained from an independent third-party provider.
During 1994, the Company paid $1,409,000 to MedPartners, Inc. for
management services rendered to certain physician practices owned by the
Company. Richard M. Scrushy, Chairman of the Board, President and Chief
Executive Officer of the Company, and Larry R. House, a Director of the Company,
are directors of MedPartners, Inc. Mr. House also serves as Chairman of the
Board, President and Chief Executive Officer of MedPartners, Inc., a position
which has been his principal occupation since August 1993. At March 1, 1995, Mr.
Scrushy owns approximately 6.1%, Mr. House owns approximately 8.2%, and the
Company owns approximately 8.3% of the issued and outstanding Common Stock of
MedPartners, Inc. The Company believes that the price paid for such services was
no less favorable to the Company than that which could have been obtained from
an independent third-party provider.
In June 1994, the Company sold six ancillary hospital facilities, three
outpatient rehabilitation facilities and one research facility to Capstone
Capital Corporation ("Capstone"), a publicly-traded real estate investment
trust. The net proceeds of the Company as a result of the transaction were
approximately $49,025,000, approximately $30,000,000 of which was applied to
reduce indebtedness under the Company's revolving credit facility. The Company
leases back substantially all these properties from Capstone and guarantees the
associated operating leases, payments under which aggregate approximately
$5,728,200 annually. Actual 1994 lease payments were $2,940,000. Richard M.
Scrushy, Chairman of the Board, President and Chief Executive Officer of the
Company, and Michael D. Martin, Senior Vice President -- Finance and Treasurer
of the Company, were among the founders of Capstone and serve on its Board of
Directors. At March 1, 1995, Mr. Scrushy owned approximately 2.5% of the issued
and outstanding capital stock of Capstone, and Mr. Martin owned approximately
0.2% of the issued and outstanding capital stock of Capstone. In addition, the
Company owned approximately 1.2% of the issued and outstanding capital stock of
Capstone at March 1, 1995. The Company acquired its shares pursuant to a
transaction wherein Mr. Scrushy and Mr. Martin assigned to the Company certain
of their rights to purchase shares of Capstone's capital stock in connection
with its initial capitalization. The Company paid Mr. Scrushy $90,200 and Mr.
Martin $8,800 for the assignment of such rights, which amounts were determined
based upon the ratio that the rights assigned to the Company bore to the initial
investment by Mr. Scrushy and Mr. Martin in Capstone's predecessor. The Company
believes that all transactions involving Capstone were effected on terms no less
favorable than those which could have been obtained in transactions with
independent third parties.
In order to enhance equity ownership by senior management, the Company
has adopted a program of making loans to officers holding the position of Group
Vice President and above to facilitate the exercise of stock options held by
such persons. See Item 11, "Executive Compensation Executive Loans".
At various times in 1992 and 1993, the Company has made loans to
executive officers to assist them in meeting financial obligations at certain
times when they were requested by the Company to refrain from selling Common
Stock in the open market. At January 1, 1994, loans in the following original
principal amounts were outstanding: $425,000 to Aaron Beam, Jr., Executive Vice
President and Chief Financial Officer, $460,000 to Larry R. House, a Director
and a former executive officer, and $140,000 to William T. Owens, Senior Vice
President and Controller. Outstanding principal balances at December 31, 1994
were $-0- for Mr. Beam, $383,000 for Mr. House and $126,000 for Mr. Owens. Such
loans bear interest at the rate of 1-1/4% per annum below the prime rate of
AmSouth Bank of Alabama, Birmingham, Alabama, and are payable on demand.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Financial Statements, Financial Statement Schedules and Exhibits.
1. Financial Statements.
The consolidated financial statements of the Company and its
subsidiaries filed as a part of this Annual Report on Form 10-K are listed in
Item 8 of this Annual Report on Form 10-K, which listing is hereby incorporated
herein by reference.
2. Financial Statement Schedules.
The financial statement schedules required by Regulation S-X are filed
under Item 14(d) of this Annual Report on Form 10-K, as listed below:
Schedules Supporting the Financial Statements
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission have been
omitted because they are not required under the related instructions or are
inapplicable, or because the information has been provided in the Consolidated
Financial Statements or the Notes thereto.
3. Exhibits.
The Exhibits filed as a part of this Annual Report are listed in Item
14(c) of this Annual Report on Form 10-K, which listing is hereby incorporated
herein by reference.
(b) Reports on Form 8-K.
No Current Reports on Form 8-K were filed by the Company during the
last quarter of the period covered by this Annual Report on Form 10-K.
(c) Exhibits.
The Exhibits required by Regulation S-K are set forth in the following
list and are filed either by incorporation by reference from previous filings
with the Securities and Exchange Commission or by attachment to this Annual
Report on Form 10-K as so indicated in such list.
(2)-1. Asset Sale Agreement dated December 3, 1993, between National
Medical Enterprises, Inc. and HEALTHSOUTH Rehabilitation
Corporation, filed as Exhibit (2)-1 to the Company's Current
Report on Form 8-K filed on January 21, 1994, is hereby
incorporated by reference.
(2)-2. Amendment No. 1 to Asset Sale Agreement dated as of January 3,
1994, between National Medical Enterprises, Inc. and HEALTHSOUTH
Rehabilitation Corporation, filed as Exhibit (2)-2 to the
Company's Current Report on Form 8-K filed on January 21, 1994, is
hereby incorporated by reference.
(2)-3. Amended and Restated Plan and Agreement of Merger, dated as of
September 18, 1994, among HEALTHSOUTH Rehabilitation Corporation,
RRS Acquisitions Company, Inc. and ReLife, Inc., filed as Exhibit
(2)-1 to the Company's Registration Statement on Form S-4
(Registration No. 33-55929), is hereby incorporated by reference.
(2)-4. Amended and Restated Plan and Agreement of Merger, dated as of
January 22, 1995, among HEALTHSOUTH Corporation, ASC Atlanta
Acquisition Company, Inc. and Surgical Health Corporation.
(2)-5. Stock Purchase Agreement, dated February 3, 1995, among
HEALTHSOUTH Corporation, NovaCare, Inc. and NC Resources, Inc.
(3)-1 Restated Certificate of Incorporation of HEALTHSOUTH
Rehabilitation Corporation, as filed in the Office of the
Secretary of State of the State of Delaware on December 30, 1994,
filed as Exhibit 3 to the Company's Current Report on Form 8-K
filed on January 13, 1995, is hereby incorporated by reference.
(3)-2 Bylaws of HEALTHSOUTH Rehabilitation Corporation, filed as Exhibit
(3)-2 to the Company's Annual Report on Form 10-K for the Fiscal
Year Ended December 31, 1991, is hereby incorporated herein by
reference.
(4)-1 Indenture, dated March 24, 1994, between HEALTHSOUTH
Rehabilitation Corporation and NationsBank of Georgia, National
Association, relating to the Company's 9.5% Senior Subordinated
Notes due 2001.
(4)-2 Indenture, dated March 24, 1994, between HEALTHSOUTH
Rehabilitation Corporation and PNC Bank of Kentucky, Inc.,
relating to the Company's 5% Convertible Subordinated Debentures
due 2001.
(10)-21. 1984 Incentive Stock Option Plan, as amended, filed as Exhibit
(10)-1 to the Company's Annual Report on Form 10-K for the Fiscal
Year Ended December 31, 1987, is hereby incorporated herein by
reference.
(10)-22. 1988 Non-Qualified Stock Option Plan, filed as Exhibit 4(a) to the
Company's Registration Statement on Form S-8 (Registration No.
33-23642), is hereby incorporated herein by reference.
(10)-23. 1989 Stock Option Plan, filed as Exhibit (10)-6 to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended December 31,
1989, is hereby incorporated by reference.
(10)-24. 1990 Stock Option Plan, filed as Exhibit (10)-13 to the Company's
Annual Report on Form 10-K for the Fiscal Year ended December 31,
1990, is hereby incorporated by reference.
(10)-25. Forms of Stock Option Agreement utilized under 1984 Incentive
Stock Option Plan, 1988 Non-Qualified Stock Option Plan, 1989
Stock Option Plan and 1990 Stock Option Plan, filed as Exhibit
(10)-14 to the Company's Annual Report on Form 10-K for the Fiscal
Year ended December 31, 1990, is hereby incorporated herein by
reference.
(10)-26. 1991 Stock Option Plan, as amended, filed as Exhibit (10)-15 to
the Company's Annual Report on Form 10-K for the Fiscal Year ended
December 31, 1991, is hereby incorporated herein by reference.
(10)-27. Forms of Stock Option Agreements utilized under 1991 Stock Option
Plan, filed as Exhibit (10)-16 to the Company's Annual Report on
Form 10-K for the Fiscal Year Ended December 31, 1991, is hereby
incorporated herein by reference.
(10)-28. 1992 Stock Option Plan, filed as Exhibit (10)-8 to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended December 31,
1992, is hereby incorporated by reference.
(10)-29. Forms of Stock Option Agreements utilized under 1992 Stock Option
Plan, filed as Exhibit (10)-9 to the Company's Annual Report on
Form 10-K for the Fiscal Year Ended December 31, 1992, are hereby
incorporated by reference .
(10)-30. 1993 Stock Option Plan, filed as Exhibit (10)-10 to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended December 31,
1993, is hereby incorporated by reference.
(10)-31. Forms of Stock Option Agreements utilized under 1993 Stock Option
Plan, filed as Exhibit (10)-11 to the Company's Annual Report on
Form 10-K for the Fiscal Year Ended December 31, 1993, are hereby
incorporated by reference.
(10)-32. 1993 Consultants Stock Option Plan, filed as Exhibit 4(a) to the
Company's Registration Statement on Form S-8 (Commission File No.
33-64316), is hereby incorporated herein by reference.
(10)-33. Form of Stock Option Agreement utilized under the 1993 Consultants
Stock Option Plan, filed as Exhibit 4(b) to the Company's
Registration Statement on Form S-8 (Commission File No. 33-64316),
is hereby incorporated herein by reference.
(10)-34. Employment Agreement, dated July 23, 1986, between HEALTHSOUTH
Rehabilitation Corporation and Richard M. Scrushy, as amended.
(10)-35. Amended and Restated Credit Agreement, dated as of June 7, 1994,
between HEALTHSOUTH Rehabilitation Corporation and NationsBank of
North Carolina, National Association.
(10)-36. Form of Indemnity Agreement entered into between HEALTHSOUTH
Rehabilitation Corporation and each of its Directors, filed as
Exhibit (10)-13 to the Company's Annual Report on Form 10-K for
the Fiscal Year Ended December 31, 1991, is hereby incorporated
herein by reference.
<PAGE>
(11) HEALTHSOUTH Corporation and Subsidiaries, Computation of Income
Per Share.
(21) Subsidiaries of HEALTHSOUTH Corporation.
(23)-1 Consent of Ernst & Young LLP.
(d) Financial Statement Schedules.
Schedule II: Valuation and Qualifying Accounts
<PAGE>
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
</TABLE>
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at Additions Charged Additions Charged
Beginning of to Costs and to Other Accounts - Deductions - Balance at
Description Period Expenses Describe Describe End of Period
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1992:
Allowance for doubtful
accounts and con- 218,964 (1)
tractual adjustments $ 26,855 $ 11,842 $ 14,704 (2) $ 223,774 (3) $ 48,591
= ====== = ====== = ====== = ======= = ======
Year ended December 31, 1993:
Allowance for doubtful
accounts and con- 289,077 (1)
tractual adjustments $ 48,591 $ 13,875 $ 49,999 (2) $ 282,796 (3) $ 118,746
= ====== = ====== = ====== = ======= = =======
Year ended December 31, 1994:
Allowance for doubtful
accounts and con- 644,658 (1)
tractual adjustments $ 118,746 $ 20,583 $ 6,547 (2) $ 648,675 (3) $ 141,859
= ======= = ====== = ===== = ======= = =======
- -------------------------
<FN>
(1) Provisions for contractual adjustments which are netted against gross revenues.
(2) Allowances of acquisitions in years 1992, 1993 and 1994, respectively.
(3) Write-offs of uncollectible patient accounts receivable and third party
contractual adjustments, net of third party retroactive settlements.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
HEALTHSOUTH Corporation
By RICHARD M. SCRUSHY
---------------------------
Richard M. Scrushy,
Chairman of the Board, President
and Chief Executive Officer
Date: March 7, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
RICHARD M. SCRUSHY Chairman of the Board, March 7, 1995
------------------
Richard M. Scrushy President and Chief
Executive Officer and
Director
AARON BEAM, JR. Executive Vice President and March 7, 1995
----------------------
Aaron Beam, Jr. Chief Financial Officer
and Director
WILLIAM T. OWENS Senior Vice President-Finance and March 7, 1995
----------------------
William T. Owens Controller (Principal Accounting
Officer)
C. SAGE GIVENS Director March 7, 1995
----------------------
C. Sage Givens
CHARLES W. NEWHALL III Director March 7, 1995
----------------------
Charles W. Newhall III
GEORGE H. STRONG Director March 7, 1995
----------------------
George H. Strong
PHILLIP C. WATKINS Director March 7, 1995
----------------------
Phillip C. Watkins
JOHN S. CHAMBERLIN Director March 7, 1995
----------------------
John S. Chamberlin
LARRY R. HOUSE Director March 7, 1995
----------------------
Larry R. House
ANTHONY J. TANNER Director March 7, 1995
----------------------
Anthony J. Tanner
JAMES P. BENNETT Director March 7, 1995
----------------------
James P. Bennett
RICHARD F. CELESTE Director March 7, 1995
----------------------
Richard F. Celeste
</TABLE>
<PAGE>
EXHIBIT (2)-4
AMENDED AND RESTATED PLAN AND AGREEMENT OF MERGER
AMENDED AND RESTATED PLAN AND AGREEMENT OF MERGER (the "Plan of Merger"),
made and entered into as of the 22nd day of January, 1995, by and among
HEALTHSOUTH Corporation, a Delaware corporation ("HEALTHSOUTH"), ASC ATLANTA
ACQUISITION COMPANY, INC., a Delaware corporation (the "Subsidiary"), and
SURGICAL HEALTH CORPORATION, a Delaware corporation ("SHC") (the Subsidiary and
SHC being sometimes collectively referred to herein as the "Constituent
Corporations").
W I T N E S S E T H:
WHEREAS, the Board of Directors of each of HEALTHSOUTH and SHC has
determined that a business combination between HEALTHSOUTH and SHC is in the
best interests of their respective companies and stockholders and presents as
opportunity for their respective companies to achieve long-term strategic and
financial benefits;
WHEREAS, on January 22, 1995, HEALTHSOUTH, the Subsidiary and SHC executed
and delivered a Plan and Agreement of Merger, which their duly authorized
officers have determined to amend and restate in its entirety as provided herein
to be effective for all purposes as of and from and after January 22, 1995;
WHEREAS, the respective Boards of Directors of HEALTHSOUTH, the Subsidiary
and SHC have approved the merger of the Subsidiary with and into SHC (the
"Merger"), upon the terms and conditions set forth in this Plan of Merger,
whereby (i) each share of Common Stock, par value $.0025 per share, of SHC (the
"SHC Common Stock"), not owned directly or indirectly by SHC, except Dissenting
Shares (as hereinafter defined), (ii) each share of Series A Convertible
Preferred Stock, par value $.01 per share, of SHC (the "Series A Preferred
Stock"), not owned directly or indirectly by SHC, except Dissenting Shares,
(iii) each share of Series B Convertible Preferred Stock, par value $.01 per
share, of SHC (the "Series B Preferred Stock"), not owned directly or indirectly
by SHC, except Dissenting Shares, and (iv) each share of Series C Convertible
Preferred Stock, par value $.01 per share, of SHC (the "Series C Preferred
Stock"), not owned directly or indirectly by SHC, except Dissenting Shares, will
be converted into the right to receive the Merger Consideration (as hereinafter
defined) (the Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock may be hereinafter collectively referred to as the "Preferred
Stock", and, together with the SHC Common Stock, may be hereinafter collectively
referred to as the "SHC Shares");
WHEREAS, each of HEALTHSOUTH, the Subsidiary and SHC desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that the Merger
(as defined herein) shall qualify as a reorganization under the provisions of
Section 368 of the Internal Revenue Code of 1986, as amended; and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling of interests".
NOW, THEREFORE, in consideration of the premises, and the mutual covenants
and agreements contained herein, the parties hereto do hereby agree as follows:
Section 1. The Merger.
1.1 The Merger. Upon the terms and conditions set forth in this Plan of
Merger, and in accordance with the Delaware General Corporation Law (the
"DGCL"), the Subsidiary shall be merged with and into SHC at the Effective Time
of the Merger (as defined in Section 1.3). Following the Effective Time
<PAGE>
of the Merger, the separate corporate existence of the Subsidiary shall cease
and SHC shall continue as the surviving corporation (the "Surviving
Corporation") under the name "Surgical Health Corporation" and shall succeed to
and assume all the rights and obligations of the Subsidiary and SHC in
accordance with the DGCL.
1.2 The Closing. The closing of the Merger (the "Closing") will take place
at 10:00 a.m. Central Time on a date to be specified by the parties (the
"Closing Date"), which (subject to satisfaction or waiver of the conditions set
forth in Sections 9.2 and 9.3) shall be no later than the second business day
after satisfaction of the conditions set forth in Section 9.1 (other than
Section 9.1(a)), at the offices of Haskell Slaughter Young & Johnston,
Professional Association, Birmingham, Alabama, unless another date or place is
agreed to in writing by the parties hereto.
1.3 Effective Time. Subject to the provisions of this Plan of Merger, the
parties shall file a certificate of merger (the "Certificate of Merger")
executed in accordance with the relevant provisions of the DGCL and shall make
all other filings or recordings required under the DGCL as soon as practicable
on or after the Closing Date. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Delaware Secretary of State, or
at such other time as Subsidiary and SHC shall agree should be specified in the
Certificate of Merger (the "Effective Time").
1.4 Effect of the Merger. The Merger shall have the effects set forth in
Section 259 of the DGCL.
Section 2. Effect of the Merger on the Capital Stock of the Constituent
Corporations; Exchange of Certificates.
2.1 Effect on Capital Stock. As of the Effective Time of the Merger, by
virtue of the Merger and without any action on the part of any holder of SHC
Shares or any shares of capital stock of the Subsidiary:
(a) Subsidiary Common Stock. Each share of capital stock of the Subsidiary
issued and outstanding immediately prior to the Effective Time of the Merger
shall be converted into one fully paid and nonassessable share of SHC Common
Stock.
(b) Cancellation of Treasury Stock. Each share of SHC Common Stock that is
owned by SHC or by any subsidiary of SHC shall automatically be canceled and
retired and shall cease to exist, and none of the Common Stock, par value $.01
per share, of HEALTHSOUTH ("HEALTHSOUTH Common Stock"), cash or other
consideration shall be delivered in exchange therefor.
(c) Conversion of SHC Shares. Subject to Section 2.2(e), each issued and
outstanding SHC Share (other than shares to be canceled in accordance with
Section 2.1(b) and Dissenting Shares) shall be converted into the right to
receive that fraction of a share of HEALTHSOUTH Common Stock obtained by
dividing $4.60 by the Base Period Trading Price (as may be adjusted as provided
below) (the "Merger Consideration"); provided, however, that for purposes of
such calculation, the Base Period Trading Price shall be deemed to equal (i)
$37.00 in the event that the Base Period Trading Price is greater than $37.00,
or (ii) $33.00 in the event the Base Period Trading Price is less than $33.00
(collectively, $37.00 and $33.00 are referred to herein as the "Base Period
Trading Price Limitations"). For purposes of this Plan of Merger, the term "Base
Period Trading Price" shall mean the average daily closing prices for the shares
of HEALTHSOUTH Common Stock for the 20 consecutive trading days on which such
shares are actually traded (as reported on the New York Stock Exchange Composite
Transaction Tape as reported in The Wall Street Journal, Eastern Edition, or if
not reported thereby, any other authoritative source) ending at the close of
trading on the third trading day immediately preceding the Closing Date. As of
the Effective Time of the Merger, all such SHC Shares shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any SHC Shares shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration and any cash in lieu of fractional shares of HEALTHSOUTH Common
Stock to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 2.2, without interest.
(d) Dissenting Shares. Notwithstanding anything in this Plan of Merger to
the contrary, SHC Shares outstanding immediately prior to the Effective Time of
the Merger held by a holder (if any) who is entitled to demand, and who properly
demands, appraisal for such shares in accordance with Section 262 of the DGCL
<PAGE>
("Dissenting Shares") shall not be converted into a right to receive the Merger
Consideration and any cash in lieu of fractional shares of HEALTHSOUTH Common
Stock unless such holder fails to perfect or otherwise loses such holder's right
to appraisal, if any. If, after the Effective Time of the Merger, such holder
fails to perfect or loses any such right to appraisal, such shares shall be
treated as if they had been converted as of the Effective Time of the Merger
into the right to receive the Merger Consideration pursuant to Section 2.1(c)
and the cash in lieu of fractional shares of HEALTHSOUTH Common Stock specified
in Section 2.2.
(e) Stock Options and Warrants. At the Effective Time, all rights with
respect to SHC Common Stock pursuant to any SHC stock options or SHC warrants
which are outstanding at the Effective Time, whether or not then exercisable,
shall be converted into and become rights with respect to HEALTHSOUTH Common
Stock and HEALTHSOUTH shall assume each SHC stock option or SHC warrant, in
accordance with the terms of the stock option plan under which it was issued and
the stock option agreement or warrant agreement, as the case may be, by which it
is evidenced. It is intended that the foregoing provisions shall be undertaken
in a manner that will not constitute a "modification" as defined in Section 425
of the Code, as to any stock option which is an "incentive stock option."
(f) Anti-Dilution Provisions. In the event that HEALTHSOUTH changes the
number of shares of HEALTHSOUTH Common Stock issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend, or similar
recapitalization with respect to such stock and the record date thereof (in the
case of a stock dividend) or the effective date thereof (in the case of a stock
split or similar recapitalization for which a record date is not established)
shall be prior to the Effective Time, (i) the Base Period Trading Price
Limitations shall be adjusted to appropriately adjust the ratio pursuant to
which SHC Shares will be converted into shares of HEALTHSOUTH Common Stock
pursuant to this Section 2.1, and (ii) if necessary, the anticipated Effective
Time shall be postponed for an appropriate period of time agreed upon by the
parties in order for the Base Period Trading Price to reflect the market effect
of such stock split, stock dividend, or similar recapitalization.
2.2 Exchange of Certificates. (a) Exchange Agent. Prior to the Effective
Time of the Merger, HEALTHSOUTH shall enter into an agreement with such bank or
trust company as may be designated by HEALTHSOUTH (the "Exchange Agent") which
provides that HEALTHSOUTH shall deposit with the Exchange Agent as of the
Effective Time of the Merger, for the benefit of the holders of SHC Shares, for
exchange in accordance with this Section 2, through the Exchange Agent,
certificates representing the shares of HEALTHSOUTH Common Stock (such shares of
HEALTHSOUTH Common Stock, together with any dividends or distributions with
respect thereto with a record date after the Effective Time of the Merger, being
hereinafter referred to as the "Exchange Fund") issuable pursuant to Section 2.1
in exchange for outstanding SHC Shares.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time of the Merger, the Exchange Agent shall mail to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time of the Merger represented outstanding SHC Shares (the "Certificates") whose
shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.1, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as HEALTHSOUTH may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of HEALTHSOUTH
Common Stock. Upon surrender of a Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by HEALTHSOUTH,
together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of HEALTHSOUTH Common Stock which such
holder has the right to receive pursuant to the provisions of this Section 2,
and the Certificate so surrendered shall forthwith be canceled. In the event of
a transfer of ownership of SHC Shares which is not registered in the transfer
records of SHC, a certificate representing the proper number of shares of
HEALTHSOUTH Common Stock may be issued to a person other than the person in
whose name the Certificate so surrendered is registered, if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
<PAGE>
person requesting such payment shall pay any transfer or other taxes required by
reason of the issuance of shares of HEALTHSOUTH Common Stock to a person other
than the registered holder of such Certificate or establish to the satisfaction
of HEALTHSOUTH that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time of the Merger to represent only the
right to receive upon such surrender the certificate representing shares of
HEALTHSOUTH Common Stock and cash in lieu of any fractional shares of
HEALTHSOUTH Common Stock as contemplated by this Section 2.2. No interest will
be paid or will accrue on any cash payable in lieu of any fractional shares of
HEALTHSOUTH Common Stock. To the extent permitted by law, former stockholders of
record of SHC shall be entitled to vote after the Effective Time of the Merger
at any meeting of HEALTHSOUTH stockholders the number of whole shares of
HEALTHSOUTH Common Stock into which their respective SHC Shares are converted,
regardless of whether such holders have exchanged their Certificates for
certificates representing HEALTHSOUTH Common Stock in accordance with this
Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to HEALTHSOUTH Common Stock with a record date after
the Effective Time of the Merger shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of HEALTHSOUTH Common Stock
represented thereby and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.2(e) until the surrender of such
Certificate in accordance with this Section 2. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificate representing whole shares of HEALTHSOUTH
Common Stock issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of any cash payable in lieu of a fractional share of
HEALTHSOUTH Common Stock to which such holder is entitled pursuant to Section
2.2(e) and the amount of dividends or other distributions with a record date
after the Effective Time of the Merger theretofore paid with respect to such
whole shares of HEALTHSOUTH Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time of the Merger but prior to such surrender and with a payment
date subsequent to such surrender payable with respect to such whole shares of
HEALTHSOUTH Common Stock.
(d) No Further Ownership Rights in SHC Shares. All shares of HEALTHSOUTH
Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Section 2 (including any cash paid pursuant to
Section 2.2(c) or 2.2(e) ) shall be deemed to have been issued (and paid) in
full satisfaction of all rights pertaining to the SHC Shares theretofore
represented by such Certificates. If, after the Effective Time of the Merger,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this Section
2, except as otherwise provided by law.
(e) No Fractional Shares. No certificates or scrip representing fractional
shares of HEALTHSOUTH Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a stockholder of HEALTHSOUTH.
Notwithstanding any other provision of this Plan of Merger, each holder of SHC
Shares exchanged pursuant to the Merger who would otherwise have been entitled
to receive a fraction of a share of HEALTHSOUTH Common Stock (after taking into
account all Certificates delivered by such holder) shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of HEALTHSOUTH Common Stock multiplied by the Base Period Trading Price.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates for six months after
the Effective Time of the Merger shall be delivered to HEALTHSOUTH, upon demand,
and any holders of the Certificates who have not theretofore complied with this
Section 2 shall thereafter look only to HEALTHSOUTH for payment of HEALTHSOUTH
Common Stock, any cash in lieu of fractional shares of HEALTHSOUTH Common Stock
and any dividends or distributions with respect to HEALTHSOUTH Common Stock.
(g) No Liability. None of HEALTHSOUTH, the Subsidiary, SHC or the Exchange
Agent shall be liable to any person in respect of any shares of HEALTHSOUTH
Common Stock (or dividends or distributions with respect thereto) or cash from
the Exchange Fund delivered to a public official pursuant to any applicable
<PAGE>
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to seven years after the Effective Time of the Merger (or
immediately prior to such earlier date on which any shares of HEALTHSOUTH Common
Stock, any cash in lieu of fractional shares of HEALTHSOUTH Common Stock or any
dividends or distributions with respect to HEALTHSOUTH Common Stock in respect
of such Certificates would otherwise escheat to or become the property of any
governmental entity), any such shares, cash, dividends or distributions in
respect of such Certificates shall, to the extent permitted by applicable law,
become the property of the Surviving Corporation, free and clear of all claims
or interest of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by HEALTHSOUTH, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
HEALTHSOUTH.
(i) The Merger will not be treated as a liquidation, dissolution or winding
up of SHC under the liquidation provisions of SHC's Certificate of
Incorporation.
2.3 Certificate of Incorporation of Surviving Corporation. The Certificate
of Incorporation of SHC shall be amended and restated, effective at the
Effective Time, in a manner satisfactory to HEALTHSOUTH. The Certificate of
Incorporation of SHC, as so amended and restated, shall become the Certificate
of Incorporation of the Surviving Corporation from and after the Effective Time
and until thereafter amended as provided by law.
2.4 Bylaws of the Surviving Corporation. The Bylaws of the Subsidiary shall
be the Bylaws of the Surviving Corporation from and after the Effective Time of
the Merger and until thereafter altered, amended or repealed in accordance with
the laws of the State of Delaware, the Certificate of Incorporation of SHC and
the said Bylaws.
2.5 Directors and Officers of the Surviving Corporation. The Directors and
officers of the Subsidiary immediately prior to the Effective Time shall be the
Directors and officers of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation.
2.6 Assets, Liabilities, Reserves and Accounts. At the Effective Time, the
assets, liabilities, reserves and accounts of each of Subsidiary and SHC shall
be taken up on the books of the Surviving Corporation at the amounts at which
they respectively shall be carried on the books of said corporations immediately
prior to the Effective Time, except as otherwise set forth in the Plan of Merger
and subject to such adjustments, or elimination of intercompany items, as may be
appropriate in giving effect to the Merger in accordance with generally accepted
accounting principles.
2.7 Corporate Acts of the Subsidiary. All corporate acts, plans, policies,
approvals and authorizations of the Subsidiary, its sole stockholder, its Board
of Directors, committees elected or appointed by the Board of Directors, and all
officers and agents, valid immediately prior to the Effective Time of the
Merger, shall be those of the Surviving Corporation and shall be as effective
and binding thereon as they were with respect to the Subsidiary. The employees
and agents of the Subsidiary shall become the employees and agents of the
Surviving Corporation and continue to be entitled to the same rights and
benefits which they enjoyed as employees and agents of the Subsidiary.
Section 3. Representations and Warranties of SHC.
SHC hereby represents and warrants to HEALTHSOUTH and the Subsidiary as
follows:
3.1 Organization, Existence and Good Standing. SHC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. SHC has all necessary corporate power to own its properties and assets
and to carry on its business as presently conducted. SHC is not, and has not
been within the two years immediately preceding the date of this Plan of Merger,
a subsidiary or division of another corporation, nor has SHC within such time
owned, directly or indirectly, any shares of HEALTHSOUTH Common Stock or
Subsidiary Common Stock, except to the extent that shares of HEALTHSOUTH Common
Stock are beneficially owned by Richard M. Scrushy and Charles W. Newhall III,
Directors of SHC.
<PAGE>
3.2 SHC Capital Stock. SHC's authorized capital consists of (i) 60,000,000
shares of SHC Common Stock, of which 21,951,901 shares were issued and
outstanding, as of January 16, 1995, and none of which shares are issued and
held as treasury shares, (ii) 5,450,624 shares of Series A Preferred Stock, par
value $.01 per share, 1,911,902 of which shares are issued and outstanding as of
the date of this Plan of Merger and none of which are issued and held as
treasury shares; (iii) 6,000,000 shares of Series B Preferred Stock, par value
$.01 per share, 3,961,413 of which shares are issued and outstanding as of the
date of this Plan of Merger and none of which shares are issued and held as
treasury shares; (iv) 3,571,429 shares of Series C Preferred Stock, $.01 per
share, 3,439,692 of which shares are issued and outstanding as of the date of
this Plan of Merger and none of which are issued and held as treasury shares;
(v) 10,000,000 shares of undesignated preferred stock, par value $.01 per share,
none of which shares are issued and outstanding as of the date of this Plan of
Merger and none of which are issued and held as treasury shares; and (vi)
700,000 shares of Non-Voting Common Stock, par value $.0025, none of which
shares are issued and outstanding and none of which shares are issued and held
as treasury shares. All of the issued and outstanding SHC Shares are duly and
validly issued, fully paid and nonassessable. Except as set forth on Exhibit 3.2
attached hereto or otherwise disclosed in the SHC Documents (hereinafter
defined), there are no options, warrants, or similar rights granted by SHC or
any other agreements to which SHC is a party providing for the issuance or sale
by it of any additional securities which would remain in effect after the
Effective Time. There is no liability for dividends declared or accumulated but
unpaid with respect to any of the SHC Shares. SHC has not made any distributions
to any holders of SHC Shares or participated in or effected any issuance,
exchange or retirement of SHC Shares, or otherwise changed the equity interests
of holders of SHC Shares, in contemplation of effecting the Merger within the
two years immediately preceding the date of this Plan of Merger. Any SHC Shares
that SHC has re-acquired during the two years immediately preceding the date of
this Plan of Merger have been so re-acquired only for purposes other than
"business combinations", as such term is defined in Accounting Principles Board
Opinion No. 16, as amended ("Business Combinations").
3.3 Subsidiaries and Affiliated Partnerships. (a) Attached hereto as
Exhibit 3.3 is a list of all subsidiaries of SHC (individually, an "SHC
Subsidiary", and collectively, the "SHC Subsidiaries") and their states of
incorporation. Except as set forth on Exhibit 3.3, SHC does not own stock in and
does not control, directly or indirectly, any other corporation, association or
business organization other than the SHC Partnerships (as defined below).
(b) Also disclosed on Exhibit 3.3 is a list of all general or limited
partnerships in which the general partner is SHC or an SHC Subsidiary
(individually, an "SHC Partnership" and collectively, the "SHC Partnerships")
and their states of organization. Except as set forth on Exhibit 3.3, neither
SHC nor any SHC Subsidiary owns an equity interest in, nor does such entity
control, directly or indirectly, any other joint venture or partnership.
3.4 Organization, Existence and Good Standing of SHC Subsidiary and/or SHC
Partnerships. (a) Each SHC Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its respective state of
incorporation. Each SHC Subsidiary has all necessary corporate power to own its
properties and assets and to carry on its business as presently conducted.
(b) Each SHC Partnership is a limited partnership validly formed and in
good standing under the laws of its respective state of organization. Each SHC
Partnership has all necessary power to own its property and assets and to carry
on its business as presently conducted.
3.5 Foreign Qualifications. SHC, each SHC Subsidiary and each SHC
Partnership is qualified to do business as a foreign corporation or foreign
general or limited partnership, as the case may be, and is in good standing in
each jurisdiction where the nature or character of the property owned, leased or
operated by it or the nature of the business transacted by it makes such
qualification necessary, except where the failure to so qualify would not have a
material adverse effect on SHC.
3.6 Power and Authority. Subject to the satisfaction of the conditions
precedent set forth herein, SHC has the corporate power to execute, deliver and
perform the Plan of Merger and all agreements and other documents executed and
delivered or to be executed and delivered by it pursuant to the Plan of Merger,
and, subject to the satisfaction of the conditions precedent set forth herein
has taken all action required by its Certificate of Incorporation, Bylaws or
<PAGE>
otherwise, to authorize the execution, delivery and performance of the Plan of
Merger and such related documents. Except as set forth on Exhibit 3.6, the
execution and delivery of the Plan of Merger does not and, subject to the
receipt of required stockholder and regulatory approvals and any other required
third-party consents or approvals, the consummation of the Merger will not,
violate any provisions of the Certificate of Incorporation of SHC or any
provisions of, or result in the acceleration of any obligation under, any
mortgage, lien, lease, agreement, instrument, order, arbitration award, judgment
or decree, to which SHC or any SHC Subsidiary or SHC Partnership is a party, or
by which it is bound, or violate any restrictions of any kind to which it is
subject which, if violated or accelerated would have a material adverse effect
on SHC. The execution and delivery of this Agreement has been approved by the
Board of Directors of SHC (or by a committee appointed by such Board of
Directors for the purpose of approving such execution and delivery).
3.7 SHC Public Information. SHC has heretofore furnished HEALTHSOUTH with
the following documents:
(i) its Registration Statement on Form S-1 (Registration No. 33-77042)
relating to the offer and sale of $75,000,000 aggregate principal amount of
11-1/2% Senior Subordinated Notes due 2004 of SHC;
(ii) its 1993 Annual Report on Form 10-K; and
(iii) its Quarterly Reports on Form 10-Q for the fiscal quarters ended
September 30, 1993, June 30, 1994 and September 30, 1994
(documents (i)--(iii) above being collectively referred to herein as the "SHC
Documents"). As of their respective dates, the SHC Documents did not contain any
untrue statements of material facts or omit to state material facts required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of their respective
dates, the descriptions of the business, operations and financial condition of
SHC contained in the SHC Documents complied in all material respects with the
applicable requirements of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and the regulations promulgated
under such statutes. The financial statements contained in the SHC Documents,
together with the notes thereto, have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the periods
indicated, reflect all known liabilities of SHC, including all known contingent
liabilities as of the end of each period reflected therein, and present fairly
the financial condition of SHC at said dates and the consolidated results of
operations and cash flows of SHC for the periods then ended. The consolidated
balance sheet of SHC at September 30, 1994 included in the SHC Documents is
herein sometimes referred to as the "SHC Balance Sheet".
3.8 Properties and Assets. SHC (including, as applicable, the SHC
Subsidiaries and the SHC Partnerships) owns all of the real and personal
property included in the SHC Balance Sheet (except assets recorded under capital
lease obligations and such property as has been disposed of during the ordinary
course of SHC's business since the date of the SHC Balance Sheet), free and
clear of any liens, claims, charges, exceptions or encumbrances, except for
those (i) if any, which in the aggregate are not material and which do not
materially affect continued use of such property, or (ii) which are disclosed in
the SHC Documents or set forth in Exhibit 3.8.
3.9 Legal Proceedings. Except as listed on Exhibit 3.9 attached to this
Plan of Merger or described in the SHC Documents, SHC has no knowledge of any
pending or threatened litigation, governmental investigation, condemnation or
other proceeding against or relating to or affecting SHC or the transactions
contemplated by this Plan of Merger for which SHC is uninsured or which, if
resolved adversely to SHC, would have a material adverse effect on SHC and, to
the knowledge of SHC, no basis for any such action exists.
3.10 Contracts, etc. (a) SHC has made available to HEALTHSOUTH true copies
of all written, and has disclosed to HEALTHSOUTH all oral, outstanding
contracts, obligations and commitments of SHC (including the SHC Subsidiaries
and SHC Partnerships) entered into in connection with and related to the
<PAGE>
business and operations of SHC (including the SHC Subsidiaries and SHC
Partnerships) or has otherwise disclosed such contracts, commitments or
obligations in an Exhibit hereto or to the SHC Documents which are material to
the operations of SHC, the SHC Subsidiaries and the SHC Partnerships, taken as a
whole. Except as otherwise indicated on Exhibit 3.10, all of such contracts,
obligations and commitments are valid, binding and enforceable in accordance
with their terms (assuming the other parties thereto are bound) and are in full
force and effect, except where such invalidity or unenforceability would not
have a material adverse effect on SHC. Except as set forth or incorporated by
reference on such Exhibit, no default or alleged default by SHC (including the
SHC Subsidiaries and SHC Partnerships) exists thereunder, except for defaults or
alleged defaults which would not have a material adverse effect on SHC.
(b) Except as set forth on Exhibit 3.10, no contract or agreement to which
SHC or any SHC Subsidiary or SHC Partnership is a party will, by its terms,
terminate as a result of the transactions contemplated hereby or require any
consent from any obligor thereto in order to remain in full force and effect
immediately after the Effective Time, except for contracts or agreements which,
if terminated, would not have a material adverse effect on SHC.
(c) Except as set forth on Exhibit 3.10, none of SHC, any SHC Subsidiary or
any SHC Partnership has granted any right of first refusal or similar right in
favor of any third party with respect to any material portion of its properties
or assets (excluding liens described in Section 3.8) or entered into any
non-competition agreement or similar agreement restricting its ability to engage
in any business in any location.
3.11 Subsequent Events. Except as set forth on Exhibit 3.11 attached to
this Plan of Merger or disclosed in the SHC Documents, SHC has not, since the
date of the SHC Balance Sheet:
(a) Incurred any material adverse change.
(b) Discharged or satisfied any material lien or encumbrance, or paid or
satisfied any material obligation or liability (absolute, accrued, contingent or
otherwise) other than (i) liabilities shown or reflected on the SHC Balance
Sheet or (ii) liabilities incurred since the date of the SHC Balance Sheet in
the ordinary course of business, which discharge or satisfaction would have a
material adverse effect on SHC.
(c) Increased or established any reserve for taxes or any other liability
on its books or otherwise provided therefor which would have a material adverse
effect on SHC, except as may have been required due to income or operations of
SHC since the date of the SHC Balance Sheet.
(d) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the assets, tangible or intangible, which assets are material
to the consolidated business or financial condition of SHC.
(e) Sold or transferred any of the assets material to the consolidated
business of SHC, cancelled any material debts or claims or waived any material
rights, except in the ordinary course of business.
(f) Granted any general or uniform increase in the rates of pay of
employees or any material increase in salary payable or to become payable by SHC
to any officer or employee, consultant or agent (other than normal merit
increases), or by means of any bonus or pension plan, contract or other
commitment, increased in a material respect the compensation of any officer,
employee, consultant or agent.
(g) Except for this Plan of Merger and any other agreement executed and
delivered pursuant to this Plan of Merger, entered into any material transaction
other than in the ordinary course of business or permitted under other Sections
hereof.
(h) Issued any stock, bonds or other securities, other than stock options
granted to employees or consultants of SHC or warrants granted to third parties,
all of which are disclosed on Exhibit 3.2.
<PAGE>
3.12 Accounts Receivable. (a) Since the date of the SHC Balance Sheet, SHC
has not changed any principle or practice with respect to the recordation of
accounts receivable or the calculation of reserves therefor, or any material
collection, discount or write-off policy or procedure. Accounts receivable are
recorded on the SHC Balance Sheet (and the other consolidated balance sheets of
SHC included in the SHC Documents) in amounts estimated to be net of contractual
allowances related to third-party payor arrangements. SHC (including the SHC
Subsidiaries and SHC Partnerships) is in compliance with the terms and
conditions of all third-party payor arrangements relating to its accounts
receivable, except to the extent that such noncompliance would not have a
material adverse effect on SHC.
(b) Without limiting the generality of the foregoing, SHC and each SHC
Subsidiary or SHC Partnership is in compliance with all Medicare and Medicaid
provider agreements to which it is a party, except to the extent that such
noncompliance would not have a material adverse effect on SHC.
3.13 Tax Returns. SHC has filed all tax returns required to be filed by it
or requests for extensions to file such returns or reports have been timely
filed and granted and have not expired, except to the extent that such failures
to file, taken together, do not have a material adverse effect on SHC. Except as
disclosed on Exhibit 3.13, SHC has made all payments shown as due on such
returns. Except as disclosed on Exhibit 3.13, SHC has not been notified that any
tax returns of SHC are currently under audit by the Internal Revenue Service or
any state or local tax agency. No agreements have been made by SHC for the
extension of time or the waiver of the statute of limitations for the assessment
or payment of any federal, state or local taxes.
3.14 Commissions and Fees. Except for fees payable to Alex. Brown & Sons
Incorporated ("Alex. Brown"), there are no valid claims for brokerage
commissions or finder's or similar fees in connection with the transactions
contemplated by this Plan of Merger which may be now or hereafter asserted
against HEALTHSOUTH resulting from any action taken by SHC or its shareholders,
officers or Directors, or any of them.
3.15 Employee Benefit Plans; Employment Matters. (a) Except as set forth on
Exhibit 3.15(a) attached to this Plan of Merger, SHC has neither established nor
maintains nor is obligated to make contributions to or under or otherwise
participate in (i) any bonus or other type of incentive compensation plan,
program, agreement, policy, commitment, contract or arrangement (whether or not
set forth in a written document), (ii) any pension, profit-sharing, retirement
or other plan, program or arrangement, or (iii) any other employee benefit plan,
fund or program, including, but not limited to, those described in Section 3(3)
of ERISA. Except as disclosed on Exhibit 3.15(a), all such plans listed on
Exhibit 3.15(a) (individually, a "Plan" and collectively, the "Plans") have been
operated and administered in all material respects in accordance with, as
applicable, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of
the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended,
the Age Discrimination in Employment Act of 1967, as amended, and the related
rules and regulations adopted by those federal agencies responsible for the
administration of such laws. Except as disclosed on Exhibit 3.15(a), no act or
failure to act by SHC has resulted in a "prohibited transaction" (as defined in
ERISA) with respect to the Plans that is not subject to a statutory or
regulatory exception. No "reportable event" (as defined in ERISA) has occurred
with respect to any of the Plans which is subject to Title IV of ERISA. SHC has
not previously made, is not currently making, and is not obligated in any way to
make, any contributions to any multi-employer plan within the meaning of the
Multi-Employer Pension Plan Amendments Act of 1980.
(b) Except as set forth on Exhibit 3.15(b), SHC is not a party to any oral
or written (i) union, guild or collective bargaining agreement which agreement
covers employees in the United States (nor is it aware of any union organizing
activity currently being conducted in respect to any of its employees), (ii)
agreement with any executive officer or other key employee the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction of the nature contemplated by this Plan of Merger
and which provides for the payment of in excess of $100,000, or (iii) agreement
or plan, including any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan, any of the benefits of which will
be increased, or the vesting, the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Plan of Merger or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Plan of Merger.
<PAGE>
3.16 Compliance with Laws in General. Except as set forth on Exhibit 3.16
or disclosed in the SHC Documents, SHC has not received any notices of material
violations of any federal, state and local laws, regulations and ordinances
relating to its business and operations, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act, the Medicare or applicable Medicaid
statutes and regulations and any Environmental Laws, and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by SHC which, if it were determined that a violation had occurred,
would have a material adverse effect on SHC.
3.17 Regulatory Approvals. SHC and each SHC Subsidiary and SHC Partnership,
as applicable, holds all licenses, certificates of need and other regulatory
approvals required or necessary to be applied for or obtained in connection with
its business as presently conducted or as proposed to be conducted, except where
the failure to obtain such license, certificate of need or regulatory approval
would not have a material adverse effect on SHC. All such licenses, certificates
of need and other regulatory approvals relating to the business, operations and
facilities of SHC and each Subsidiary and SHC Partnership are in full force and
effect, except where any failure of such license, certificate of need or
regulatory approval to be in full force and effect would not have a material
adverse effect on SHC. Except as disclosed in the SHC Documents, any and all
past litigation concerning such licenses, certificates of need and regulatory
approvals, and all claims and causes of action raised therein, has been finally
adjudicated. No such license, certificate of need or regulatory approval has
been revoked, conditioned (except as may be customary) or restricted, and,
except as disclosed in the SHC Documents, no action (equitable, legal or
administrative), arbitration or other process is pending, or to the best
knowledge of SHC, threatened, which in any way challenges the validity of, or
seeks to revoke, condition or restrict any such license, certificate of need, or
regulatory approval. Subject to compliance with applicable securities laws and
the Hart Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR
Act"), the consummation of the Merger will not violate any law or restriction to
which SHC is subject which, if violated, would have a material adverse effect on
SHC.
3.18 Retirement or Re-Acquisition of HEALTHSOUTH Common Stock. SHC is not a
party to any agreement the effect of which would be to require HEALTHSOUTH
directly or indirectly to retire or re-acquire all or part of the shares of
HEALTHSOUTH Common Stock issued pursuant to Section 2.1 hereof.
3.19 Disposition of Assets of Surviving Corporation. Except as provided in
Exhibit 3.11 with the consent of HEALTHSOUTH, SHC is not a party to any plan to
dispose of a significant part of the assets of the Surviving Corporation within
two years after the Closing Date, other than dispositions in the ordinary course
of business of the Surviving Corporation and dispositions intended to eliminate
duplicate facilities or excess capacity.
3.20 Vote Required. The affirmative vote of the holders of a majority of
each class of the outstanding Preferred Stock entitled to vote thereon and a
majority of the outstanding SHC Shares entitled to vote thereon is the only vote
of the holders of any class or series of SHC capital stock necessary to approve
this Plan of Merger, the Merger and the transactions contemplated hereby.
3.21 Opinion of Financial Advisor. SHC has received the oral opinion of
Alex. Brown to the effect that, as of the date hereof, the Merger Consideration
is fair to the holders of SHC Shares from a financial point of view, a written
copy of which opinion will be delivered by SHC to HEALTHSOUTH prior to the date
on which the definitive proxy materials for the Proxy Statement (as defined in
Section 7.4(a)) are filed with the Securities and Exchange Commission.
3.22 No Untrue Representations. No representation or warranty by SHC in
this Plan of Merger, and no Exhibit or certificate issued by SHC and furnished
or to be furnished to HEALTHSOUTH pursuant hereto, or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact in response to the disclosure requested, or omits or will
omit to state a material fact necessary to make the statements or facts
contained therein in response to the disclosure requested not misleading in
light of all of the circumstances then prevailing.
<PAGE>
Section 4. Representations and Warranties of the Subsidiary and HEALTHSOUTH.
The Subsidiary and HEALTHSOUTH, jointly and severally, hereby represent and
warrant to SHC as follows:
4.1 Organization, Existence and Capital Stock. The Subsidiary is a
corporation duly organized and validly existing and is in good standing under
the laws of the State of Delaware. The Subsidiary's authorized capital consists
of 1,000 shares of Common Stock, par value $.01 per share, all of which shares
are issued and registered in the name of HEALTHSOUTH. The Subsidiary has not,
within the two years immediately preceding the date of this Plan of Merger,
owned, directly or indirectly, any shares of SHC Common Stock.
4.2 Power and Authority. The Subsidiary has corporate power to execute,
deliver and perform the Plan of Merger and all agreements and other documents
executed and delivered, or to be executed and delivered, by it pursuant to the
Plan of Merger, and, subject to the satisfaction of the conditions precedent set
forth herein subject to stockholder approval as required by Delaware law, has
taken all actions required by law, its Certificate of Incorporation, its Bylaws
or otherwise, to authorize the execution and delivery of the Plan of Merger and
such related documents. The execution and delivery of the Plan of Merger does
not and, subject to the receipt of required stockholder and regulatory approvals
and any other required third-party consents or approvals, the consummation of
the Merger contemplated hereby will not, violate any provisions of the
Certificate of Incorporation or Bylaws of the Subsidiary, or any agreement,
instrument, order, judgment or decree to which the Subsidiary is a party or by
which it is bound, violate any restrictions of any kind to which the Subsidiary
is subject, or result in the creation of any lien, charge or encumbrance upon
any of the property or assets of the Subsidiary.
4.3 Commissions and Fees. Except for fees owed to Smith Barney Inc., there
are no claims for brokerage commissions, investment bankers' fees or finder's
fees in connection with the transaction contemplated by the Plan of Merger
resulting from any action taken by the Subsidiary or any of its officers,
Directors or agents.
4.4 No Subsidiaries. The Subsidiary does not own stock in, and does not
control directly or indirectly, any other corporation, association or business
organization. The Subsidiary is not a party to any joint venture or partnership.
4.5 Legal Proceedings. There are no actions, suits or proceedings pending
or threatened against the Subsidiary, at law or in equity, relating to or
affecting the Subsidiary, including the Merger. The Subsidiary does not know or
have any reasonable grounds to know of any justification for any such action,
suit or proceeding.
4.6 No Contracts or Liabilities. Other than the obligations created under
the Plan of Merger, the Subsidiary is not obligated under any contracts, claims,
leases, liabilities (contingent or otherwise), loans or otherwise.
Section 5. Representations and Warranties of HEALTHSOUTH.
HEALTHSOUTH hereby represents and warrants to SHC as follows:
5.1 Organization, Existence and Good Standing. HEALTHSOUTH is a corporation
duly organized and validly existing and is in good standing under the laws of
the State of Delaware. HEALTHSOUTH has all necessary corporate power to own its
properties and assets and to carry on its business as presently conducted.
HEALTHSOUTH is duly qualified to do business and is in good standing in all
jurisdictions in which the character of the property owned, leased or operated
or the nature of the business transacted by it makes qualification necessary.
HEALTHSOUTH is not, and has not been within the two years immediately preceding
the date of this Plan of Merger, a subsidiary or division of another
corporation, nor has HEALTHSOUTH within such time owned, directly or indirectly,
any shares of SHC Common Stock.
5.2 Power and Authority. HEALTHSOUTH has corporate power to execute,
deliver and perform the Plan of Merger and all agreements and other documents
executed and delivered, or to be executed and delivered, by it pursuant to the
Plan of Merger, and, subject to the satisfaction of the conditions recedent set
<PAGE>
forth herein has taken all actions required by law, its Certificate of
Incorporation, its Bylaws or otherwise, to authorize the execution and delivery
of the Plan of Merger and such related documents. The execution and delivery of
the Plan of Merger does not and, subject to the receipt of required stockholder
and regulatory approvals and any other required third-party consents or
approvals, the consummation of the Merger contemplated hereby will not, violate
any provisions of the Certificate of Incorporation or Bylaws of HEALTHSOUTH, or
any provision of, or result in the acceleration of any obligation under, any
mortgage, lien, lease, agreement, instrument, order, arbitration award, judgment
or decree to which HEALTHSOUTH is a party or by which it is bound, or violate
any restrictions of any kind to which HEALTHSOUTH is subject. The execution and
delivery of this Agreement has been approved by the Board of Directors of
HEALTHSOUTH.
5.3 HEALTHSOUTH Common Stock. On the Closing Date, HEALTHSOUTH will have a
sufficient number of authorized but unissued and/or treasury shares of its
Common Stock available for issuance to the holders of SHC Shares in accordance
with the provisions of the Plan of Merger. The HEALTHSOUTH Common Stock to be
issued pursuant to the Plan of Merger will, when so delivered, be (i) duly and
validly issued, fully paid and nonassessable, (ii) issued pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
and (iii) authorized for listing on the New York Stock Exchange, Inc. (the
"Exchange") upon official notice of issuance.
5.4 Capitalization. HEALTHSOUTH has an authorized capitalization of
1,500,000 shares of Preferred Stock, par value $.10 per share, of which no
shares are issued and outstanding, and no shares are held in treasury, and
100,000,000 shares of Common Stock, par value $.01 per share, of which
35,533,661 shares are issued and outstanding, and 91,000 shares are held in
treasury. All of the issued and outstanding shares of HEALTHSOUTH Common Stock
have been duly and validly issued and are fully paid and non-assessable. Except
as disclosed in the HEALTHSOUTH Documents (as hereinafter defined), and except
as described on Exhibit 5.4, there are no options, warrants or similar rights
granted by HEALTHSOUTH or any other agreements to which HEALTHSOUTH is a party
providing for the issuance or sale by it of any additional securities. There is
no liability for dividends declared or accumulated but unpaid with respect to
any shares of HEALTHSOUTH Common Stock. HEALTHSOUTH has not made any
distributions to any holder of HEALTHSOUTH Common Stock or participated in or
effected any issuance, exchange or retirement of HEALTHSOUTH Common Stock, or
otherwise changed the equity interests of holders of HEALTHSOUTH Common Stock,
in contemplation of effecting the Merger within the two years immediately
preceding the date of this Plan of Merger. Any shares of HEALTHSOUTH Common
Stock that HEALTHSOUTH has re-acquired during the two years immediately
preceding the date of this Plan of Merger have been so re-acquired only for
purposes other than Business Combinations.
5.5 Subsidiary Common Stock. HEALTHSOUTH owns, beneficially and of record,
all of the issued and outstanding shares of Subsidiary Common Stock, which are
validly issued and outstanding, fully paid and nonassessable, free and clear of
all liens and encumbrances. HEALTHSOUTH has the corporate power to endorse and
surrender such Subsidiary Shares for cancellation pursuant to the Plan of
Merger. HEALTHSOUTH has taken all such actions as may be required in its
capacity as the sole stockholder of the Subsidiary to approve the Merger.
5.6 HEALTHSOUTH Documents. HEALTHSOUTH has heretofore furnished SHC with
the following documents:
(i) its Annual Report on Form 10-K for the Fiscal Year Ended December
31, 1993;
(ii) its 1993 Annual Report to Stockholders;
(iii) the Proxy Statement utilized in soliciting proxies in connection
with the 1994 Annual Meeting of Stockholders of HEALTHSOUTH;
(iv) its Quarterly Reports on Form 10-Q for the fiscal quarters ended March
31, June 30 and September 30, 1994;
(v) the Registration Statement on Form S-3 (Registration No. 33-52111)
relating to a recent public offering of debt securities of HEALTHSOUTH,
together with Amendments No. 1, No. 2 and No. 3 thereto; and
<PAGE>
(vi) the Proxy Statement -- Prospectus relating to its recent merger with
ReLife, Inc.
(documents (i)- (vi) above being collectively referred to herein as the
"HEALTHSOUTH Documents"). As of their respective dates, the HEALTHSOUTH
Documents did not contain any untrue statements of material facts or omit to
state material facts required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the descriptions of the business,
operations and financial condition of HEALTHSOUTH contained in the HEALTHSOUTH
Documents complied in all material respects with the applicable requirements of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended, and the regulations promulgated under such statutes. The financial
statements contained in the HEALTHSOUTH Documents, together with the notes
thereto, have been prepared in accordance with generally accepted accounting
principles consistently followed throughout the periods indicated, reflect all
known liabilities of HEALTHSOUTH, including all known contingent liabilities as
of the end of each period reflected therein, and present fairly the financial
condition of HEALTHSOUTH at said dates and the consolidated results of
operations and cash flows of HEALTHSOUTH for the periods then ended.
5.7 Investment Intent. HEALTHSOUTH is acquiring the SHC Shares hereunder
for its own account and not with a view to the distribution or sale thereof, and
HEALTHSOUTH has no understanding, agreement or arrangement to sell, distribute,
partition or otherwise transfer or assign all or any part of the SHC Shares to
any other person, firm or corporation.
5.8 Commissions and Fees. Except for fees owed to Smith Barney Inc., there
are no claims for brokerage commissions, investment bankers' fees or finder's
fees in connection with the transactions contemplated by the Plan of Merger
resulting from any action taken by HEALTHSOUTH or any of its officers, Directors
or agents.
5.9 Legal Proceedings. Except as disclosed in the HEALTHSOUTH Documents,
there is no material litigation, governmental investigation or other proceeding
pending or, so far as is known to HEALTHSOUTH, threatened against or relating to
HEALTHSOUTH, its properties or business, or the transaction contemplated by the
Plan of Merger and, so far as is known to HEALTHSOUTH, no basis for any such
action exists.
5.10 No Violations. Subject to compliance with applicable securities laws
and the HSR Act, the consummation of the Merger will not violate any law or
restriction to which HEALTHSOUTH is subject.
5.11 No Material Changes. Since September 30, 1994, except as set forth on
Exhibit 5.11, there has not been (i) any material adverse change in the
financial condition, business, properties, or assets of HEALTHSOUTH and its
subsidiaries; (ii) any material loss or damage to any of the properties or
assets of HEALTHSOUTH and its subsidiaries (whether or not covered by insurance)
which affects or impairs the ability of HEALTHSOUTH and its subsidiaries to
conduct their businesses or any labor trouble or any other event or condition of
any character which has materially and adversely affected HEALTHSOUTH's business
or the business of any of its subsidiaries; (iii) any mortgage or pledge of any
of the properties or assets of HEALTHSOUTH or any of its subsidiaries, or any
indebtedness incurred by HEALTHSOUTH or any of its subsidiaries maturing more
than one year from the date the indebtedness was incurred; (iv) any purchase,
redemption, or other acquisition by HEALTHSOUTH of any shares of its Common
Stock; (v) any payment or declaration of a dividend or any other distribution or
payment in respect of HEALTHSOUTH Common Stock; (vi) any issuance, sale, or
other disposition of any shares, options or warrants of HEALTHSOUTH Common Stock
or of any shares of capital stock of any subsidiary of HEALTHSOUTH or any
evidence of indebtedness or securities of HEALTHSOUTH or any of HEALTHSOUTH's
subsidiaries, except upon exercise of previously outstanding stock options or in
the ordinary course of HEALTHSOUTH's business; or (vii) any notice received by
HEALTHSOUTH or any of its subsidiaries from any state or federal taxing
authorities notifying that HEALTHSOUTH or any of its subsidiaries is subject to
any material action or proceeding for assessment or collection of taxes asserted
against HEALTHSOUTH or any of its subsidiaries other than actions or proceedings
or claims for assessment or collection of taxes which are being contested in
good faith by appropriate proceedings.
<PAGE>
5.12 Retirement or Re-Acquisition of HEALTHSOUTH Common Stock. HEALTHSOUTH
has not agreed directly or indirectly to retire or re-acquire all or part of the
shares of HEALTHSOUTH Common Stock issued pursuant to Section 2.1 hereof.
5.13 Disposition of Assets of Surviving Corporation. HEALTHSOUTH does not
intend or plan to dispose of, or to cause the Surviving Corporation to dispose
of, a significant part of the assets of the Surviving Corporation within two
years after the Effective Time, other than dispositions in the ordinary course
of business of the Surviving Corporation and dispositions intended to eliminate
duplicate facilities or excess capacity.
5.14 Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of HEALTHSOUTH Common Stock entitled to vote thereon is
the only vote of the holders in each class or series of HEALTHSOUTH capital
stock necessary to approve this Plan of Merger, the Merger and the transactions
contemplated by this Plan of Merger.
5.15 Opinion of Financial Advisor. HEALTHSOUTH has received the oral
opinion of Smith Barney Inc. to the effect that, as of the date hereof, the
Merger Consideration is fair to HEALTHSOUTH from a financial point of view, a
written copy of which opinion will be delivered by HEALTHSOUTH to SHC prior to
the date on which the definitive proxy materials for the Proxy Statement (as
defined in Section 7.4(a)) are filed with the Securities and Exchange
Commission.
5.16 Tax Returns. HEALTHSOUTH has filed all tax returns required to be
filed by it or requests for extensions to file such returns or reports have been
timely filed and granted and have not expired, except to the extent that such
failures to file, taken together, do not have a material adverse effect on
HEALTHSOUTH. HEALTHSOUTH has made all payments shown as due on such returns.
HEALTHSOUTH has not been notified that any tax returns of HEALTHSOUTH are
currently under audit by the Internal Revenue Service or any state or local tax
agency. No agreements have been made by HEALTHSOUTH for the extension of time or
the waiver of the statute of limitations for the assessment or payment of any
federal, state or local taxes.
5.17 Employee Benefit Plans; Employment Matters. (a) Except as disclosed in
the HEALTHSOUTH Documents, HEALTHSOUTH has neither established nor maintains nor
is obligated to make contributions to or under or otherwise participate in (i)
any bonus or other type of incentive compensation plan, program, agreement,
policy, commitment, contract or arrangement (whether or not set forth in a
written document), (ii) any pension, profit-sharing, retirement or other plan,
program or arrangement, or (iii) any other employee benefit plan, fund or
program, including, but not limited to, those described in Section 3(3) of
ERISA. All such plans have been operated and administered in all material
respects in accordance with, as applicable, ERISA, the Internal Revenue Code of
1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the
Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of
1967, as amended, and the related rules and regulations adopted by those federal
agencies responsible for the administration of such laws. No act or failure to
act by HEALTHSOUTH has resulted in a "prohibited transaction" (as defined in
ERISA) with respect to the Plans that is not subject to a statutory or
regulatory exception. No "reportable event" (as defined in ERISA) has occurred
with respect to any of the Plans which is subject to Title IV of ERISA. Except
as disclosed in the HEALTHSOUTH Documents, HEALTHSOUTH has not previously made,
is not currently making, and is not obligated in any way to make, any
contributions to any multi-employer plan within the meaning of the
Multi-Employer Pension Plan Amendments Act of 1980.
(b) Except as disclosed in the HEALTHSOUTH Documents, HEALTHSOUTH is not a
party to any oral or written (i) union, guild or collective bargaining agreement
which agreement covers employees in the United States (nor is it aware of any
union organizing activity currently being conducted in respect to any of its
employees), (ii) agreement with any executive officer or other key employee the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction of the nature contemplated by this Plan of
Merger and which provides for the payment of in excess of $100,000, or (iii)
agreement or plan, including any stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan, any of the benefits of which
will be increased, or the esting the benefits of which will be accelerated, by
<PAGE>
the occurrence of any of the transactions contemplated by this Plan of Merger or
the value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Plan of Merger.
5.18 Compliance with Laws in General. Except as disclosed in the
HEALTHSOUTH Documents, HEALTHSOUTH has not received any notices of material
violations of any federal, state and local laws, regulations and ordinances
relating to its business and operations, including, without limitation, the
Federal Environmental Protection Act, the Occupational Safety and Health Act,
the Americans with Disabilities Act, the Medicare or applicable Medicaid
statutes and regulations and any Environmental Laws, and no notice of any
pending inspection or violation of any such law, regulation or ordinance has
been received by HEALTHSOUTH with respect to any alleged violation which, if it
were determined that a violation occurred, would have a material adverse effect
on HEALTHSOUTH.
5.19 Regulatory Approvals. HEALTHSOUTH holds all licenses, certificates of
need and other regulatory approvals required or necessary to be applied for or
obtained in connection with its business as presently conducted or as proposed
to be conducted, except where the failure to obtain such license, certificate of
need or regulatory approval would not have a material adverse effect on
HEALTHSOUTH. All such licenses, certificates of need and other regulatory
approvals relating to the business, operations and facilities of HEALTHSOUTH are
in full force and effect. Except as disclosed in the HEALTHSOUTH Documents, any
and all past litigation concerning such licenses, certificates of need and
regulatory approvals, and all claims and causes of action raised therein, has
been finally adjudicated. No such license, certificate of need or regulatory
approval has been revoked, conditioned (except as may be customary) or
restricted, and, except as disclosed in the HEALTHSOUTH Documents, no action
(equitable, legal or administrative), arbitration or other process is pending,
or to the best knowledge of HEALTHSOUTH, threatened, which in any way challenges
the validity of, or seeks to revoke, condition or restrict any such license,
certificate of need, or regulatory approval. Subject to compliance with
applicable securities laws and the HSR Act, the consummation of the Merger will
not violate any law or restriction to which HEALTHSOUTH is subject.
5.20 No Untrue Representation. No representation or warranty by HEALTHSOUTH
in this Plan of Merger, and no Exhibit or Certificate issued by HEALTHSOUTH and
furnished or to be furnished to SHC pursuant hereto, or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact in response to the disclosure requested, or omits or will
omit to state a material fact necessary to make the statement or facts contained
therein in response to the disclosure requested not misleading in light of all
of the circumstances then prevailing.
Section 6. Access to Information and Documents.
6.1 Access to Information. Between the date hereof and the Closing Date,
each of SHC and HEALTHSOUTH will give to the other party and its counsel,
accountants and other representatives full access to all the properties,
documents, contracts, personnel files and other records of such party and shall
furnish the other party with copies of such documents and with such information
with respect to the affairs of such party as the other party may from time to
time reasonably request. Each party will disclose and make available to the
other party and its representatives all books, contracts, accounts, personnel
records, letters of intent, papers, records, communications with regulatory
authorities and other documents relating to the business and operations of such
party. In addition, SHC shall make available to HEALTHSOUTH all such banking,
investment and financial information as shall be necessary to allow for the
efficient integration of SHC's banking, investment and financial arrangements
with those of HEALTHSOUTH at the Effective Time.
6.2 Return of Records. If the transactions contemplated hereby are not
consummated and this Plan of Merger terminates, each party agrees to promptly
return all documents, contracts, records or properties of the other party and
all copies thereof furnished pursuant to this Section 6 or otherwise. All
information disclosed by any party or any affiliate of such party shall be
deemed to be confidential information, unless and until such information becomes
public otherwise than through the act or omission of the other party. Each party
agrees that it will not cause any confidential information to be isclosed to
<PAGE>
unauthorized persons and that it will not, without the prior written consent of
the affected person, disclose or make use of such confidential information
except in connection with the transactions contemplated by this Plan of Merger
or as otherwise required by applicable law.
6.3 Effect of Access. (a) Nothing contained in this Section 6 shall be
deemed to create any duty or responsibility on the part of either party to
investigate or evaluate the value, validity or enforceability of any contract,
lease or other asset included in the assets of the other party.
(b) With respect to matters as to which any party has made express
representations or warranties herein, the parties shall be entitled to rely upon
such express representations and warranties irrespective of any investigations
made by such parties, except to the extent that such investigations result in
actual knowledge of the inaccuracy or falsehood of particular representations
and warranties.
Section 7. Covenants.
7.1 Preservation of Business. SHC will use its best efforts to preserve the
business organization of SHC intact, to keep available to HEALTHSOUTH and the
Surviving Corporation the services of the present employees of SHC, and to
preserve for HEALTHSOUTH and the Surviving Corporation the goodwill of the
suppliers, customers and others having business relations with SHC.
7.2 Material Transactions. Prior to the Closing Date, SHC will not (other
than as required pursuant to the terms of the Plan of Merger and the related
documents), without first obtaining the written consent of HEALTHSOUTH:
(a) Encumber any asset or enter into any transaction or make any contract
or commitment relating to the properties, assets and business of SHC, other than
in the ordinary course of business or as otherwise disclosed herein.
(b) Enter into any employment contract which is not terminable upon notice
of 30 days or less, at will, and without penalty to SHC except as provided
herein.
(c) Except in connection with the ongoing construction or development of
new surgery centers as disclosed to HEALTHSOUTH, enter into any contract or
agreement (i) which cannot be performed within three months or less, or (ii)
which involves the expenditure of over $100,000.
(d) Issue or sell, or agree to issue or sell, any shares of capital stock
or other securities of SHC, except upon exercise of currently outstanding stock
options or warrants.
(e) Except for contributions to the Outpatient/Midwest Retirement Plan,
make any payment or distribution to the trustee under any bonus, pension,
profit-sharing or retirement plan or incur any obligation to make any such
payment or contribution which is not in accordance with SHC's usual past
practice, or make any payment or contributions or incur any obligation pursuant
to or in respect of any other plan or contract or arrangement providing for
bonuses, executive incentive compensation, pensions, deferred compensation,
retirement payments, profit-sharing or the like, establish or enter into any
such plan, contract or arrangement, or terminate any Plan.
(f) Extend credit to anyone, except in the ordinary course of business
consistent with prior practices.
(g) Guarantee the obligation of any person, firm or corporation, except in
the ordinary course of business consistent with prior practices.
(h) Amend its Certificate of Incorporation or Bylaws.
(i) Take any action of a character described in Section 3.11(a) to 3.11(h),
inclusive.
7.3 Meetings of Stockholders. (a) Each of HEALTHSOUTH and SHC will take all
steps necessary in accordance with their respective Certificates of
Incorporation and Bylaws to call, give notice of, convene and hold meetings of
their respective stockholders as soon as practicable after the effectiveness of
the Registration Statement (as defined in Section 7.4 hereof), for the purpose
of approving this Plan of Merger and for such other purposes as may be
necessary. Unless this Plan of Merger shall have been alidly terminated as
<PAGE>
provided herein, the Boards of Directors of HEALTHSOUTH and SHC (subject, in the
case of SHC, to the provisions of Section 8.1(d) hereof) will (i) recommend to
their respective stockholders the approval of this Plan of Merger, the
transactions contemplated hereby and any other matters to be submitted to the
stockholders in connection therewith, to the extent that such approval is
required by applicable law in order to consummate the Merger, and (ii) use their
respective reasonable, good faith efforts to obtain the approval by their
respective stockholders of this Plan of Merger and the transactions contemplated
hereby.
(b) Nothing contained herein shall affect the right of HEALTHSOUTH, the
Subsidiary and SHC to take action by written consent in lieu of meeting to the
extent permitted by applicable law and their respective Certificates of
Incorporation and Bylaws.
7.4 Registration Statement. (a) HEALTHSOUTH shall prepare and file with the
Securities and Exchange Commission and any other applicable regulatory bodies,
as soon as reasonably practicable, a Registration Statement on Form S-4 with
respect to the shares of HEALTHSOUTH Common Stock to be issued in the Merger
(the "Registration Statement"), and will otherwise proceed promptly to satisfy
the requirements of the Securities Act of 1933, including Rule 145 thereunder.
Such Registration Statement shall contain a joint proxy statement of HEALTHSOUTH
and SHC containing the information required by the Securities Exchange Act of
1934 (the "Proxy Statement"). HEALTHSOUTH shall take all reasonable steps to
cause the Registration Statement to be declared effective and to maintain such
effectiveness until all of the shares covered thereby have been distributed.
HEALTHSOUTH shall promptly amend or supplement the Registration Statement to the
extent necessary in order to make the statements therein not misleading or to
correct any misstatements which have become false or misleading. HEALTHSOUTH
shall use its reasonable, good faith efforts to have the Proxy Statement
approved by the SEC under the provisions of the Securities Exchange Act of 1934.
(b) Prior to the Closing Date, HEALTHSOUTH shall use its reasonable, good
faith efforts to cause the shares of HEALTHSOUTH Common Stock to be issued
pursuant to the Merger to be registered or qualified under all applicable
securities or Blue Sky laws of each of the states and territories of the United
States, and to take any other actions which may be necessary to enable the
Common Stock to be issued pursuant to the Merger to be distributed in each such
jurisdiction.
(c) Prior to the Closing Date, HEALTHSOUTH shall file an additional listing
application (the "Listing Application") with the Exchange relating to the shares
of HEALTHSOUTH Common Stock to be issued in connection with the Merger, and
shall use its reasonable, good faith efforts to cause such shares of HEALTHSOUTH
Common Stock to be approved for listing on the Exchange, upon official notice of
issuance, prior to the Closing Date.
(d) SHC shall furnish all information to HEALTHSOUTH with respect to SHC
and the SHC Subsidiaries and SHC Partnerships as HEALTHSOUTH may reasonably
request for inclusion in the Registration Statement, the Proxy Statement and the
Listing Application, and shall otherwise cooperate with HEALTHSOUTH in the
preparation and filing of such documents.
7.5 Exemption from State Takeover Laws. SHC shall take all reasonable steps
necessary to exempt SHC and the Merger from the requirements of any state
takeover statute or other similar state law which would prevent or impede the
consummation of the transactions contemplated hereby, by action of SHC's Board
of Directors or otherwise.
7.6 HSR Act Compliance. HEALTHSOUTH and SHC shall promptly make their
respective filings, and shall thereafter use their reasonable, good faith
efforts to promptly make any required submissions, under the HSR Act with
respect to the Merger and the transactions contemplated hereby. HEALTHSOUTH and
SHC will use their respective reasonable, good faith efforts to obtain all other
permits, authorizations, consents and approvals from third parties and
governmental authorities necessary to consummate the Merger and the transactions
contemplated hereby.
7.7 Public Disclosures. HEALTHSOUTH and SHC will consult with each other
before issuing any press release or otherwise making any public statement with
respect to the transactions contemplated by this Plan of Merger, and shall not
issue any such press release or make any such public tatement prior to such
<PAGE>
consultation except as may be required by applicable law or requirements of the
Exchange. The parties shall issue a joint press release, mutually acceptable to
HEALTHSOUTH and SHC, promptly upon execution and delivery of this Plan of
Merger.
7.8 Resignation of SHC Directors. On or prior to the Closing Date, SHC
shall deliver to HEALTHSOUTH evidence satisfactory to HEALTHSOUTH of the
resignation of the Directors of SHC, such resignations to be effective on the
Closing Date.
7.9 Notice of Subsequent Events. Each party hereto shall notify the other
parties of any changes, additions or events which would cause any material
change in or material addition to any Exhibit delivered by the notifying party
under this Plan of Merger, promptly after the occurrence of the same. If the
effect of such change or addition would, individually or in the aggregate with
the effect of changes or additions previously disclosed pursuant to this Section
7.9, constitute a material adverse effect on the notifying party, the
non-notifying party may, within ten days after receipt of such notice, elect to
terminate this Plan of Merger. If the non-notifying party does not give written
notice of such termination within such 10-day period, the non-notifying party
shall be deemed to have consented to such change or addition and shall not be
entitled to terminate this Plan of Merger by reason thereof (except to the
extent that a material adverse change with respect to the notifying party occurs
when the effect of such change or addition is aggregated with the effect of
subsequently-disclosed changes or additions).
7.10 No Solicitations. SHC may, directly or indirectly, furnish information
and access, in response to unsolicited requests therefor, to the same extent
permitted by Section 6.1, to any corporation, partnership, person or other
entity or group, pursuant to appropriate confidentiality agreements, and may
participate in discussions and negotiate with such corporation, partnership,
person or other entity or group concerning any proposal to acquire SHC upon a
merger, purchase of assets, purchase of or tender offer for SHC Shares or
similar transaction (an "Acquisition Transaction"), if the Board of Directors of
SHC determines in its good faith judgment in the exercise of its fiduciary
duties, after consultation with legal counsel and its financial advisors, that
such action is appropriate in furtherance of the best interest of its
stockholders. Except as set forth above, SHC shall not, and will direct each
officer, director, employee, representative and agent of SHC not to, directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with or provide any information to any corporation, partnership,
person or other entity or group (other than HEALTHSOUTH or an affiliate or
associate or agent of HEALTHSOUTH) concerning any merger, sale of assets, sale
of or tender offer for SHC Shares or similar transactions involving SHC. SHC
shall promptly notify HEALTHSOUTH if it shall, on or after the date hereof, have
entered into a confidentiality agreement with any third party in response to any
unsolicited request for information and access in connection with a possible
Acquisition Transaction involving such party, such notification to include the
identity of such third party and the proposed terms of such possible Acquisition
Transaction.
7.11 Other Actions. Subject to the provisions of Section 7.10 hereof, SHC
shall not knowingly or intentionally take any action that would, or reasonably
might be expected to, result in any of its representations and warranties set
forth herein being or becoming untrue in any material respect, or in any of the
conditions to the Merger set forth in this Plan of Merger not being satisfied,
or (unless such action is required by applicable law) which would adversely
affect the ability of SHC or HEALTHSOUTH to obtain any consents or approvals
required for the consummation of the Merger without imposition of a condition or
restriction which would have a material adverse effect on the Surviving
Corporation.
7.12 Accounting Methods. Neither HEALTHSOUTH nor SHC shall change its
methods of accounting in effect at its most recent fiscal year end, except as
required by changes in generally accepted accounting principles as concurred by
such parties' independent accountants.
7.13 Pooling and Tax-Free Reorganization Treatment. Neither HEALTHSOUTH nor
SHC shall intentionally take or cause to be taken any action, whether on or
before the Effective Time, which would disqualify the Merger as a "pooling of
interests" for accounting purposes or as a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended.
7.14 Affiliate and Pooling Agreements. HEALTHSOUTH and SHC will each use
their respective reasonable, good faith efforts to cause each of their
respective Directors and executive officers and each of their respective
"affiliates" (within the meaning of Rule 145 under the Securities Act of 1933,
as amended) to execute and deliver to HEALTHSOUTH as soon as practicable an
agreement in the form attached hereto as Appendix 7.14 relating to the
disposition of the SHC Shares and shares of HEALTHSOUTH Common Stock held by
such person and the shares of HEALTHSOUTH Common Stock issuable pursuant to this
Plan of Merger.
7.15 Cooperation. (a) HEALTHSOUTH and SHC shall together, or pursuant to an
allocation of responsibility agreed to between them, (i) cooperate with one
another in determining whether any filings required to be made or consents
required to be obtained in any jurisdiction prior to the Effective Time in
connection with the consummation of the transactions contemplated hereby and
cooperate in making any such filings promptly and in seeking to obtain timely
any such consents, (ii) use their respective best efforts to cause to be lifted
any injunction prohibiting the Merger, or any part thereof, or the other
transactions contemplated hereby, and (iii) furnish to one another and to one
another's counsel all such information as may be required to effect the
foregoing actions.
(b) Subject to the terms and conditions herein provided, and unless this
Plan of Merger shall have been validly terminated as provided herein, each of
HEALTHSOUTH and SHC shall use all reasonable efforts (i) to take, or cause to be
taken, all actions necessary to comply promptly with all legal requirements
which may be imposed on such party (or any subsidiaries or affiliates of such
party) with respect to the Plan of Merger and to consummate the transactions
contemplated hereby, subject to the votes of its stockholders described above,
and (ii) to obtain (and to cooperate with the other party to obtain) any
consent, authorization, order or approval of, or any exemption by, any
governmental entity and/or any other public or private third party which is
required to be obtained or made by such party or any of its subsidiaries or
affiliates in connection with this Plan of Merger and the transactions
contemplated hereby. Each of HEALTHSOUTH and SHC will promptly cooperate with
and furnish information to the other in connection with any such burden suffered
by, or requirement imposed upon, either of them or any of their subsidiaries or
affiliates in connection with the foregoing.
7.16 SHC Stock Options and Warrants. (a) As soon as reasonably practicable
after the Effective Time of the Merger, HEALTHSOUTH shall deliver to the holders
of SHC stock options and warrants appropriate notices setting forth such
holders' rights pursuant to the stock option plans under which such SHC stock
options were issued and the stock option agreements or warrant agreements
evidencing such options or warrants, which shall continue in full force and
effect on the same terms and conditions (subject to the adjustments required by
Sections 2.1(e) or this Section 7.16 after giving effect to the Merger and the
assumption of such options and warrants by HEALTHSOUTH as set forth herein) as
in effect immediately prior to the Effective Time. HEALTHSOUTH shall comply with
the terms of the stock option plans, the stock option agreements and the warrant
agreements as so adjusted, and shall use its reasonable, good faith efforts to
ensure, to the extent required by, and subject to the provisions of, such plans
or agreements, that the SHC stock options which qualified as incentive stock
options prior to the Effective Time of the Merger shall continue to qualify as
incentive stock options after the Effective Time of the Merger.
(b) HEALTHSOUTH shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of HEALTHSOUTH Common Stock for delivery
upon exercise of the SHC stock options and warrants assumed by HEALTHSOUTH in
accordance with Section 2.1(e). At the Effective Time, HEALTHSOUTH shall file
with the SEC a registration statement on Form S-8 with respect to shares of
HEALTHSOUTH Common Stock subject to such SHC stock options and shall use its
best efforts to maintain the effectiveness of a registration statement or
registration statements covering such options (and maintain the current status
of the prospectus or prospectuses contained therein) for so long as such SHC
stock options remain outstanding. With respect to those individuals who
subsequent to the Merger will be subject to the reporting requirements under
Section 16(a) of the Exchange Act, where applicable, HEALTHSOUTH shall
administer the plans assumed pursuant to Section 2.1(e) hereof in a manner that
complies with Rule 16b-3 promulgated under the Exchange Act to the extent the
applicable plan complied with such rule prior to the Merger.
(c) Except to the extent otherwise agreed to by the parties, all
restrictions or limitations on transfer and vesting with respect to the SHC
stock options awarded under any plan, program, or arrangement of SHC or any of
its subsidiaries, to the extent that such restrictions or limitations shall not
have already lapsed, shall remain in full force and effect with respect to such
options after giving effect to the Merger and the assumption by HEALTHSOUTH as
set forth above.
<PAGE>
7.17 Publication of Combined Results. HEALTHSOUTH agrees that within 15
days after the end of the first calendar month following at least 30 days after
the Closing Date, HEALTHSOUTH shall cause publication of the combined results of
operations of HEALTHSOUTH and SHC. For purposes of this Section 7.17, the term
"publication" shall have the meaning provided in SEC Accounting Series Release
No. 135.
7.18 Employee Welfare. HEALTHSOUTH agrees that following the Closing Date,
employees of SHC shall be entitled to receive the same customary employee
benefits as HEALTHSOUTH provides its employees. In addition, except for those
employees identified in Section 7.19 below, if during the one-year period
following the Closing Date, any employee of SHC listed on Exhibit 7.18 is
terminated, such terminated employee shall receive a lump sum cash severance
payment in the amount of not less than three months' salary or wages.
7.19 Retention Bonus Agreement; Employment Agreement. Between the date of
this Plan of Merger and the Closing Date, HEALTHSOUTH and SHC shall, subject to
confirmation by Ernst & Young that such agreements do not adversely affect
pooling-of-interests accounting treatment, enter into (i) an Agreement with Rock
A. Morphis in the form of Exhibit 7.19.1 attached hereto; and (ii) an Employment
Agreement with H. Michael Finley in the form of Exhibit 7.19.2 attached hereto.
Section 8. Termination, Amendment and Waiver.
8.1 Termination. This Plan of Merger may be terminated at any time prior to
the Effective Time of the Merger, whether before or after approval of matters
presented in connection with the Merger by the holders of SHC Shares and the
holders of HEALTHSOUTH Common Stock:
(a) by mutual written consent of HEALTHSOUTH, the Subsidiary and SHC;
(b) by either HEALTHSOUTH or SHC:
(i) if, upon a vote at a duly held meeting of stockholders or any
adjournment thereof, any required approval of the holders of SHC Shares or the
holders of HEALTHSOUTH Common Stock shall not have been obtained;
(ii) if the Merger shall not have been consummated on or before June 30,
1995, unless the failure to consummate the Merger is the result of a willful and
material breach of this Plan of Merger by the party seeking to terminate this
Plan of Merger; provided, however, that the passage of such period shall be
tolled for any part thereof (but not exceeding 60 days in the aggregate) during
which any party shall be subject to a nonfinal order, decree, ruling or action
restraining, enjoining or otherwise prohibiting the consummation of the Merger
or the calling or holding of a meeting of stockholders;
(iii) if any court of competent jurisdiction or other governmental entity
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and nonappealable;
(iv) in the event of a breach by the other party of any representation,
warranty, covenant or other agreement contained in this Plan of Merger which (A)
would give rise to the failure of a condition set forth in Section 9.2(a) or (b)
or Section 9.3(a) or (b), as applicable, and (B) cannot be or has not been cured
within 30 days after the giving of written notice to the breaching party of such
breach (a "Material Breach") (provided that the terminating party is not then in
Material Breach of any representation, warranty, covenant or other agreement
contained in this Plan of Merger); or
(v) if either HEALTHSOUTH or SHC gives notice of termination pursuant to
Section 7.9;
(c) by either HEALTHSOUTH or SHC in the event that (i) all of the
conditions to the obligation of such party to effect the Merger set forth in
Section 9.1 shall have been satisfied and (ii) any condition to the obligation
of such party to effect the Merger set forth in Section 9.2 (in the case of
HEALTHSOUTH) or Section 9.3 (in the case of SHC) is not capable of being
satisfied prior to the end of the period referred to in Section 8.1(b)(ii);
<PAGE>
(d) By SHC, if SHC's Board of Directors shall have (i) determined, in the
exercise of its fiduciary duties under applicable law, not to recommend the
Merger to the holders of SHC Shares or shall have withdrawn such recommendation
or (ii) approved, recommended or endorsed any Acquisition Transaction (as
defined in Section 7.10) other than this Plan of Merger or (iii) resolved to do
any of the foregoing;
(e) By either HEALTHSOUTH or SHC, if the condition set forth in Section
9.1(g)(i) is not satisfied by March 1, 1995; or
(f) By HEALTHSOUTH, if the holders of more than 10% of the SHC Shares shall
have given proper written demand for appraisal of the value of such SHC Shares
as provided in Section 262 of the DGCL before the taking of a vote on the Merger
at any meeting of the holders of SHC Shares called for that purpose.
8.2 Effect of Termination. In the event of termination of this Plan of
Merger as provided in Section 8.1, this Plan of Merger shall forthwith become
void and have no effect, without any liability or obligation on the part of any
party, other than the provisions of Sections 6.2, 8.2, 8.6 and 8.7, and except
to the extent that such termination results from the willful and material breach
by a party of any of its representations, warranties, covenants or other
agreements set forth in this Plan of Merger.
8.3 Amendment. This Plan of Merger may be amended by the parties at any
time before or after any required approval of matters presented in connection
with the Merger by the holders of SHC Shares or holders of HEALTHSOUTH Common
Stock; provided, however, that after any such approval, there shall be made no
amendment that pursuant to Section 251(d) of the DGCL requires further approval
by such stockholders without the further approval of such stockholders. This
Plan of Merger may not be amended except by an instrument in writing signed on
behalf of each of the parties.
8.4 Extension; Waiver. At any time prior to the Effective Time of the
Merger, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Plan of Merger or in any
document delivered pursuant to this Plan of Merger or (c) subject to the proviso
of Section 8.3, waive compliance with any of the agreements or conditions
contained in this Plan of Merger. Any agreement on the part of a party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this Plan of
Merger to assert any of its rights under this Plan of Merger or otherwise shall
not constitute a waiver of such rights, except as otherwise provided in Section
7.9.
8.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Plan of Merger pursuant to Section 8.1, an amendment of this
Plan of Merger pursuant to Section 8.3, or an extension or waiver pursuant to
Section 8.4 shall, in order to be effective, require in the case of HEALTHSOUTH,
the Subsidiary or SHC, action by its Board of Directors or the duly authorized
designee of the Board of Directors.
8.6 Expenses. All costs and expenses incurred in connection with this Plan
of Merger and the transactions contemplated hereby shall be paid by the party
incurring such expense, except that expenses incurred in connection with
printing and mailing the Proxy Statement and the Registration Statement shall be
shared equally by SHC and HEALTHSOUTH.
8.7 Certain Rights of HEALTHSOUTH. If this Plan of Merger is terminated by
SHC pursuant to Section 8.1(d) and, within six months after the effective date
of such termination, SHC enters into an agreement with another person or entity
(a "Third Party") with respect to an Acquisition Transaction (as defined in
Section 7.10 hereof), SHC shall immediately notify HEALTHSOUTH in writing that
an agreement has been entered into with respect to an Acquisition Transaction.
Each of HEALTHSOUTH and the Third Party shall then have not less than 48 hours
(the exact deadline to be set by SHC) from the time of receipt of written notice
by SHC to submit a final and best offer (a "Final Offer") for a business
combination with SHC, together with a fully-executed definitive agreement,
acceptable to SHC, reflecting the terms of such Final Offer. Not later than 48
hours after receipt of any Final Offer from HEALTHSOUTH and the Third Party (but
in no event sooner than the expiration of the deadline set by SHC unless
<PAGE>
HEALTHSOUTH has expressly declined to submit a Final Offer), SHC shall notify
the party submitting the most favorable Final Offer (as determined by SHC's
Board of Directors after consulting with its legal counsel and financial
advisors) and, subject to the approval of SHC's Board of Directors, SHC shall
enter into a definitive agreement with the party which submitted the most
favorable Final Offer. HEALTHSOUTH agrees that any such determination of the
most favorable Final Offer by SHC's Board of Directors shall be final and
binding, and HEALTHSOUTH agrees not to dispute any such determination in any
forum or jurisdiction; provided, however, that the foregoing covenant not to sue
of HEALTHSOUTH is expressly conditioned upon SHC's obtaining a like covenant not
to sue from the Third Party prior to SHC's determination of the most favorable
Final Offer.
Section 9. Conditions to Closing.
9.1 Mutual Conditions. The respective obligations of each party to effect
the Merger shall be subject to the satisfaction, at or prior to the Closing
Date, of the following conditions (any of which may be waived in writing by
HEALTHSOUTH, the Subsidiary and SHC):
(a) None of HEALTHSOUTH, the Subsidiary or SHC nor any of their respective
subsidiaries shall be subject to any order, decree or injunction by a court of
competent jurisdiction which (i) prevents or materially delays the consummation
of the Merger or (ii) would impose any material limitation on the ability of
HEALTHSOUTH effectively to exercise full rights of ownership of the Common Stock
of the Surviving Corporation or any material portion of the assets or business
of SHC, the SHC Subsidiaries and the SHC Partnerships, taken as a whole.
(b) No statute, rule or regulation shall have been enacted by the
government (or any governmental agency) of the United States or any state,
municipality or other political subdivision thereof that makes the consummation
of the Merger and any other transaction contemplated hereby illegal.
(c) Any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(d) The Registration Statement shall have been declared effective and no
stop order with respect to the Registration Statement shall be in effect.
(e) The holders of HEALTHSOUTH Common Stock and the holders of SHC Shares
shall have approved the adoption of this Plan of Merger and any other matters
submitted to them in accordance with the provisions of Section 7.3 hereof.
(f) The shares of HEALTHSOUTH Common Stock to be issued in connection with
the Merger shall have been approved for listing on the Exchange and shall have
been issued pursuant to an effective registration statement (which is subject to
no stop order) or in transactions qualified or exempt from registration under
applicable securities or Blue Sky laws of such states and territories of the
United States as may be required.
(g) The Merger shall qualify for "pooling of interests" accounting
treatment, and HEALTHSOUTH and SHC shall each have received letters to that
effect from Ernst & Young, independent accountants for HEALTHSOUTH and SHC,
dated (i) not later than March 1, 1995, (ii) the date of the mailing of the
Proxy Statement and (iii) the Closing Date.
9.2 Conditions to Obligations of HEALTHSOUTH and the Subsidiary. The
obligations of HEALTHSOUTH and the Subsidiary to consummate the Merger and the
other transactions contemplated hereby shall be subject to the satisfaction, at
or prior to the Closing Date, of the following conditions (any of which may be
waived by HEALTHSOUTH and the Subsidiary):
(a) Each of the agreements of SHC to be performed at or prior to the
Closing Date pursuant to the terms hereof shall have been duly performed in all
material respects, and SHC shall have performed, in all material respects, all
of the acts required to be performed by it at or prior to the Closing Date by
the terms hereof.
(b) The representations and warranties of SHC set forth in Section 3.11(a)
shall be true and correct as of the date of this Plan of Merger and as of the
Closing Date. The representations and warranties of SHC set forth in Sections
3.1, 3.2, 3.6, 3.9, 3.17, 3.18 and 3.19 shall be true and correct in all
material respects as of the date of this Plan of Merger and as of the Closing
Date as though made on and as of the Closing Date, except to the extent that
such representations and warranties expressly relate to an earlier date (in
which case such representations and warranties shall be true and correct in all
material respects on and as of such earlier date). The representations and
warranties of SHC set forth in this Plan of Merger (other than those set forth
in Section 3.11(a), 3.2, 3.6, 3.9, 3.17, 3.18 and 3.19), shall be true and
correct as of the date of this Plan of Merger and as of the Closing Date as
though made on and as of the Closing Date, (i) except to the extent that such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties shall be true and correct on and as of
such earlier date) and (ii) except for breaches of representations and
warranties as to matters that do not have a material adverse effect on SHC.
HEALTHSOUTH and the Subsidiary shall have been furnished with a certificate,
executed by a duly authorized officer of SHC, dated the Closing Date, certifying
in such detail as HEALTHSOUTH and the Subsidiary may reasonably request as to
the fulfillment of the foregoing conditions.
(c) HEALTHSOUTH and the Subsidiary shall have obtained, or obtained the
transfer of, any licenses, certificates of need and other regulatory approvals
necessary to allow the Surviving Corporation to operate the SHC facilities,
unless the failure to obtain such transfer or approval would not have a material
adverse effect on SHC.
(d) HEALTHSOUTH shall have received an opinion from Haskell Slaughter Young
& Johnston, Professional Association, to the effect that the merger will
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended, which opinion may be based upon reasonable
representations of fact provided by officers of HEALTHSOUTH, SHC and the
Subsidiary.
9.3 Conditions to Obligations of SHC. The obligations of SHC to consummate
the Merger and the other transactions contemplated hereby shall be subject to
the satisfaction, at or prior to the Closing Date, of the following conditions
(any of which may be waived by SHC):
(a) Each of the agreements of HEALTHSOUTH and the Subsidiary to be
performed at or prior to the Closing Date pursuant to the terms hereof shall
have been duly performed, in all material respects, and HEALTHSOUTH and the
Subsidiary shall have performed, in all material respects, all of the acts
required to be performed by them at or prior to the Closing Date by the terms
hereof.
(b) The representations and warranties of HEALTHSOUTH set forth in Section
5.11(i) shall be true and correct as of the date of this Plan of Merger and as
of the Closing Date. The representations and warranties of HEALTHSOUTH set forth
in Sections 5.1, 5.2, 5.3, 5.12 and 5.13 shall be true and correct in all
material respects, as of the date of this Plan of Merger and as of the Closing
Date as though made on and as of the Closing Date, except to the extent that
such representations and warranties expressly relate to an earlier date (in
which case such representations and warranties shall be true and correct in all
material respects on and as of such earlier date). The representations and
warranties of HEALTHSOUTH set forth in this Plan of Merger (other than those set
forth in Sections 5.1, 5.2, 5.3, 5.11(i), 5.13 and 5.14) shall be true and
correct as of the date of this Plan of Merger and as of the Closing Date as
though made on and as of the Closing Date (i) except to the extent that such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties shall be true and correct on and as of
such earlier date), and (ii) except for breaches of representations and
warranties as to matters that do not have a material adverse effect on
HEALTHSOUTH. SHC shall have been furnished with a certificate, executed by duly
authorized officers of HEALTHSOUTH and the Subsidiary, dated the Closing Date,
certifying in such detail as SHC may reasonably request as to the fulfillment of
the foregoing conditions.
(c) SHC shall have received an opinion from Alston & Bird to the effect
that the Merger will constitute a reorganization with the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended, which opinion may be
based upon reasonable representations of fact provided by officers of
HEALTHSOUTH, SHC and the Subsidiary.
<PAGE>
Section 10. Miscellaneous.
10.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Plan of Merger or in any instrument
delivered pursuant to this Plan of Merger shall survive the Effective Time.
10.2 Notices. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery or by
facsimile and overnight courier to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to HEALTHSOUTH:
HEALTHSOUTH Corporation
Two Perimeter Park South
Birmingham, Alabama 35243
Attention: Michael D. Martin
Facsimile: (205) 969-4719
with copies to:
William W. Horton, Esq.
HEALTHSOUTH Corporation
Two Perimeter Park South
Birmingham, Alabama 35243
Facsimile: (205) 969-4732
and
J. Brooke Johnston, Jr., Esq.
Haskell Slaughter Young & Johnston,
Professional Association
1200 AmSouth/Harbert Plaza
1901 Sixth Avenue North
Birmingham, Alabama 35203
Facsimile: (205) 324-1133
If to SHC:
Surgical Health Corporation
990 Hammond Drive
Suite 300
Atlanta, Georgia 30328
Attention: Rock A. Morphis
Facsimile: (404) 673-1970
with a copy to:
J. Vaughan Curtis, Esq.
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Facsimile: (404) 881-7777
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications with the overnight courier.
10.3 Further Assurances. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Plan of Merger.
<PAGE>
10.4 Indemnification. HEALTHSOUTH and Subsidiary agree that all rights to
indemnification for acts or omissions occurring prior to the Effective Time of
the Merger now existing in favor of the current or former directors or officers
of SHC and the SHC Subsidiaries as provided in their respective certificates or
articles of incorporation or bylaws shall survive the Merger and shall continue
in full force and effect in accordance with their terms. The provisions of this
Section 10.4 are intended to be for the benefit of, and shall be enforceable by,
each such indemnified party and each such indemnified party's heirs and
representatives.
10.5 Governing Law. This Plan of Merger shall be interpreted, construed and
enforced in accordance with the laws of the State of Delaware, applied without
giving effect to any conflicts-of-law principles.
10.6 "Including". The word "including", when following any general
statement, term or matter, shall not be construed to limit such statement, term
or matter to the specific terms or matters as provided immediately following the
word "including" or to similar items or matters, whether or not non-limiting
language (such as "without limitation", "but not limited to", or words of
similar import) is used with reference to the word "including" or the similar
items or matters, but rather shall be deemed to refer to all other items or
matters that could reasonably fall within the broadest possible scope of the
general statement, term or matter.
10.7 "Knowledge". "To the knowledge", "to the best knowledge, information
and belief", or any similar phrase shall be deemed to refer to the knowledge of
the Chairman of the Board, Chief Executive Officer or Chief Financial Officer of
a party and to include the assurance that such knowledge is based upon a
reasonable investigation, unless otherwise expressly provided.
10.8 "Material adverse change" or "material adverse effect". "Material
adverse change" or "material adverse effect" means, when used in connection with
SHC or HEALTHSOUTH, any change, effect, event or occurrence that has, or is
reasonably likely to have, individually or in the aggregate, a material adverse
impact on the business or financial position of such party and its subsidiaries
taken as a whole; provided, however, that "material adverse change" and
"material adverse effect" shall be deemed to exclude the impact of (i) changes
in generally accepted accounting principles, (ii) changes in applicable law, and
(iii) any changes resulting from any restructuring or other similar charges or
write-offs taken by SHC with the consent of HEALTHSOUTH; provided, however, that
no such changes or write-offs will be taken if such would adversely affect
pooling-of-interests accounting treatment for the Merger. Notwithstanding the
foregoing, "material adverse change" or "material adverse effect" shall not
mean, with respect to SHC, any reclassification of long-term indebtedness to
short-term indebtedness solely by reason of SHC's execution, delivery and
performance of its obligations under this Agreement.
10.9 "Hazardous Materials". The term "Hazardous Materials" means any
material which has been determined by any applicable governmental authority to
be harmful to the health or safety of human or animal life or vegetation,
regardless of whether such material is found on or below the surface of the
ground, in any surface or underground water, airborne in ambient air or in the
air inside any structure built or located upon or below the surface of the
ground or in building materials or in improvements of any structures, or in any
personal property located or used in any such structure, including, but not
limited to, all hazardous substances, imminently hazardous substances, hazardous
wastes, toxic substances, infectious wastes, pollutants and contaminants from
time to time defined, listed, identified, designated or classified as such under
any Environmental Laws (as defined in Section 10.10) regardless of the quantity
of any such material.
10.10 Environmental Laws. The term "Environmental Laws" means any federal,
state or local statute, regulation, rule or ordinance, and any judicial or
administrative interpretation thereof, regulating the use, generation, handling,
storage, transportation, discharge, emission, spillage or other release of
Hazardous Materials or relating to the protection of the environment.
10.11 Captions. The captions or headings in this Plan of Merger are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Plan of Merger.
<PAGE>
10.12 Integration of Exhibits. All Exhibits attached to this Plan of Merger
are integral parts of this Plan of Merger as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
10.13 Entire Agreement. This instrument, including all Exhibits attached
hereto, contains the entire agreement of the parties and supersedes any and all
prior or contemporaneous agreements between the parties, written or oral, with
respect to the transactions contemplated hereby. It may not be changed or
terminated orally, but may only be changed by an agreement in writing signed by
the party or parties against whom enforcement of any waiver, change,
modification, extension, discharge or termination is sought.
10.14 Counterparts. This Plan of Merger may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
10.15 Binding Effect. This Plan of Merger shall be binding on, and shall
inure to the benefit of, the parties hereto, and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Plan of Merger. No party may assign any right or obligation hereunder
without the prior written consent of the other parties.
10.16 No Rule of Construction. The parties acknowledge that this Plan of
Merger was initially prepared by HEALTHSOUTH, and that all parties have read and
negotiated the language used in this Plan of Merger. The parties agree that,
because all parties participated in negotiating and drafting this Plan of
Merger, no rule of construction shall apply to this Plan of Merger which
construes ambiguous language in favor of or against any party by reason of that
party's role in drafting this Plan of Merger.
IN WITNESS WHEREOF, HEALTHSOUTH, the Subsidiary and SHC have caused this
Amended and Restated Plan and Agreement of Merger to be executed by their
respective duly authorized officers, and have caused their respective corporate
seals to be hereunto affixed, all as of the day and year first above written.
SURGICAL HEALTH CORPORATION
By
Rock A. Morphis
President and Chief Executive Officer
ATTEST:
H. Michael Finley
Secretary
[ CORPORATE SEAL ]
26
<PAGE>
<PAGE>
HEALTHSOUTH Corporation
By
Richard M. Scrushy
Chariman of the Board, President and
Chief Executive Officer
ATTEST:
Anthony J. Tanner
Secretary
[ CORPORATE SEAL ]
ASC ATLANTA ACQUISITION
COMPANY, INC.
By
Richard M. Scrushy
President
ATTEST:
Anthony J. Tanner
Secretary
[ CORPORATE SEAL ]
27
<PAGE>
<PAGE>
APPENDIX 7.14
Gentlemen:
I have been advised that I might be considered to be an "affiliate" of
Surgical Health Corporation for purposes of Rule 145 under the Securities
Exchange Act of 1933, as amended (the "1993 Act"), and for purposes of generally
accepted accounting principles as such term relates to pooling of interests
accounting treatment for certain business combinations or the Securities and
Exchange Commission's Staff Accounting Bulletin No. 65.
HEALTHSOUTH Corporation ("HEALTHSOUTH"), ASC Atlanta Acquisition Company,
Inc. and Surgical Health Corporation ("SHC") have entered into a Plan and
Agreement of Merger dated as of the 22nd day of January, 1995 (the "Plan of
Merger"). Upon consummation of the transactions contemplated by the Plan of
Merger (the "Merger"), I will receive shares of capital stock of HEALTHSOUTH for
all of the shares of capital stock of SHC owned by me or as to which I may be
deemed a beneficial owner. I own _______ shares of common stock of SHC. Such
shares will be converted in the Merger into shares of common stock of
HEALTHSOUTH as described in the Plan of Merger. The shares of SHC capital stock
and HEALTHSOUTH capital stock owned by me or as to which I may deemed to be a
beneficial owner prior to the Merger are hereinafter collectively referred to as
the "Pre-Merger Stock" and the shares of HEALTHSOUTH capital stock received by
me in the Merger are hereinafter collectively referred to as the "Exchange
Stock". This agreement is hereinafter referred to as the "Letter Agreement".
I represent and warrant to, and agree with, HEALTHSOUTH, SHC and the
Subsidiary that:
A. I have read this Letter Agreement and the Plan of Merger and have
discussed their requirements and other applicable limitations upon my ability to
sell, transfer or otherwise dispose of the Pre-Merger Stock and Exchange Stock,
to the extent I felt necessary, with my counsel or counsel for SHC.
B. The shares of common stock of HEALTHSOUTH that I shall receive in
exchange for my shares of common stock of SHC are not being acquired by me with
a view to their distribution except to the extent and in the manner provided for
in paragraph (d) of Rule 145 under the 1933 Act.
C. I agree with you not to dispose of any such shares of common stock of
HEALTHSOUTH in any manner that would violate Rule 145.
I further agree with you that the certificate or certificates representing
such shares of common stock of HEALTHSOUTH may bear a legend referring to the
restrictions on disposition thereof in accordance with the provisions of the
foregoing paragraph and that stop transfer instructions may be filed with
respect to such shares with the transfer agent for such shares.
D. I understand that stop transfer instructions will be given to HEALTHSOUTH,
SHC and their respective transfer agents, as the case may be, with respect to
the shares of Pre-Merger Stock and the Exchange Stock in connection with the
restrictions set forth herein.
E. Notwithstanding the foregoing and any other agreements on my part in
connection with the Pre-Merger Stock and the Exchange Stock, I hereby agree (i)
that I will not sell or otherwise reduce my risk relative to any shares of
Pre-Merger Stock during the period of thirty days prior to the effective date of
Merger and (ii) that I will not sell or otherwise reduce my risk relative to any
shares of Exchange Stock until financial results covering at least thirty days
of combined operations have been published following the effective date of the
Merger so as to ensure that the Merger qualified as a pooling of interests for
accounting purposes.
It is understood and agreed that this Letter Agreement shall terminate and
be of no further force and effect if the Plan of Merger is terminated pursuant
to the terms thereof.
The agreements made by me in the foregoing paragraphs are on the
understanding and condition that you agree, in the event that any shares may be
disposed of in accordance with the provisions of paragraph E above, to deliver
in exchange for the certificate or certificates representing such shares a new
<PAGE>
certificate or certificates representing such shares not bearing the legend and
not subject to the stop transfer instruction referred to in paragraph D above,
and so long as I hold shares of stock subject to the provisions of the foregoing
paragraph (but not for a period in excess of two years from the date of
consummation of the Merger) to file with the Securities and Exchange Commission
or otherwise make publicly available all information about HEALTHSOUTH, to the
extent available to you without unreasonable effort or expense, necessary to
enable me to resell shares under the provisions of paragraph (d) of Rule 145.
This Letter Agreement shall be binding on my heirs, legal representatives
and successors.
Very truly yours,
[Name of Shareholder]
<PAGE>
EXHIBIT 2.5
STOCK PURCHASE AGREEMENT
******
NOVACARE, INC.,
NC RESOURCES, INC.
AND
HEALTHSOUTH Corporation
Dated: February 3, 1995
<PAGE>
STOCK PURCHASE AGREEMENT
Table of Contents
ARTICLE 1
DEFINITIONS
........................................................................... 1
Section 1.1 Certain Defined Terms......................................... 1
Section 1.2 Index of Other Defined Terms.................................. 3
ARTICLE 2
BASIC TRANSACTIONS
........................................................................... 4
Section 2.1 Conveyance of RSC Shares...................................... 4
Section 2.2 Purchase Price; Post Closing Adjustment....................... 4
Section 2.3 Excluded Assets............................................... 5
Section 2.4 Employee Matters.............................................. 6
Section 2.5 Use of Names and Manuals...................................... 6
Section 2.6 Procedure for Consents or Default............................. 7
Section 2.7 Closing....................................................... 7
Section 2.8 Resolution of Cooperative Arrangements........................ 8
Section 2.9 Guaranty by NovaCare.......................................... 9
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
........................................................................... 9
Section 3.1 Organization and Corporate Power.............................. 9
Section 3.2 RSC and Subsidiaries.......................................... 10
Section 3.3 Authority Relative to this Agreement.......................... 10
Section 3.4 Absence of Breach............................................. 10
Section 3.5 Private Party Consents........................................ 11
Section 3.6 Governmental Consents......................................... 11
Section 3.7 Brokers....................................................... 11
Section 3.8 Title to Personal Property.................................... 11
Section 3.9 Contracts and Leases.......................................... 12
Section 3.10 Licenses..................................................... 12
Section 3.11 Employee Relations........................................... 12
Section 3.12 Employee Plans............................................... 12
Section 3.13 Litigation................................................... 13
Section 3.14 Inventory.................................................... 13
Section 3.15 Hazardous Substances......................................... 13
Section 3.16 Financial Information and Related Matters.................... 13
Section 3.17 Changes Since Balance Sheet.................................. 15
Section 3.18 Compliance with Laws......................................... 15
Section 3.19 Lists of Other Data.......................................... 16
(i)
<PAGE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
........................................................................... 16
Section 4.1 Organization and Corporate Power.............................. 16
Section 4.2 Authority Relative to this Agreement.......................... 16
Section 4.3 Absence of Breach............................................. 17
Section 4.4 Private Party Consents........................................ 17
Section 4.5 Governmental Consents......................................... 17
Section 4.6 Brokers....................................................... 17
Section 4.7 Qualified for Licenses........................................ 17
Section 4.8 Financial Ability to Perform.................................. 17
Section 4.9 No Assurance.................................................. 18
Section 4.10 Disposal of Assets........................................... 18
ARTICLE 5
COVENANTS OF EACH PARTY
........................................................................... 18
Section 5.1 Efforts to Consummate Transactions............................ 18
Section 5.2 Cooperation................................................... 18
Section 5.3 Further Assistance............................................ 19
Section 5.4 Cooperation Respecting Proceedings............................ 19
Section 5.5 Expenses...................................................... 19
Section 5.6 Announcements; Confidentiality................................ 20
Section 5.7 Cost Reports.................................................. 21
ARTICLE 6
ADDITIONAL COVENANTS OF SELLER
........................................................................... 22
Section 6.1 Conduct Pending Closing....................................... 22
Section 6.2 Access and Information; Environmental Survey; Remediation or
Adjustment.................................................... 23
Section 6.3 Updating...................................................... 24
Section 6.4 No Solicitation............................................... 24
Section 6.5 Filing of Cost Reports........................................ 24
ARTICLE 7
ADDITIONAL COVENANTS OF BUYER
........................................................................... 24
Section 7.1 Waiver of Bulk Sales Law Compliance........................... 24
Section 7.2 Cost Reports and Audit Contests............................... 24
Section 7.3 Letters of Credit............................................. 25
(ii)
<PAGE>
ARTICLE 8
BUYER'S CONDITIONS TO CLOSING
........................................................................... 25
Section 8.1 Performance of Agreement...................................... 25
Section 8.2 Accuracy of Representations and Warranties.................... 25
Section 8.3 Officer's Certificate......................................... 25
Section 8.4 Consents...................................................... 25
Section 8.5 Absence of Injunctions........................................ 25
Section 8.6 Opinion of Counsel............................................ 26
Section 8.7 Receipt of Other Documents.................................... 26
Section 8.8 Certificates of Need and Consents............................. 26
ARTICLE 9
SELLER'S CONDITIONS TO CLOSING
........................................................................... 27
Section 9.1 Performance of Agreement...................................... 27
Section 9.2 Accuracy of Representations and Warranties.................... 27
Section 9.3 Officer's Certificate......................................... 27
Section 9.4 Consents...................................................... 27
Section 9.5 Absence of Injunctions........................................ 28
Section 9.6 Opinion of Counsel............................................ 28
Section 9.7 Receipt of Other Documents.................................... 28
ARTICLE 10
TERMINATION
........................................................................... 29
Section 10.1 Termination................................................. 29
Section 10.2 Effect of Termination....................................... 29
ARTICLE 11
SURVIVAL AND REMEDIES; INDEMNIFICATION
........................................................................... 29
Section 11.1 Survival..................................................... 29
Section 11.2 Exclusive Remedy............................................. 29
Section 11.3 Indemnity by Seller.......................................... 30
Section 11.4 Indemnity by Buyer........................................... 30
Section 11.5 Further Qualifications Respecting Indemnification............ 31
Section 11.6 Procedures Respecting Third Party Claims..................... 32
(iii)
<PAGE>
ARTICLE 12
GENERAL PROVISIONS
........................................................................... 32
Section 12.1 Notices...................................................... 32
Section 12.2 Attorneys' Fees.............................................. 34
Section 12.3 Successors and Assigns....................................... 34
Section 12.4 Counterparts................................................. 34
Section 12.5 Captions and Paragraph Headings.............................. 34
Section 12.6 Entirety of Agreement; Amendments............................ 34
Section 12.7 Construction................................................. 34
Section 12.8 Waiver....................................................... 35
Section 12.9 Governing Law................................................ 35
Section 12.10 Severability................................................ 35
Section 12.11 Consents Not Unreasonably Withheld.......................... 35
Section 12.12 Time Is of the Essence...................................... 35
(iv)
<PAGE>
LIST OF SCHEDULES
A-1 Subsidiaries and Their
Respective States of Incorporation and
Qualification
A-2 Facilities
1.1-1 Leased Real Property
1.1-2 Other Contracts
1.1-3 Owned Real Property
1.1-5 Transferred Business Names
2.3 Excluded Assets
2.4 Employee Pension Benefit Plans
3.7 Brokers
3.13 Litigation
3.16(a) EBITDA Statements
3.16(b) Balance Sheet
3.19(a) Depreciation Schedule
3.19(b) Personal Property Leases
3.19(c) Insurance
3.19(d) Employee Benefit Arrangements
3.19(f) Material Licenses
7.3 Bonds, Letters of Credit, etc.
(v)
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, made and entered into as of the 3d day of
February, 1995, by and among NOVACARE, INC., a Delaware corporation
("NovaCare"), NC RESOURCES, INC., a Delaware corporation ("Seller"), and
HEALTHSOUTH Corporation, a Delaware corporation ("Buyer").
W I T N E S S E T H :
WHEREAS, Seller owns all of the issued and outstanding capital stock of
Rehab Systems Company, a Delaware corporation ("RSC");
WHEREAS, through subsidiary corporations identified on Schedule A-1
hereto (each, a "Subsidiary", and collectively, the "Subsidiaries"), RSC engages
in the business of delivering rehabilitative health care services to the public
through 11 rehabilitation hospitals, five community re-entry centers, five
sub-acute units and two satellite outpatient facilities, all of which are
identified on Schedule A-2 (the "Facilities");
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell to Buyer, all of the issued and outstanding shares of capital stock of RSC
(the "RSC Shares"), such transaction being referred to herein as the
"Transaction"; and
WHEREAS, NovaCare is the ultimate parent of Seller and is willing to
guarantee the obligations of Seller hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledge, the
parties hereto to hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Certain Defined Terms. For purposes of this Agreement, the
following terms shall have the following meanings:
"Affiliate" of a specified person shall mean any corporation,
partnership, sole proprietorship or other person or entity which directly or
indirectly through one or more intermediaries controls, is controlled by or is
under common control with the person specified. The term "control" means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a person or entity.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
<PAGE>
"Cost Report" shall mean the cost report required to be filed,
as of the end of a provider cost year or for any other required period, with
cost-based Payors with respect to cost reimbursement.
"Cost Report Settlements" shall mean all right, title and
interest of RSC or any Subsidiary in assets resulting from the finalization with
Payors of amounts due with respect to Cost Reports.
"Equipment" means fixed machinery and equipment, other
fixtures and fittings, movable plant, machinery, equipment and furniture,
trucks, tractors, trailers, and other vehicles, tools and other similar items of
tangible personal property (i) that are not consumed, disposed of or held for
sale or as Inventory in the ordinary course of business, and (ii) that are owned
or leased by or consigned to RSC or any Subsidiary as of the closing.
"Inventory" means all of RSC's or any Subsidiary right, title
and interest in and to inventories and supplies, drugs, food, janitorial and
office supplies, maintenance and shop supplies, and other similar items of
tangible personal property intended to be consumed, disposed of or sold, in the
ordinary course of business that are owned by or consigned to RSC or any
Subsidiary as of the Closing.
"Knowledge" of a party shall mean the collective knowledge of
the persons who serve as of the date of this Agreement as the duly elected
officers of such party.
"Laws" shall mean all statutes, rules, regulations,
ordinances, orders, codes, permits, licenses and agreements with or of federal,
state, local and foreign governmental and regulatory authorities and any order,
writ, injunction or decree issued by any court, arbitrator or governmental
agency or in connection with any judicial, administrative or other non-judicial
proceeding (including, without limitation, arbitration or reference).
"Leased Real Property" shall mean the land, Facilities and
real property improvements (whether owned or leased) which are held by RSC or
any Subsidiary pursuant to the Real Property Leases and which are identified in
Schedule 1.1-1, together with all construction work-in-progress in respect
thereof and rights, privileges and easements appurtenant thereto.
"Licenses" shall mean certificates of need, accreditations,
registrations, licenses, permits and other consents or approvals of governmental
agencies or accreditation organizations.
"Other Contracts" shall mean all contracts and agreements to
which RSC or any Subsidiary is a party as of the Closing, other than Real
Property Leases, including, but not limited to the contracts identified on
Schedule 1.1-2, which contains a list of the following categories of Other
Contracts: constructions contracts relating to construction work-in-progress at
a Facility; equipment leases (whether operating or capitalized leases),
installment purchase contracts where the annualized lease or installment
payments exceed $25,000; contracts or arrangements binding on a Subsidiary or a
Facility which contain any covenant not to compete or otherwise significantly
restrict the nature of the business activities in which such Subsidiary or
Facility may engage; employment contracts, if any, between RSC, any Subsidiary
or any Facility and any person providing services for such Facility; collective
bargaining agreements, if any; Medicare and Medicaid provider numbers and
provider agreements, and provider agreements with other Payors; and any other
contracts pursuant to which RSC or any Subsidiary paid or received over $25,000
during its last fiscal year; provided, however, that Schedule 1.1-2 need not
list an Other Contract if all material obligations of RSC and/or the Subsidiary
thereunder have been, or prior to the Closing will be, completed or RSC, or RSC
or the Subsidiary is entitled, or has or by the Closing will have exercised a
right, to terminate the contract without penalty on 90 days' notice or less.
<PAGE>
"Owned Real Property" shall mean the real property owned in
fee by RSC or any Subsidiary that is identified on Schedule 1.1-3, together with
the Facilities located thereon, construction work-in-progress, and all other
buildings and improvements thereon, and all rights, privileges, permits and
easements appurtenant thereto.
"Payor" shall mean Medicare, Medicaid, CHAMPUS and Medically
Indigent Assistance programs, Blue Cross, Blue Shield or any other third party
payor (including an insurance company), or any health care provider (such as a
health maintenance organization, preferred provider organization, peer review
organization, or any other managed care program).
"Prepayments" shall mean advance payments, prepayments,
prepaid expenses, deposits and the like made by RSC or any Subsidiary in the
ordinary course of business prior to the Closing, which exist as of the Closing
and with respect to which RSC or any Subsidiary will receive the benefit after
the Closing, and other items recorded as prepaid expenses by RSC and the
Subsidiaries.
"Real Property Leases" shall mean all leases pursuant to which
RSC or any Subsidiary holds a leasehold interest in land, Facilities and/or real
property improvements, all of which are identified on Schedule 1.1-4.
"Receivables" shall mean all of RSC's or any Subsidiary's
right, title and interest as of the Closing in and to accounts receivable
recorded by RSC or such Subsidiary as an account receivable from Payors,
patients and other third parties, including, but not limited to, Cost Report
Settlements.
"Taxes" shall mean (i) all federal, state, county and local
sales, use, property, payroll, recordation and transfer taxes, (ii) all state,
county and local taxes, levies, fees, assessments or surcharges (however
designated, including privilege taxes, room or bed taxes and user fees) which
are based on the gross receipts, net operating revenues or patient days of a
Facility for a period ending on, before or including the Closing Date (as
defined in Section 2.7) or a formula taking any one of the foregoing into
account, and (iii) any interest, penalties and additions to tax attributable to
any of the foregoing.
"Transferred Business Names" means all right, title and
interest of RSC or any Subsidiary in and to the business names set forth in
Schedule 1.1-5.
<PAGE>
Section 1.2 Index of Other Defined Terms. In addition to those terms
defined above, the following terms shall have the respective meanings given
thereto in the sections indicated below:
Defined Term Section
------------- ---------
Balance Sheet 3.16(b)
Buyer Preamble
Charter Documents 3.4
Claim Notice 11.6
Closing 2.7
Closing Balance Sheet 2.2(b)
Closing Date 2.7
Consultant 6.2(b)
Current Cost Reports 5.7(a)
EBITDA 3.16(a)
EBITDA Statements 3.16(a)
Employee Benefit Arrangements 3.18(d)
Environmental Regulations 3.15(a)
Environmental Survey 6.2(b)
ERISA 2.4
Excluded Assets 2.3
Facilities Recitals
Financial Schedule 3.16
Hazardous Materials 3.15
HSR Act 3.4
Indemnitee 11.5
Indemnitor 11.5(a)
Losses 11.3(a)
Manuals 2.5(b)
Material Adverse Effect 3.4
NovaCare Preamble
Panel 2.8
Pension Plans 2.14
Permitted Encumbrances 3.8
Post-Closing Adjustment Amount 2.2(b)
Prior Cost Reports 5.7(b)
Purchase Price 2.2(a)
Related Agreements 3.4
Seller Preamble
Subsidiaries Recitals
Termination Date 10.1(b)
Third Party Claims 11.5(a)
Transaction Recitals
Working Capital 2.2(b)
<PAGE>
ARTICLE 2
BASIC TRANSACTIONS
Section 2.1 Conveyance of RSC Shares. On the Closing Date, Seller will
convey, transfer and assign to Buyer all the Seller's right, title and interest
in and to the RSC Shares, free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever.
Section 2.2 Purchase Price; Post-Closing Adjustment. (a) The purchase
price (the "Purchase Price") in the aggregate for all of the RSC Shares shall be
$215,000,000, as adjusted pursuant to this Section 2.2, which price is based
upon the retention by RSC and the Subsidiaries of all assets which they own or
lease immediately prior to the Closing, including, but not limited to, working
capital and Receivables, subject only to Section 2.3 below.
(b) Within 30 days after the Closing, Seller shall deliver to
Buyer a balance sheet (the "Closing Balance Sheet") of RSC as of the Closing
Date, which shall be prepared in accordance with generally accepted accounting
principles, in a manner consistent with the methods and principles used by RSC
in preparing its financial statements on the date of this Agreement. Buyer shall
provide Seller with access to the books and records of RSC and the Subsidiaries
and the cooperation of their employees in connection with such preparation.
Seller shall also at that time prepare and deliver a statement computing a
"Post-Closing Adjustment Amount" equal to the difference between $26,573,000 and
the Working Capital of RSC as reflected on the Closing Balance Sheet. For
purposes of this Section 2.2, "Working Capital" shall mean the sum of the
following categories on the Closing Balance Sheet: (i) Cash, (ii) Net Patients
Accounts Receivable, (iii) Due (To) From Medicare, (iv) Other Accounts
Receivable, and (v) Other Current Assets, less (i) Accounts Payable, (ii)
Accrued Expenses and (iii) Other Current Liabilities. The following categories
shall not be included in the computation of Working Capital: (i) Current Portion
of Capital Leases and (ii) Current Portion of Long-Term Debt.
RSC and the Subsidiaries have received cash payments,
through the Subsidiary Cost Reports by interim or tentative cost report payments
and otherwise, based on Home Office Cost Statements of NovaCare for 1994 and
prior years. These amounts have historically been included as a liability in the
category Due (To) From Medicare. On the Closing Balance Sheet, these amounts
will be reclassified to a liability account entitled NovaCare, Inc. Home Office
Liability.
Cash held in trust accounts or other funds to pay
indebtedness pursuant to the Trust Indentures and Loan Agreements as amended (i)
by and between Mercer County, West Virginia and American Health Enterprises,
Ltd., and (ii) by and between Wood County, West Virginia and West Virginia
Rehabilitation Services, Inc. will be included in the category Cash on the
Closing Balance Sheet.
(c) Buyer shall have a period of 15 days from the date of
delivery to it of the Closing Balance Sheet and the Post-Closing Adjustment
Amount statement to object to the determination of the Post-Closing Adjustment
Amount, computed as aforesaid. In the event of an objection from Buyer, Price
Waterhouse, LLP and a public accounting firm chosen by Buyer shall have a period
of 15 days in which to review the Closing Balance Sheet and the statement
showing Seller's computation of the Post-Closing Adjustment Amount. If the
dispute is not resolved in the said 15-day period to the satisfaction of Buyer
and Seller, such accounting firms shall have an additional period of 15 days to
select a third accounting firm acceptable to both of them to review the Closing
Balance Sheet, and to make the final determination of the Post-Closing
Adjustment Amount, which determination, absent fraud, shall be conclusive and
binding. If Price Waterhouse and the second accounting firm are unable to agree
upon a third accounting firm to make the final determination, such an accounting
firm shall be appointed in accordance with the then-current rules of the
American Arbitration Association. The fees and expenses of the third accounting
firm shall be shared equally by Buyer and Seller.
<PAGE>
(d) Upon the determination of the Post-Closing Adjustment
Amount as provided for in the preceding two paragraphs, the Purchase Price to be
paid by Buyer hereunder shall be adjusted by the amount of the Post-Closing
Adjustment Amount. Such adjustment shall be paid by the appropriate party within
ten days after final determination of the Post-Closing Adjustment Amount.
Section 2.3 Excluded Assets. Notwithstanding any contrary provision of
this Agreement, the parties acknowledge and agree that the following described
assets of RSC and the Subsidiaries and the assets listed on Schedule 2.3
(collectively, "Excluded Assets") are not intended to be included in the
Transaction and that Seller, RSC and the Subsidiaries may take such actions as
are reasonably necessary to cause RSC and the Subsidiaries to sign all of their
respective right, title and interest in and to such Excluded Assets to Seller
(or a person or entity designated by Seller) immediately prior to the Closing:
all proprietary materials, documents, information, media, methods and processes
owned by Seller, and any and all rights to use the same, including, but not
limited to, all intangible assets of an intellectual property nature such as
trademarks, service marks and trade names (whether or not registered) other than
the Transferred Business Names, proprietary computer software, proprietary
procedures and manuals, promotional and marketing materials (including all
marketing and computer hardware and software); provided, however, that Buyer
shall have the rights set forth in Section 2.5.
Section 2.4 Employee Matters. Schedule 2.4 lists all "employee pension
benefit plans" ("Pension Plans") within the meaning of Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), in which
employees (as defined in Subsection (b) below) directly employed to work at the
Facilities participate. Neither Seller nor RSC nor any Subsidiary is a party to,
nor do any such employees participate in, any "multiemployer plans" within the
meaning of Section 3(37) of ERISA. Seller shall, or shall cause the Subsidiaries
to, (i) terminate as of the Closing Date the active participation of all such
employees in the Pension Plans, (ii) cause the Pension Plans to make timely
appropriate distributions, to the extent required, to such employees in
accordance with, and to the extent permitted by, the terms and conditions of
such Pension Plans, and (iii) in connection with the termination of the active
participation of all such employees in such Pension Plans, comply, and cause
each Pension Plan to comply, with all applicable Laws. Prior to the Closing,
Seller shall have delivered to Buyer, for information purposes only, forms of
any letters or other written communications which Seller or the Subsidiaries
shall distribute generally to such employees notifying them of their rights in
respect of their cessation of active participation in the Pension Plans.
<PAGE>
Section 2.5 Use of Names and Manuals.
(a) Although trade names of Seller, other than the Transferred
Business Names, are Excluded Assets, such names appear on certain fixtures and
Equipment, and on supplies, materials, stationery and similar consumable items
which will be on hand at the Facilities at the Closing. Notwithstanding that
such names are Excluded Assets, Buyer shall be entitled to use such consumable
items for a period of three months following the Closing and shall have up to
six months following the Closing to remove such names from fixed assets,
provided that Buyer shall not send correspondence or other materials to third
parties on any stationery that contains a trade name (other than a Transferred
Business Name) of Seller or any Affiliate of Seller.
(b) Seller hereby grants to Buyer, for the period from the
Closing Date through the expiration of the ninetieth day thereafter, the
non-exclusive right and license to use, solely in connection with the operation
of the Facilities, the clinical policy and procedures manuals of Seller (the
"Manuals") presently used at the Facilities. Such license shall be on the
following terms and conditions:
(i) Buyer shall accept the Manuals in their present
condition, "AS IS" and "WITH ALL FAULTS" and without any representation
or warranty of any kind whatsoever, either express or implied, by
Seller, including, but not limited to, any representation or warranty
that the Manuals are adequate for Buyer's operation of the Facilities
after the Closing or are in compliance with any Laws;
(ii) Buyer agrees that Seller shall have no
obligation whatsoever to update or otherwise revise the Manuals, even
if Seller or its Affiliates are revising similar manuals at other
healthcare facilities, and that Buyer shall have sole responsibility
for updating and revising such manuals;
(iii) Buyer acknowledges and agrees that the Manuals
are confidential and proprietary information of Seller and its
Affiliates and Buyer agrees that it will not, directly or indirectly,
reproduce, distribute or disclose the contents of the Manuals except as
may be required in the operation of the Facilities (including, but not
limited to, as may be required by any Laws) and shall exercise due care
to otherwise preserve and protect the proprietary nature thereof;
(iv) Upon the termination of Buyer's use of the
Manuals pursuant to this Section, Buyer shall return to Seller all
originals and copies of the Manuals; and
(v) Buyer shall diligently implement its own policy
and procedure manuals promptly following the Closing Date, and in any
event by the date on which the license hereby granted to Buyer
terminates.
<PAGE>
Section 2.6 Procedure for Consents or Default. The transfer of the RSC
Shares, in the absence of the consent or authorization of a third party, could
constitute a breach or default under a lease, agreement, encumbrance, obligation
or commitment or could adversely affect the rights, or increase the obligations,
of Buyer, Seller, RSC or any Subsidiary with respect thereto. If any such
consent or authorization is not obtained before Closing, and transfer of such
lease, agreement, encumbrance, obligation or commitment in the absence of such
consent or authorization would be ineffective or would adversely affect the
rights or increase the obligations of Seller, RSC, a Subsidiary or Buyer, with
respect to any such lease, agreement, encumbrance or commitment, so that Buyer
would not, in fact, receive all such rights, or assume the obligations of
Seller, RSC or such Subsidiary with respect thereto, as they exist prior to
Closing, then, in accordance with the procedures described in Section 2.8,
Seller and Buyer shall, and Seller shall cause RSC and each Subsidiary to, enter
into such reasonable cooperative arrangements as may be reasonably acceptable to
both Buyer and Seller (including, without limitation, sublease, agency,
management, indemnity or payment arrangements and/or other means to enforce, at
the cost and for the benefit of Buyer and any and all rights of RSC and the
Subsidiaries against an involved third party) to provide for Buyer the benefits
of such items or to relieve Seller from the obligations of such items. The
assignment of any contract, lease, agreement, encumbrance, obligation or
commitment, including, but not limited to, Medicare, Medicaid and similar
provider agreements, which may lawfully be made subject to customary conditions
subsequent (such as needs surveys, evaluations of Buyer or other determinations
by the counterparties to such agreements) shall be deemed not to constitute a
default under, or to in any way adversely affect the rights or increase the
obligations of Buyer with respect to, such lease, agreement, encumbrance or
commitment, whether or not the counterparty indicates prior to the Closing that
such condition or conditions subsequent are likely or not likely to be met.
Section 2.7 Closing. Subject to the terms and conditions hereof, the
consummation of the Transactions (the "Closing") shall occur at a mutually
agreeable time and place or places within five business days after the first
date on which all of the conditions set forth in Article 8 and Article 9 hereof
are capable of being satisfied, but in no event later than the Termination Date
set forth in Section 10.1(b). The date on which the Closing actually occurs is
referred to herein as the "Closing Date". The Closing shall be effective for all
purposes at 11:59 p.m. Eastern Time on the Closing Date. At the Closing, and
subject to the terms and conditions hereof, the following will occur:
(a) Deliveries by Seller. Seller shall deliver, or cause the
Subsidiaries to deliver, to Buyer:
(i) A certificate or certificates representing the
RSC Shares, together with stock powers duly executed in blank:
(ii) The documents and instruments required pursuant
to Section 8.7; and
(iii) Such other instruments of transfer executed by
Seller as may be necessary or advisable to transfer to and vest in
Buyer all of Seller's right, title and interest in and to the RSC
Shares.
<PAGE>
(b) Deliveries by Buyer. Buyer shall deliver to Seller:
(i) Immediately available funds, by way of wire
transfer to an account or accounts designated by Seller, in an amount
equal to the Purchase Price, as adjusted by the expenses due at Closing
pursuant to Section 5.5; and
(ii) The documents and instruments required to be
delivered pursuant to Section 9.7.
Section 2.8 Resolution of Cooperative Arrangements. In the event that
circumstances exist that require the parties to negotiate in good faith
cooperative arrangements under Section 2.6 or potential amendments to this
Agreement pursuant to Sections 8.5 then and in such event, such negotiations,
and the resolution of disagreements arising therefrom, shall be conducted in
accordance with the provisions of this Section 2.8. The parties shall negotiate
such cooperative arrangements in good faith prior to any scheduled Closing Date
(as may be extended by mutual agreement of the parties). If the parties are
unable to agree by the day prior to such scheduled Closing Date, then such
scheduled Closing Date (and the Termination Date, if necessary) shall be
extended for up to 15 business days to provide for the opportunity to resolve
such disagreement pursuant to the provisions of this Section 2.8. On the day the
Closing would have occurred but for the absence of agreement between the
parties, each party shall designate an individual (who may not be a present or
former officer, director, partner or employee of the party or of any present or
former investment banker, accounting firm, law firm or attorney of or for the
party) to mediate such disagreement, and advise the other party in writing of
the identity of such individual, which advice shall be accompanied by a list of
up to 10 suggested neutral individuals to serve as a third mediator. The
mediators originally designated by each party shall promptly confer about the
selection of a third mediator from such lists, and within five business days
following the originally scheduled Closing Date (or Termination Date, as the
case may be), the originally designated mediators shall agree upon and (subject
to availability) select the third mediator from the lists submitted by the
parties or otherwise, provided that if the originally designated mediators fail
to agree upon a third mediator by such date, the third mediator shall be
designated by the American Arbitration Association in accordance with its
then-current rules. The three mediators so selected are herein referred to as
the "Panel". Within two business days following the designation of the third
mediator, each party shall submit to the Panel in writing, its proposed
cooperative arrangements. Such proposals shall be materially in accordance with
the last proposals made by such party to the other party during the course of
the aforementioned good faith negotia- tions between the parties. The parties
shall additionally submit such memoranda, arguments, briefs and evidence in
support of their respective positions, and in accordance with such procedures,
as a majority of the Panel may determine. Within seven business days following
the designation of the third mediator, the Panel shall, by majority vote, select
the proposed cooperative arrangements proposed by one of the parties, it being
agreed that the Panel shall have no authority to alter any such proposal in any
way. Thereafter, the parties shall, subject to the terms and conditions of this
Agreement, consummate the Transactions on the basis of such selected cooperative
arrangements, amendments or adjustments at a mutually agreeable time and place
or places, in accordance with the provisions of Section 2.7, which shall be no
later than the fifteenth business day following the originally scheduled Closing
Date or such later date as the parties may agree upon. Subject to the foregoing,
the Panel may determine the issues in dispute following such procedures,
consistent with the language of this Agree- ment, as it deems appropriate to the
circumstances and with reference to the amounts in issue. No particular
procedures are intended to be imposed upon the Panel, it being the desire of the
parties that any such disagreement shall be resolved as expeditiously and
inexpensively as reasonably practicable. No member of the Panel shall have any
liability to the parties in connection with service on the Panel, and the
parties shall provide such indemnities to the members of the Panel as they shall
request.
<PAGE>
Section 2.9 Guaranty by NovaCare. To induce Buyer to execute and
deliver this Agreement, NovaCare hereby absolutely and unconditionally
guarantees the full, prompt and faithful performance by Seller of all covenants
and obligations to be performed by Seller under this Agreement and any Schedule,
certificate and agreement executed and delivered in connection herewith,
including, without limitation, the payment of all sums stipulated to be paid by
Seller pursuant to this Agreement. In the event that Seller fails to fully
perform all such covenants and obligations in accordance with their terms or pay
all or any part of such sums when due, NovaCare will perform all such covenants
and obligations in accordance with their terms or immediately pay to Buyer (or
such other payee as may be provided herein or in any such agreement) the amount
due and unpaid by Seller, it being understood that each such covenant or
obligation and each obligation to pay any such amount constitutes the direct and
primary obligation of NovaCare. NovaCare hereby waives presentment, demand of
payment, protest, dishonor, notice of protest or dishonor, and notice of
acceptance of the guaranty set forth in this Section 2.9 and all rights to
require Buyer to proceed against Seller, or to pursue any other remedy it may
have against Seller in the event of a breach by Seller of any representation,
warranty, obligation or covenant in this Agreement or in any Schedule,
certificate or agreement executed and delivered in connection therewith. In the
event that Seller is not liable to perform any such obligations or covenants
because the act creating such obligation or covenant is ultra vires or
unauthorized, and for such reasons such obligations or covenants cannot be
enforced against Seller, such fact shall not affect NovaCare's liability under
this Section 2.9. In the event of the merger, acquisition, termination,
liquidation or dissolution of Seller, this unconditional guaranty shall continue
in full force and effect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer, as of the date hereof,
as follows, except as disclosed in Schedule 3:
Section 3.1 Organization and Corporate Power. Seller is a corporation
duly incorporated and validly existing under the laws of, and is authorized to
exercise its corporate powers, rights and privileges and is in good standing in,
the State of Delaware and has full corporate power to carry on its business as
presently conducted and to own or lease and operate its properties and assets
now owned or leased and operated by it.
<PAGE>
Section 3.2 RSC and Subsidiaries.
(a) Each of RSC and each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation (which in each case is indicated on Schedule A-1) and is duly
qualified and in good standing as a foreign corporation in all jurisdictions in
which such qualification is required by reason of its business, properties or
activities in or relating to such jurisdictions (which is likewise indicated on
Schedule A-1), except where the failure to be so qualified will not have a
Material Adverse Effect (as defined in Section 3.4) on RSC or the applicable
Subsidiary.
(b) (i) All of the outstanding capital stock of RSC has been
duly authorized and is validly issued, fully paid and nonassessable and is owned
beneficially and of record by Seller. There are no rights, subscriptions,
warrants, options, conversion rights or agreements of any kind outstanding to
purchase or otherwise acquire any shares of capital stock of or securities or
obligations of any kind convertible into or exchangeable for any shares of
capital stock of RSC.
(ii) All of the outstanding capital stock of each
Subsidiary has been duly authorized and is validly issued, fully paid and
nonassessable and, except as indicated on Schedule A-1, is owned beneficially
and of record by RSC. Except as provided in Schedule A- 1, there are no rights,
subscriptions, warrants, options, conversion rights or agreements of any kind
outstanding to purchase or otherwise acquire any shares of capital stock of or
securities or obligations of any kind convertible into or exchangeable for any
shares of capital stock of any Subsidiary.
(c) Upon consummation of the Transaction, Buyer will acquire
valid title to the RSC Shares, free and clear of all liens, charges, pledges or
security interests (except for those created or allowed to be suffered by Buyer)
and free of any restrictions on voting and transfer.
(d) No corporate act or proceeding on the part of RSC or any
Subsidiary or their respective boards of directors or shareholders is necessary
to authorize the Transaction.
Section 3.3 Authority Relative to this Agreement. The execution,
delivery and performance of this Agreement and all other agreements contemplated
hereby and the consummation of the transactions contemplated hereby and thereby
have been duly and effectively authorized by the board of directors of Seller;
no other corporate act or proceeding on the part of Seller, its board of
directors or its stockholders is necessary to authorize this Agreement, any such
other agreement or the transactions contemplated hereby and thereby. This
Agreement has been, and each of the other agreements contemplated hereby will as
of the Closing have been, duly executed and delivered by Seller, and this
Agreement constitutes, and each such other agreement when executed and delivered
will constitute, a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, except as it may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar Laws now or hereafter in
effect relating to creditors' rights generally and that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding may be brought.
<PAGE>
Section 3.4 Absence of Breach. Subject to the provisions of Sections
3.5 and 3.6 below regarding private party and governmental consents, and except
for compliance with the requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and any regulatory or
licensing Laws applicable to the businesses and assets represented by the
Transferred Assets, the execution, delivery and performance by Seller of this
Agreement and all other agreements contemplated hereby or executed in connection
herewith (the "Related Agreements"), do not (a) conflict with or result in a
breach of any of the provisions of the Articles or Certificates of Incorporation
or Bylaws or similar charter documents (the "Charter Documents") of Seller, of
RSC or of any of the Subsidiaries, (b) contravene any Law or cause the
suspension or revocation of any License presently in effect, which affects or
binds Seller or RSC or any of the Subsidiaries, or any of their material
properties, except where such contravention, suspension or revocation will not
have a Material Adverse Effect (as defined below) on RSC and the Subsidiaries
and will not affect the validity or enforceability of this Agreement and the
Related Agreements or the validity of the Transaction contemplated hereby and
thereby, or (c) conflict with or result in a breach of or default under any
indenture or loan or credit agreement or any other agreement or instrument to
which Seller or any of the Subsidiaries is a party or by which it or they or any
of their properties may be affected or bound, the effect of which conflict,
breach, or default, either individually or in the aggregate, would be a Material
Adverse Effect on RSC and the Subsidiaries. As used herein, a "Material Adverse
Effect": (a) when used with respect to a Facility, means a material adverse
effect on a Facility and on the businesses operated therefrom, including their
condition (financial or otherwise) and results of operations, taken as a whole;
and (b) when used with respect to an entity, such as Seller, RSC, a Subsidiary
or Buyer, means a material adverse effect on the business, condition (financial
or otherwise) and results of operations of such entity taken as a whole
(including any subsidiaries of such entity).
Section 3.5 Private Party Consents. Except as set forth on Schedule
3.5, the execution, delivery and performance by Seller of this Agreement and the
Related Agreements do not require the authorization, consent or approval of any
non-governmental third party of such a nature that the failure to obtain the
same would have a Material Adverse Effect on RSC and the Subsidiaries.
Section 3.6 Governmental Consents. The execution, delivery and
performance by Seller of this Agreement and the Related Agreements do not
require the authorization, con- sent, approval, certification, license or order
of, or any filing with, any court or governmental agency of such a nature that
the failure to obtain the same would have a Material Adverse Effect on the
Transferred Assets, except for compliance with the HSR Act and except for such
governmental authorizations, consents, approvals, certifications, licenses and
orders that customarily accompany the transfer of health care facilities such as
the Facilities.
Section 3.7 Brokers. No broker, finder, or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with this Agreement or the Transaction contemplated hereby based upon any
agreements or arrangements or commitments, written or oral, made by or on behalf
of Seller or any of its Affiliates. Seller shall be solely responsible for the
payment of any such fee or commission to any person or entity listed on Schedule
3.7 as an exception to the foregoing.
<PAGE>
Section 3.8 Title to Personal Property. Each Subsidiary has good and
defensible title, or valid and effective leasehold rights in the case of leased
property, to all tangible personal property owned by such Subsidiary or used in
the operations of the applicable Facility, free and clear of all liens, charges,
claims, pledges, security interests, equities and encumbrances of any nature
whatsoever, except for those created or allowed to be suffered by Buyer and
except for the following (individually and collectively, the "Permitted
Encumbrances"): (a) the lien of current taxes not delinquent, (b) matters that
when viewed in the aggregate, do not have a Material Adverse Effect on RSC and
the Subsidiaries, (c) such consents, authorizations, approvals and Licenses as
are referred to in Sections 3.5 and 3.6, (e) liens, charges, claims, pledges,
security interests, equities and encumbrances which will be discharged or
released either prior to, or substantially simultaneously with, the Closing, and
(f) liens created under or pursuant to the Real Property Leases.
Section 3.9 Contracts and Leases. Except for matters that, when viewed
in the aggregate, do not have a Material Adverse Effect on RSC and the
Subsidiaries, (a) there is no liability to any person by reason of the default
by Seller, RSC or a Subsidiary under any Real Property Lease or Other Contract,
(b) neither Seller nor RSC nor any Subsidiary has received written or other
notice that any person intends to cancel or terminate any Real Property Lease or
Other Contract, (c) all of the Real Property Leases and Other Contracts are in
full force and effect, (d) subject to the provisions of Sections 3.5 and 3.6,
the consummation of the transactions contemplated by this Agreement will not
constitute and, to the best of Seller's current actual knowledge, no event has
occurred which, with or without the passage of time or the giving of notice,
would constitute a breach or default by Seller, RSC or a Subsidiary of such Real
Property Lease or Other Contract or would cause the acceleration of any
obligation of Seller, RSC or any Subsidiary or the creation of any lien (except
for Permitted Encumbrances) upon any asset of RSC or any Subsidiary, and (e)
neither Seller nor RSC nor any Subsidiary has waived any right under any Real
Property Lease or Other Contract.
Section 3.10 Licenses. To the best of Seller's current actual
knowledge, and except for such matters which, in the aggregate, do not have a
Material Adverse Affect on RSC and the Subsidiaries, (a) the Subsidiaries
possess all Licenses necessary for their operation of the Facilities at the
locations and in the manner presently operated, (b) if required, such Facilities
are accredited by applicable accrediting agencies as necessary for their
operations in the manner presently operated, (c) such Facilities are certified
for participation in the Medicare and applicable Medicaid programs and have
current and valid provider contracts with such programs, and (d) there is no
matter which would adversely affect the maintenance of any such Licenses,
program participations or accreditations.
Section 3.11 Employee Relations. With respect to the employees of RSC
and the Subsidiaries:
(a) Neither Seller nor RSC nor any Subsidiary nor any Facility
is a party to any agreement with any union, trade association or other similar
employee organization, no written demand has been made for recognition by a
labor organization, and to the best of Seller's current actual knowledge no
union organizing activities by or with respect to any such employees are taking
place; and
<PAGE>
(b) There are no controversies (including, without limitation,
any unfair labor practice complaints, labor strikes, arbitrations, disputes,
work slowdowns or work stoppages) affecting a material number of such employees
pending, or to the best of Seller's current actual knowledge, threatened.
Section 3.12 Employee Plans. Except for the Pension Plans, and except
as set forth on Schedule 3.19(d) hereto, neither RSC nor any Subsidiary has
established or maintains or is obligated to make contributions to or under or
otherwise participate in any Employee Benefit Arrangement. All such Employee
Benefit Arrangements have been operated and administered in all material
respects in accordance with, as applicable, ERISA, the Code, Title VII of the
Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the
age discrimination in employment act of 1967, as amended, the Americans with
Disabilities Act, as amended, and the related rules and regulations adopted by
those federal agencies responsible for the administration of such Laws. All
accrued benefits under any such Employee Benefit Arrangement will be fully
funded at the Closing Date. No act or failure to act by Seller, RSC or any
Subsidiary has resulted in a "prohibited transaction" (as defined in ERISA).
With respect to any employee benefit plan, and no "reportable event" (as defined
in ERISA) has occurred with respect to any such employee benefit plan.
Section 3.13 Litigation. Except for ordinary routine claims and
litigation incidental to the businesses represented by the Facilities
(including, but not limited to, actions for negligence, professional
malpractice, workers' compensation claims, so-called "slip-and-fall" claims and
the like), and governmental inspections and reviews customarily made of
businesses such as those operated from the Facilities, there are no actions,
suits, claims or proceedings pending, or to the current actual knowledge of
Seller, threatened against or affecting RSC or the Subsidiaries or relating to
the operations of the Facilities, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, agency
or instrumentality. Schedule 3.13 sets forth identifying information and a brief
description with respect to any pending or, to the current actual knowledge of
Seller, RSC and the Subsidiaries, threatened claims or litigation affecting RSC,
the Subsidiaries or the Facilities (i) where the amount in controversy exceeds
$100,000, (ii) which involve any alleged violation of any Laws or (iii) which
could otherwise be reasonably expected to have a Material Adverse Effect on RSC
or the applicable Subsidiary.
Section 3.14 Inventory. All Inventory of the Facilities will, at the
Closing Date, consist of a quality and quantity usable and salable in the
ordinary course of business, except for items of obsolete materials and
materials of below-standard quality, all of which in the aggregate are
immaterial to the financial condition or results of operations of the businesses
operated from the Facilities taken as a whole, or have been, or prior to Closing
will be, written down to realizable market value.
Section 3.15 Hazardous Substances. To the best of Seller's current
actual knowledge, except as may be disclosed by the Environmental Survey (as
defined in Section 6.2(b)):
(a) There are no Hazardous Materials (as defined below) upon,
about, beneath or migrating or threatening to migrate to or from the Owned Real
Property or the Leased Real Property or the existence of any violation in any
material respect of any Laws relating to industrial hygiene, Hazardous Materials
and environmental protection ("Environmental Regulations"); and
<PAGE>
(b) There is no proceeding or action pending or threatened by
any person or governmental agency regarding the environmental condition or
occupational safety of the Facilities.
"Hazardous Materials" shall mean any substance (including, without limitation,
any asbestos, formaldehyde, radioactive substance, hydrocarbons, polychlorinated
biphenyls, industrial solvents, flammables, explosives and any other hazardous
substance or toxic material) which, in any material respect, is known to cause,
as of the date of this Agreement, a health, safety or environmental hazard and
require remediation at the behest of any governmental agency.
Section 3.16 Financial Information and Related Matters.
(a) To be attached hereto as Schedule 3.16(a) within seven
days after the execution and delivery of this Agreement is an unaudited
statement of certain combined earnings from the operations of the Facilities (as
they were comprised on the as of date of such schedule) before interest, income
taxes, depreciation and amortization ("EBITDA") for the fiscal year ended June
30, 1994 (the "EBITDA Statements") and for the six months ended December 31,
1994. The EBITDA Statements present fairly the combined EBITDA of such
operations, taken as a whole, as of the dates and for the periods shown, and
were derived from and are in accordance with the internal books and records of
RSC and the Subsidiaries and the regularly prepared unaudited internal financial
statements of the Facilities, which are prepared on a basis materially in
accordance with the generally accepted accounting principles utilized in the
preparation of the published financial statements of Seller.
(b) Attached hereto as Schedule 3.16(b) is a regularly
prepared internal unaudited combined balance sheet of the Facilities as of
December 31, 1994 (the "Balance Sheet"; collectively, the Balance Sheet and the
EBITDA Statement are the "Financial Schedule"). The Balance Sheet has been
prepared from, and is in accordance with, the internal books and records of RSC
and the Subsidiaries and presents fairly the financial condition of the
Facilities, taken as a whole, as of the date shown. The Balance Sheet was
prepared in accordance with Seller's practices for the preparation of internal
financial statements, consistently applied, and is materially in accordance with
the generally accepted accounting principles utilized in the preparation of the
published financial statements of Seller.
(c) Notwithstanding the foregoing, the Financial Schedule does
not (i) reflect allocations of indirect costs and overhead or the corresponding
cost reimbursement impact of claiming such costs in a Facility cost report, (ii)
reflect all intercompany eliminations, adjustments and accruals that are
reflected in financial statements of Seller, (iii) reflect any anticipation of
the divestiture of the Facilities and any adjustments to the carrying values of
the Facilities occasioned thereby, (iv) contain footnotes or other explanatory
material associated with financial statements prepared in accordance with
generally accepted accounting principles, or (v) contain normal year-end
adjustments with respect to interim peri- ods. In addition, the Financial
Schedule is to be read in conjunction with, and is subject to, all notes and
other explanatory material set forth therein.
<PAGE>
(d) The Balance Sheet reflects the amount of Receivables as of
the date thereof, net of allowances customarily recorded by the Subsidiaries for
uncollectible and doubtful accounts, and contractual allowances pursuant to
agreements with Payors, all in conformity with Seller's practices for the
preparation of internal financial statements and materially in accordance with
the generally accepted accounting principles utilized in the preparation of the
published financial statements of the Seller and the past practices employed by
each Subsidiary. To the current actual knowledge of Seller, all such Receivables
included in the Balance Sheet represent amounts validly owed to the applicable
Subsidiary by reason of the provision of goods, services and other consideration
by such Subsidiary, and, to the current actual knowledge of Seller, are not
valued in excess of the amounts expected to be collected with respect thereto.
Each Subsidiary maintains its accounting records in sufficient detail to
substantiate the Receivables reflected on the Balance Sheet. Since the date of
Seller's most recent audited financial statements, neither Seller nor RSC nor
any Subsidiary has changed any principle or practice with respect to the
recordation of accounts receivable or the calculation of reserves therefor, or
any material collection, discount or write-off policy or procedure.
(e) RSC and the Subsidiaries, as applicable, have timely filed
all Cost Reports required to be filed with respect to the Facilities prior to
the date of this Agreement. All such Cost Reports are, to the knowledge of
Seller, true and complete in all material respects and comply in all material
respects with all applicable Laws respecting Cost Reports. Neither Seller nor
RSC nor any Subsidiary has received any notice with respect to any challenge,
dispute or adjustment with respect to any open Cost Reports except challenges,
disputes or adjustments (i) which, if resolved adversely to Seller, RSC or the
Applicable Subsidiary, as the case may be, would not have a Material Adverse
Effect on such entity, or (ii) which are described on Schedule 3.16(e).
(f) Each of RSC and the Subsidiaries has filed all returns
required to be filed by it, and made all payments required to be made by it,
with respect to any Taxes as to which such filings or payments were due on or
before the date of this Agreement. To the best of Seller's knowledge, neither
RSC nor any Subsidiary has any liability with respect to any Taxes for which its
reserves are inadequate, except for sales, use, employment and similar Taxes for
periods as to which such Taxes have not yet become due and payable.
Section 3.17 Changes Since Balance Sheet. Since the date of the Balance
Sheet and up to and including the date of this Agreement, other than as
contemplated or permitted by this Agreement, RSC and the Subsidiaries have
conducted their respective businesses only in the ordinary and normal course,
except for matters in anticipation of the divestiture of the Facilities, and
there has not been:
(a) Any entry into or termination by Seller or RSC or a
Subsidiary of any material commitment, contract, agreement or transaction
(including, without limitation, any borrowing or lending transaction or capital
expenditure) related to RSC, the Subsidiaries or the Facilities, except for
transactions in the ordinary course of business and renegotiation of credit
agreements to which Seller and certain of its subsidiaries are parties;
<PAGE>
(b) Any casualty, physical damage, destruction or physical
loss respecting, or change in the physical condition of, the Facilities and the
Equipment that has had a Material Adverse Effect on RSC and the Subsidiaries;
(c) Any transfer of or rights granted under any contract which
would have been an Other Contract on the date of the Balance Sheet except for
transactions in the ordinary course of business;
(d) Other than in the ordinary course of business, any sale or
other disposition of any fixed asset included in the Balance Sheet having a net
book value in excess of $50,000 or any material mortgage, pledge or imposition
of any lien or other encumbrances on any such asset, or sales or dispositions
of, or the imposition of material encumbrances on, fixed assets included in such
Balance Sheet having a net book value that exceeds $250,000 in the aggregate, or
any sale or other disposition of Inventories included in the Balance Sheet;
(e) Any amendment (other than general amendments which the
carrier makes for a category of policy) or termination of any insurance policy
or failure to renew any insurance policy covering the Facilities, except for
amendments, terminations or failures to renew that do not have a Material
Adverse Effect on RSC and the Subsidiaries;
(f) Any default or breach by Seller, RSC or a Subsidiary under
any contract that would have been an Other Contract on the date of the Balance
Sheet which, when viewed individually or in the aggregate of all such breaches
or defaults, has had a Material Adverse Effect on RSC and the Facilities; or
(g) Any increase made in the compensation levels of any chief
executive officer or chief financial officer of any Facility, or any general
increase made in the compensation levels of the other employees of RSC or any
Subsidiary, except in the ordinary course of business.
Section 3.18 Compliance with Laws. Except as otherwise disclosed in
this Agreement (or in the Schedule thereto), RSC, each Subsidiary and each
Facility are, to the knowledge of NovaCare and Seller, in compliance in all
material respects with all Laws applicable to a Facility or the operations
thereof, and neither Seller, RSC nor any Facility has received any notices of
violations of any such Laws.
Section 3.19 Lists of Other Data. Except for contracts and agreements
already listed in Schedules 1.1-2 and 1.1-4, Schedules 3.19(a) through (f)
contain lists, complete and correct as of the dates shown thereon, of the
following:
(a) The most recent regularly generated depreciation schedules
0related to tangible personal property constituting Equipment, together with
copies of such schedules;
(b) Each lease constituting an Other Contract as of such date
(whether an operating or a capital lease) under which tangible personal property
was leased, where the annualized lease payments exceed $25,000;
<PAGE>
(c) A brief description of insurance in force covering fixed
assets that would constitute assets of the Facilities as of such date;
(d) All compensation, bonus, incentive, deferred payments,
retirement, pension, severance, profit-sharing, stock purchase and stock option
plans, group life, automobile, medical, dental, disability, welfare or other
employee benefit plans or insurance policies, and other similar arrangements
(collectively, "Employee Benefit Arrangements") generally applicable to the
employees of the Facilities or a substantial part thereof or generally
applicable to the chief executive or chief financial officers, or a substantial
part thereof, of the Facilities as of such date;
(e) The aggregate accrued paid time off (including vacation
time) and earned or available sick pay for all employees at each Facility, as of
the date shown; and
(f) Material Licenses of Seller and the Subsidiaries in force,
as of the date shown, with respect to the Facilities.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller, as of the date hereof,
as follows, except as disclosed in Schedule 4:
Section 4.1 Organization and Corporate Power. Buyer is a corporation
duly incorporated and validly existing under the laws of, and is authorized to
exercise its corporate powers, rights and privileges and is in good standing in,
the State of Delaware and has full corporate power to carry on its business as
presently conducted and to own or lease and operate its properties and assets
now owned or leased and operated by it.
Section 4.2 Authority Relative to this Agreement. The execution,
delivery and performance of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
and effectively authorized by the board of directors of Buyer; no other
corporate act or proceeding on the part of Buyer, its board of directors or its
stockholders is necessary to authorize this Agreement, any such Related
Agreement or the transactions contemplated hereby and thereby. This Agreement
has been, and each of the Related Agreements contemplated hereby will, as of the
Closing, have been, duly executed and delivered by Buyer and this Agreement
constitutes, and each such Related Agreement when executed and delivered will
constitute, a valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms, except as it may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar Laws now or hereafter in
effect relating to creditors' rights generally and that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding may be brought.
Section 4.3 Absence of Breach. Subject to the provisions of Sections
4.4 and 4.5 below regarding private party and governmental consents, and except
for compliance with the requirements of the HSR Act and any regulatory or
licensing Laws applicable to the businesses and assets represented by the
Facilities, the execution, delivery and performance by Buyer of this Agreement
and the Related Agreements do not, (a) conflict with or result in a breach of
any of the provisions of Charter Documents of Buyer, (b) contravene any Law or
cause the suspension or revocation of any License presently in effect, which
affects or binds Buyer or any of its material properties, or (c) conflict with
or result in a breach of or default under any indenture or loan or credit
agreement or any other agreement or instrument to which Buyer is a party or by
which it or any of its properties may be affected or bound.
<PAGE>
Section 4.4 Private Party Consents. The execution, delivery and
performance by Buyer of this Agreement and the Related Agreements do not require
the authorization, consent or approval of any non-governmental third party.
Section 4.5 Governmental Consents. The execution, delivery and
performance by Buyer of this Agreement and the Related Agreements do not require
the authorization, consent, approval, certification, license or order of, or any
filing with, any court or governmen- tal agency, except for compliance with the
HSR Act and except for such governmental authorizations, consents, approvals,
certifications, licenses and orders that customarily accompany the transfer of
health care facilities such as the Facilities.
Section 4.6 Brokers. No broker, finder, or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with this Agreement or the transactions contemplated hereby based upon any
agreements or arrangements or commitments, written or oral, made by or on behalf
of Buyer or any of its Affiliates. Buyer shall be solely responsible for the
payment of any such fee or commission to any person or entity listed on Schedule
4.6 as an exception to the foregoing.
Section 4.7 Qualified for Licenses. Buyer is qualified to obtain any
Licenses and program participations necessary for the operation by Buyer of the
Facilities in the same manner as the Facilities are presently operated by Seller
and the Subsidiaries. Each of Buyer and its Affiliates possesses all Licenses
and program participations necessary to permit them to operate the healthcare
facilities operated by them. If required, all such healthcare facilities are
accredited by applicable accrediting agencies as necessary for their operations
in the manner presently operated. Neither Buyer nor any of its Affiliates has
received any notice or has any knowledge of any matter which would materially
adversely affect the maintenance of any such Licenses, program participations or
accreditations.
Section 4.8 Financial Ability to Perform. Buyer has liquid capital or
committed sources therefor sufficient to permit it to perform timely its
obligations hereunder, including, but not limited to, the payment of the
Purchase Price to Seller at the Closing and the other payments to Seller
required hereunder. Promptly after its receipt of letters of commitment or other
documents related to the financing of its obligations hereunder, Buyer will
provide copies of the same to Seller.
Section 4.9 No Assurance. Buyer acknowledges and agrees that the rates
or bases used in calculating payments or reimbursements to it by any Payor
(including but not limited to Medicare) may differ from the rates and bases used
in calculating such payments or reim- bursements to Seller, RSC and the
Subsidiaries.
<PAGE>
Section 4.10 Disposal of Assets. Buyer does not intend to or currently
plan to dispose of, or cause RSC to dispose of, a significant part of the assets
of RSC or the Subsidiaries within two years after the Closing, other than
dispositions in the ordinary course of business or to eliminate duplicate
facilities or excess capacity.
ARTICLE 5
COVENANTS OF EACH PARTY
Section 5.1 Efforts to Consummate Transactions. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use its
reasonable commercial efforts to take, or to cause to be taken, all reasonable
actions and to do, or to cause to be done, all reasonable things necessary,
proper or advisable under applicable Laws to consummate and make effective, as
soon as reasonably practicable, the Transaction contemplated hereby, including
the satisfaction of all conditions thereto set forth herein. Such actions shall
include, without limitation, exerting their reasonable efforts to obtain the
consents, authoriza- tions and approvals of all private parties and governmental
authorities whose consent is reasonably necessary to effectuate the Transaction
contemplated hereby, and effecting all other necessary registrations and
filings, including but not limited to filings under Laws relating to the
transfer or obtaining of necessary Licenses, under the HSR Act and all other
necessary filings with governmental authorities. The foregoing notwithstanding,
it shall be the responsibility of Buyer to use its reasonable commercial efforts
and to act diligently and at its expense to obtain any authorizations, approvals
and consents in connection with acquiring Licenses and program participations
that will permit it to operate the Facilities after the Closing. Subject to
Sections 2.6 and 8.8, neither party shall have any liability to the other if,
after using its reasonable commercial efforts (and, in the case of Buyer's
efforts to obtain requisite Licenses, acting diligently), it is unable to obtain
any consents, authorizations or approvals necessary for such party to consummate
the Transactions, except as may result from cooperative arrangements determined
in accordance with Section 2.8. As used herein, the terms "reasonable commercial
efforts" or "reasonable efforts" do not include the provision of any
consideration to any third party or the suffering of any economic detriment to a
party's ongoing operations for the procurement of any such consent,
authorization or approval except for the costs of gathering and supplying data
or other information or making any filings, fees and expenses of counsel and
consultants and for customary fees and charges of governmental authorities and
accreditation organizations.
Section 5.2 Cooperation. Prior to and after the Closing, upon prior
reasonable written request, each party agrees to cooperate with the other in
every reasonable commercial way to consummate the Transaction. Notwithstanding
the foregoing, all analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of either
party hereto in connection with proceedings under or relating to the HSR Act or
any other federal or state antitrust or fair trade law, or made or submitted by
or on behalf of Buyer in connection with proceedings to obtain the Licenses and
program participations referred to in Section 5.1 hereof, shall be subject to
the joint approval or disapproval and the joint control of Buyer and Seller,
acting with the advice of their respective counsel, it being the intent of the
foregoing that the parties hereto will consult and cooperate with one another,
and consider in good faith the views of one another, in connection with any such
analysis, presentation, memorandum, brief, argument, appearance, opinion or
proposal; provided that nothing herein shall prevent either party hereto or any
of their Affiliates or their authorized representatives from (a) making or
submitting any such analysis, appearance, presentation, memorandum, brief,
argument, opinion or proposal in response to a subpoena or other legal process
or as otherwise required by Law, or (b) submitting factual information to the
United States Department of Justice, the Federal Trade Commission, any other
govern- mental agency or any court or administrative law judge in response to a
request therefor or as otherwise required by Law.
<PAGE>
Section 5.3 Further Assistance. From time to time, at the request of
either party, whether on or after the Closing, without further consideration,
either party, at its expense and within a reasonable amount of time after
request hereunder is made, shall execute and deliver such further instruments of
assignment, transfer and assumption and take such other action as may be
reasonably required to more effectively assign and transfer the RSC Shares to
Buyer, deliver or make the payment of the Purchase Price to Seller or any
amounts due from one party to the other pursuant to the terms of this Agreement
or confirm Seller's ownership of the Excluded Assets.
Section 5.4 Cooperation Respecting Proceedings. After the Closing, upon
prior reason- able written request, each party shall cooperate with the other,
at the requesting party's expense (but including only out-of-pocket expenses to
third parties and not the costs incurred by any party for the wages or other
benefits paid to its officers, directors or employees), in furnishing
information, testimony and other assistance in connection with any inquiries,
actions, tax or cost report audits, proceedings, arrangements or disputes
involving either of the parties hereto (other than in connection with disputes
between the parties hereto) and based upon contracts, arrangements or acts of
Seller, RSC or any of the Subsidiaries which were in effect or occurred on or
prior to the Closing and which relate to the Facilities, including, without
limitation, arranging discussions with (and the calling as witness of) officers,
directors, employees, agents, and representatives of Buyer.
Section 5.5 Expenses. Whether or not the Transactions contemplated
hereby are consummated, except as otherwise provided in this Agreement, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses. Notwithstanding the foregoing:
(a) All costs of the Environmental Survey referred to in
Section 6.2(b) shall be borne by Buyer;
(b) All charges of any neutral independent public accountant
or mediator, and related costs, shall be borne one-half by Buyer and one-half by
Seller (it being agreed that each party shall bear the costs of its own
independent public accountant or designated mediator);
(c) All fees and charges of governmental authorities and
accreditation agencies in connection with the transfer, issuance or
authorization of any License, accreditation or program participation shall be
borne by Buyer; and
<PAGE>
(d) All fees, charges or costs, including auditing fees and
expenses, incurred as a result of Buyer's compliance with the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder,
shall be borne by Buyer.
All such charges and expenses shall be promptly settled between the parties at
the Closing or upon termination or expiration of further proceedings under this
Agreement, or with respect to such charges and expenses not determined as of
such time, as soon thereafter as is reasonably practicable.
Section 5.6 Announcements; Confidentiality. Prior to the Closing Date,
no press or other public announcement, or public statement or comment in
response to any inquiry, relating to the transactions contemplated by this
Agreement shall be issued or made by Buyer or Seller or any Subsidiary without
the joint approval of Buyer and Seller; provided that a press release or other
public announcement, statement or comment made without such joint approval shall
not be in violation of this Section if it is made in order to comply with
applicable securities Laws or stock exchange policies and in the reasonable
judgment of the party making such release or announcement, based upon advice of
independent counsel, prior review and joint approval, despite reasonable efforts
to obtain the same, would prevent dissemination of such release or announcement
in a timely enough fashion to comply with such Laws or policies, provided that
in all instances prompt notice from one party to the other shall be given with
respect to any such release, announcement, statement or comment. Subject to the
foregoing, the parties hereto recognize and agree that all information,
instruments, documents and details concerning the businesses of Buyer, Seller,
RSC and the Subsidiaries are strictly confidential, and Seller and Buyer
expressly covenant and agree with each other that, prior to and after the
Closing, they will not, nor will they allow any of their respective officers,
directors, employees, representatives or agents (including professional
advisors) to disclose or publicly comment upon any matters relating to the
business of the other or relating to this Agreement, including, without
limitation, the terms, timing or progress of the transactions contemplated
hereby, or its negotiation, terms, provisions or conditions, including Purchase
Price, except for disclosure to their respective professional advisors (who
shall agree not to disclose the same) which is reasonably necessary to
effectuate the Transaction contemplated hereby and in a manner consistent with
the provisions of this Agreement. Each party shall keep all information obtained
from the other either before or after the date of this Agreement confidential,
and neither party shall reveal such information to, nor produce copies of any
written information for, any person outside its management group or its
professional advisors without the prior written consent of the other party,
unless such party is compelled to disclose such information by judicial or
administrative process or by any other requirements of Law. If the Transaction
contemplated by this Agreement should fail to close for any reason, each party
shall return to the other as soon as practicable all originals and copies of
written information provided to such party by or on behalf of the other party
and none of such information shall be used by either party, or their employees,
agents or representatives in the business operations of any person.
Notwithstanding the foregoing, each party's obligations under this Section shall
not apply to any information or document which is or becomes available to the
public other than as a result of a disclosure by the other party in violation of
this Agreement or other obligation of confidentiality under which such
information may be held or becomes available to the party on a non-confidential
basis from a source other than the other party or its officers, directors,
employees, representatives or agents. The parties' obligations under this
Section shall survive the termination of this Agreement. Nothing in this Section
shall, or is intended to, impair or modify any of the rights or obligations of
Buyer or its Affiliates under that certain letter agreement dated January 14,
1995, 1995, all of which remain in effect until termination of such letter
agreement in accordance with its terms.
<PAGE>
Section 5.7 Cost Reports.
(a) Buyer shall cause the Subsidiaries to prepare and file the
Cost Reports as required under their agreements and applicable laws, rules and
regulations pertaining to Medicare and Medicaid for their current cost report
years (the "Current Cost Reports"; similar Cost Reports for prior periods are
referred to as the "Prior Cost Reports") within the time periods required under
said agreements, laws, rules and regulations. Seller shall cooperate in the
preparation of the Cost Reports.
(b) No adjustments or positions shall be taken or agreed to by
Buyer or the Subsidiaries or their successors with respect to the Current Cost
Reports, or with respect to any Cost Reports for prior or subsequent periods,
which would create any claims on the part of Buyer pursuant to Article 11
without prior written consent of Seller. With respect to rights retained by
Seller relating to Prior Cost Reports, Seller shall not agree to any adjustment
or take any position which would adversely effect Buyer or the Subsidiaries or
their successors without prior written consent of Buyer. In the event that
Seller and Buyer fail to agree on any such adjustments or positions, either of
Seller or Buyer may cause the matter to be resolved by arbitration; provided,
however, that the arbitrator chosen by the parties shall have experience with
and understanding of the rules and regulations of the Payor with which the Cost
Report in question is to be filed and in the preparation of Cost Reports. The
matter shall be resolved within the time for filing such Cost Reports, or within
the time required for taking any action with respect thereto, including such
extensions as Buyer can cause the Subsidiaries to obtain using the best efforts
of said companies.
(c) NovaCare shall prepare and file its Home Office Cost
Statement for the fiscal year beginning on July 1, 1994 and ending on June 30,
1995 within the time period required pursuant to applicable laws and
regulations. Buyer agrees to include NovaCare's home office expenses in the
applicable Subsidiaries' Cost Reports and to cause RSC and the Subsidiaries to
deliver to NovaCare within ten days after their receipt thereof any payments
made by Medicare or other cost-based payors based on such Cost Reports or based
on the Home Office Cost Statement for prior periods, or any appeals of such
reports.
(d) The Closing Balance Sheet will contain Receivables
representing amounts Seller determines are payable by Medicare to the
Subsidiaries pursuant to the Current Cost Reports and the Prior Cost Reports. A
separate schedule identifying these amounts based on the financial data in the
Closing Balance Sheet and back-up materials will be prepared and delivered by
Seller along with the Closing Balance Sheet. In addition, RSC and the
Subsidiaries may receive payments from Medicare or other cost-based payors
pursuant to appeals of items contained in the Prior Cost Reports. Buyer agrees
to cause RSC and the Subsidiaries to deliver to NovaCare, Inc. within ten days
after their receipt thereof (i) any payments based on the Current Cost Reports
in excess of the amounts reflected on such schedule; and (ii) any payments based
on the Prior Cost Reports in excess of the amounts reflected on such schedule.
(e) Buyer, RSC or the Subsidiaries may be obligated to repay
Medicare or other cost-based payors for amounts which were reflected on Prior
Cost Reports or on the Current Cost Reports. Seller agrees to reimburse Buyer,
within ten days after such repayment is made, to the extent such repayments
exceed the amounts reflected on the schedule referred to in 5.7(d) as a
liability for such repayment. In such event, Buyer and Seller shall mutually
agree on whether to appeal the determination resulting in such repayment
obligation.
<PAGE>
ARTICLE 6
ADDITIONAL COVENANTS OF SELLER
Seller hereby additionally covenants, promises and agrees as follows:
Section 6.1 Conduct Pending Closing. Prior to consummation of the
Transaction contemplated hereby or the termination or expiration of this
Agreement pursuant to its terms, unless Buyer shall otherwise consent in
writing, which consent shall not be unreasonably withheld or delayed, and except
for actions taken pursuant to Real Property or Other Contracts, or which arise
from or are related to the anticipated transfer of the RSC Shares, or as
otherwise contemplated by this Agreement or disclosed in Schedule 6.1 or another
Schedule to this Agreement, Seller shall, and shall cause RSC and the
Subsidiaries to:
(a) Conduct the business represented by, and otherwise deal
with, the Facilities only in the usual and ordinary course, materially
consistent with practices followed prior to the execution of this Agreement;
(b) Use reasonable efforts to keep intact the Facilities and
the business they represent and to preserve relationships beneficial to such
business that physicians, patients, Payors, suppliers and others have with the
Facilities;
(c) Except as required by their terms, not amend, terminate,
renew, fail to renew or renegotiate any material contract, except in the
ordinary course of business and consistent with practices of the recent past, or
default (or take or omit to take any action that, with or without the giving of
notice or passage of time, would constitute a default) in any of its obligations
under any such contracts, that would be a Real Property Lease or Other Contract
as of the date hereof;
(d) Not sell, lease, mortgage, encumber, or otherwise dispose
of or grant any interest in, or permit or suffer to exist any lien or
encumbrance upon or the disposition of, any Facility, Inventory, or items of
Equipment having an undepreciated book value in excess of $25,000, including
without limitation any of its leasehold interests therein, whether by the taking
of action or the failure to take action, except for (i) sales of Inventory in
the ordinary course, (ii) liens constituting Permitted Encumbrances, or (iii)
sales or dispositions of Equip- ment in the ordinary course of business that are
consistent with practices of the recent past;
(e) Maintain in force and effect the insurance policies
identified in Section 3.19(c);
(f) Not enter into any contract that will constitute a Real
Property Lease or Other Contract as of the Closing except in the ordinary course
of business and consistent with practices of the recent past; or
<PAGE>
(g) Not grant any general or uniform increase in the rates of
pay or benefits to employees of the Facilities (or a class thereof) or any
increase in salary or benefits of any chief executive or financial officer of
any Facility, except for compensation previously agreed to prior to the date
hereof;
provided that nothing in this Section shall (i) obligate Seller or any
Subsidiary to make expenditures other than in the ordinary course of business
and consistent with practices of the recent past or to otherwise suffer any
economic detriment, or (ii) preclude Seller from paying, prepaying or otherwise
satisfying any liability of RSC or any Subsidiary.
Section 6.2 Access and Information; Environmental Survey; Remediation
or Adjustment.
(a) Subject to the restrictions set forth in Section 5.6
respecting confidentiality, Seller shall, and shall cause the Subsidiaries to,
afford Buyer, and the counsel, accountants and other representatives of Buyer,
reasonable access, throughout the period from the date hereof to the Closing, to
the Facilities and the employees, personnel and medical staff associated
therewith and all the properties, books, contracts, commitments, cost reports
and records respecting RSC, the Subsidiaries and the Facilities (regardless of
where such information may be located). Such access shall be afforded after no
less than 24 hours' prior written notice, during normal business hours whenever
reasonably possible and only in such manner so as not to disturb patient care or
to interfere with the normal operations of the Facilities. Seller's covenants
under this Section are made with the understanding that Buyer shall use all such
information in compliance with all Laws.
(b) At least ten business days prior to the Closing, Seller
shall, if so requested by Buyer, provide to Buyer copies of an environmental
survey conducted (at Buyer's expense) with respect to each of the Facilities
(the "Environmental Survey"). The Environmental Survey shall be conducted by an
environmental consulting firm or firms (the "Consultant") and in accordance with
such reasonable procedures as are jointly determined by Seller and Buyer. The
results of any such Environmental Survey shall be delivered to and owned by
Seller, and all proceedings in connection with the Environmental Survey and the
results thereof shall be subject to the confidentiality provisions of Section
5.6 and such other restrictions as Seller may impose in its reasonable
discretion. Buyer acknowledges and agrees that the Environmental Survey shall be
only an initial "Phase I" environmental site assess- ment. If subsequently
agreed by Seller and Buyer, after consultation with Consultant, to be necessary
or prudent and if Seller and Buyer jointly thereafter direct the Consultant to
undertake the same (at Buyer's sole cost and expense), the Environmental Survey
may include a further "Phase II" investigation respecting certain Facilities. In
any "Phase II" investigation, Seller shall give Buyer no less than 24 hours'
notice before the Consultant enters onto any Facility, and the "Phase II"
Environmental Survey shall be conducted so as not to interfere with the normal
operation of the Facilities. Buyer shall be permitted to have one of its
employees present during all inspections of, and sample gatherings (including
borings) from the soil or any floor tile, insulation or other internal component
of, a Facility.
(c) With respect to any matters disclosed by such
Environmental Survey that would constitute a breach of Seller's warranties in
Section 3.15, but for the qualifications to such warranties based on Seller's
knowledge or disclosures in the Environmental Survey, Seller will at its
election, either (i) clean up or otherwise remediate such matters in a
reasonable manner prior to the Closing Date, at its expense; or (ii) reimburse
Buyer for the costs of such reasonable clean-up or remediation incurred by Buyer
after the Closing Date, provided Seller shall have approved such costs in
advance and in writing (such approval not unreasonably to be withheld).
<PAGE>
(d) Promptly after execution and delivery of this Agreement,
Seller shall provide, or shall cause RSC or any applicable Subsidiary to
provide, Buyer with a copy of the most recent title binder, commitment or policy
in the possession of any of the foregoing entities with respect to the Owned
Real Property and the Leased Real Property, together with any documentation in
any of such entities' possession relating to any exceptions or encumbrances
reflected on such title binders, commitments or policies.
Section 6.3 Updating. Seller shall notify Buyer of any changes or
additions to any of Seller's Schedules to this Agreement by the delivery of
updates thereof, if any, not later than five business days prior to the Closing,
provided, however, that the Financial Schedule shall not be updated to cover any
period or periods subsequent to the respective dates thereof. No such updates
made pursuant to this Section shall be deemed to cure any breach of any
representation or warranty made in this Agreement, unless Buyer specifically
agrees thereto in writing, nor shall any such notification be considered to
constitute or give rise to a waiver by Buyer of any condition set forth in this
Agreement. Seller has delivered to Buyer all Other Contracts and leases that
Seller has knowledge of, if such contracts were located at the corporate offices
of Seller. Seller shall deliver all Other Contracts and leases which it is
obligated to deliver pursuant to this Agreement within seven business days after
the date hereof. Unless performance under such contracts or leases would have a
Material Adverse Effect (as defined in Section 3.4), Buyer shall have no claim
against Seller based on the delivery after the date hereof rather than before
execution of this Agreement.
Section 6.4 No Solicitation. Seller will not, and shall cause RSC and
the Subsidiaries not to, and will use its best efforts to cause its and their
officers, employees, agents and representatives (including any investment
banker) not to, directly or indirectly, solicit, encourage or initiate any
discussions with, or, subject to fiduciary duties to shareholders, negotiate or
otherwise deal with, or provide any information to, any corporation,
partnership, person or other entity or group, other than Buyer and its officers,
employees and agents, concerning any sale of or similar transactions involving
RSC, the Facilities or the stock of the Subsidiaries. None of the foregoing
shall prohibit providing information to others in a manner in keeping with the
ordinary conduct of Seller's or the Subsidiaries' businesses.
Section 6.5 Filing of Cost Reports. Seller shall cause to be prepared
and timely filed all Cost Reports which are required to be filed prior to the
Closing Date with Medicare and any other cost-based Payors with respect to the
operations of the Facilities for any and all periods ending prior to the Closing
Date.
<PAGE>
ARTICLE 7
ADDITIONAL COVENANTS OF BUYER
Section 7.1 Waiver of Bulk Sales Law Compliance. Subject to the
indemnification provisions of Section 11.3(a)(iii) hereof, Buyer hereby waives
compliance by Seller and the Subsidiaries with the requirements, if any, of
Article 6 of the Uniform Commercial Code as in force in any state in which the
Facilities are located and all other similar laws applicable to bulk sales and
transfers.
Section 7.2 Cost Reports and Audit Contests. After the Closing and for
the period of time necessary to conclude any pending or potential audit or
contest of any Cost Reports with respect to the Facilities that include periods
ending on or before the Closing Date, Buyer shall properly keep and preserve all
financial books and records delivered to Buyer by Seller and the Subsidiaries
(if any) and utilized in preparing such Reports, including, without limitation,
accounts payable invoices, Medicare logs and billing information in accordance
with Section 5.7. Upon reasonable written notice by Seller, Seller (or its
agents) shall be entitled, at Seller's expense, during regular business hours,
to have access to, inspect and make copies of all such books and records. Upon
the reasonable request of Seller, Buyer shall assist Seller and the Subsidiaries
in obtaining information deemed by Seller to be necessary or desirable in
connection with any audit or contest of such reports. To the extent required to
meet its obligations under this Section, Buyer shall provide the reasonable
support of its employees at no cost to Seller.
Section 7.3 Letters of Credit. Subject to the terms and conditions
hereof, at the Closing, Buyer shall cause guaranties, letters of credit and
indemnity or performance bonds to be provided to substitute for those letters of
credit and bonds listed in Schedule 7.3, so that at and as of the Closing Seller
and its Affiliates shall have no further obligation to provide such designated
letters of credit or bonds. Buyer shall use its reasonable commercial efforts to
cause the release of NovaCare promptly after Closing from any guaranties related
to the business of RSC or the Subsidiaries, provided that such guaranties have
been disclosed to Buyer in writing.
ARTICLE 8
BUYER'S CONDITIONS TO CLOSING
The obligations of Buyer to consummate the Transactions at the Closing
shall be subject to the fulfillment at or prior to the Closing of the following
conditions, unless Buyer waives such fulfillment:
Section 8.1 Performance of Agreement. Seller shall have performed in
all material respects its agreements and obligations contained in this Agreement
required to be performed on or prior to the Closing.
Section 8.2 Accuracy of Representations and Warranties. The
representations and warranties of Seller set forth in Article 3 of this
Agreement shall be true in all respects as of the date of this Agreement (unless
the inaccuracy or inaccuracies which would otherwise result in a failure of this
condition have been cured by the Closing) and as of the Closing (as updated by
the revising of Schedules contemplated by Section 6.3) as if made as of such
time, except where such inaccuracy or inaccuracies would not individually or in
the aggregate result in a Material Adverse Effect on RSC and the Subsidiaries.
<PAGE>
Section 8.3 Officer's Certificate. Buyer shall have received from
Seller an officer's certificate, executed on Seller's behalf by its chief
executive officer, president, chief financial officer or treasurer (in his or
her capacity as such) dated the Closing Date and stating that to the actual
knowledge of such individual, after inquiry of the other officers identified in
this Section 8.3, the conditions in Sections 8.1 and 8.2 above have been met.
Section 8.4 Consents. The waiting period under the HSR Act shall have
expired or been terminated.
Section 8.5 Absence of Injunctions. There shall not be in effect a
temporary restraining order or a preliminary or permanent injunction or other
order, decree or ruling by a court of competent jurisdiction or by a
governmental agency which restrains or prohibits Buyer's acquisition or
operation of the Facilities, provided that the parties will use their reasonable
efforts to litigate against the entry of, or to obtain the lifting of, any such
order or injunction, and the existence of any such temporary restraining order
or preliminary injunction shall operate, at the option of Seller, only to delay
the Closing (and extend the Termination Date) until the thirtieth day following
the lifting of any such order or injunction, except that such delay may not
extend the original Termination Date for more than nine months.
Section 8.6 Opinion of Counsel. Buyer shall have received, on and as of
the Closing Date, an opinion of Peter D. Bewley, Esq., counsel to Seller,
substantially as to the matters set forth in Sections 3.1, 3.2, 3.3, 3.4(a), and
3.4(c) (to the knowledge of such counsel), subject to customary conditions and
limitations.
Section 8.7 Receipt of Other Documents. Buyer shall have received the
following:
(a) Certified copies of the resolutions of Seller's board of
directors respecting this Agreement, the Related Agreements and the Transaction,
together with certified copies of any stockholder resolutions which are
necessary to approve the execution and delivery of this Agreement and any
Related Agreements and/or the performance of the obligations of Seller hereunder
and thereunder;
(b) Certified copies of Seller's, RSC's and each Subsidiary's
Charter Documents, together with a certificate of the corporate secretary of
each that none of such documents have been amended;
(c) One or more certificates as to the incumbency of each
officer of Seller or of RSC or of any Subsidiary who has signed the Agreement,
any Agreement or any certificate, document or instrument delivered pursuant to
the Agreement or any Agreement;
(d) Good standing certificates for Seller, RSC and each of the
Subsidiaries from the Secretaries of State of their respective states of
incorporation dated as of a date not earlier than 30 days prior to the Closing
Date; and
<PAGE>
(e) Copies of all third party and governmental consents,
permits and authorizations that Seller or any Subsidiary has received in
connection with the Agreement, the Agreements and the Transactions.
Section 8.8 Certificates of Need and Consents. The consent of the West
Virginia Health Care Cost Review Authority ("HCCRA") or other applicable
authority for facilities in other states and the issuance of a Certificate of
Need is legally required for Buyer to operate certain of the Subsidiaries after
Closing. In addition, other approvals, consents, authorizations and waivers from
governmental and accreditation agencies and from other third parties are
required to consummate the transactions. If such approvals, consents,
authorizations, waivers or issuance with respect to one or more of the
Subsidiaries has not been obtained within three days before the date Closing
would otherwise have occurred pursuant to this Agreement, the following
procedure shall be followed:
(i) The shares of the affected Subsidiary or
Subsidiaries which are owned by RSC shall be transferred from RSC to
Seller.
(ii) Seller shall then deposit such shares with an
escrow agent (the "Escrow Agent") chosen by the parties pursuant to the
mechanism in Section 2.8.
(iii) When the approval and issuance of a Certificate
of Need and delivery of consents, authorizations or waivers to Buyer
with respect to such Subsidiary occurs, the Escrow Agent shall deliver
the shares of such Subsidiary of Buyer.
(iv) If the approval and issuance with respect to any
Subsidiary is not approved within six months after Closing, or such
longer period as Buyer may determinie, Buyer shall use commercially
reasonable efforts to resell the shares of such Subsidiary to a buyer
who is able to obtain the required Certificate of Need. Buyer shall be
entitled to retain any proceeds from such sale and shall be subject to
any liabilities or obligations in connection with such sale. Upon
closing of such sale, the Escrow Agent shall deliver the escrowed
shares of such Subsidiary to Buyer.
(v) After Closing, and until release of the shares of
each Subsidiary from escrow, Buyer shall operate the Subsidiary
pursuant to a Management Agreement. Buyer shall be entitled to any
income with respect to each Subsidiary it manages and shall be liable
for any expenses or liabilities with respect to such Subsidiary;
provided, however, that all employees providing services to the
Subsidiary shall remain employees of the Subsidiary and Buyer and the
Subsidiary shall enter into appropriate arrangements to cause Buyer to
bear all compensation expense of such employees.
(vi) Within two weeks after execution of this
Agreement, Buyer and Seller shall agree on the form of Escrow
Agreement, designation of Escrow Agent, and form of Management
Agreement to effectuate the foregoing process. If they are unable to
reach agreement by such time, the dispute shall be settled pursuant to
the mechanism in Section 2.8.
<PAGE>
ARTICLE 9
SELLER'S CONDITIONS TO CLOSING
The obligations of Seller to consummate the Transaction at the Closing
shall be subject to the fulfillment at or prior to the Closing of the following
conditions, unless Seller waives such fulfillment:
Section 9.1 Performance of Agreement. Buyer shall have performed in all
material respects its agreements and obligations contained in this Agreement
required to be performed on or prior to the Closing.
Section 9.2 Accuracy of Representations and Warranties. The
representations and warranties of Buyer set forth in Article 4 of this Agreement
shall be true in all material respects as of the date of this Agreement (unless
the inaccuracy or inaccuracies which would otherwise result in a failure of this
condition have been cured by the Closing) and as of the Closing as if made as of
such time.
Section 9.3 Officer's Certificate. Seller shall have received from
Buyer an officers' certificate, executed on Buyer's behalf by its chief
executive officer, president, chief financial officer or treasurer (in his or
her capacity as such) dated the Closing Date and stating that to the actual
knowledge of such individual after inquiry of the other officers identified in
this Section 9.3, the conditions in Sections 9.1 and 9.2 above have been met.
Section 9.4 Consents. The waiting period under the HSR Act shall have
expired or been terminated, and, subject to the provisions of Sections 2.6, 2.7
and 2.8, all approvals, consents, authorizations and waivers from governmental
and accreditation agencies and from other third parties required for Seller to
consummate the Transaction shall have been obtained, except for such approvals,
consents, authorizations and waivers the failure to obtain which will not,
individually or in the aggregate, result in a Material Adverse Effect on Seller
following the Closing.
Section 9.5 Absence of Injunctions. There shall not be in effect a
temporary restraining order or a preliminary or permanent injunction or other
order, decree or ruling by a court of competent jurisdiction or by a
governmental agency which restrains or prohibits Seller's consummation of the
Transaction, or any threat by governmental authorities to exact any penalty or
impose any economic detriment upon Seller if it consummates the Transac- tions
that would have a Material Adverse Effect upon Seller following the Closing,
provided that the parties will use their reasonable efforts to litigate against
the entry of, or to obtain the lifting of, any such order, injunction or
potential penalty or imposition, and the existence of any such temporary
restraining order, preliminary injunction or potential penalty or imposition
shall operate, at the option of Seller, only to delay the Closing (and extend
the Termination Date) until the thirtieth day following the lifting of any such
order or injunction or threat, except that such delay may not extend the
original Termination Date for more than nine months.
Section 9.6 Opinion of Counsel. Seller shall have received, on and as
of the Closing Date, an opinion ofWilliam W. Horton, Esq., counsel to Buyer,
substantially as to the matters set forth in Sections 4.1, 4.2, 4.3(a), and
4.3(c) (to the knowledge of such counsel), subject to customary conditions and
limitations.
<PAGE>
Section 9.7 Receipt of Other Documents. Seller shall have received the
following:
(a) Certified copies of the resolutions of Buyer's board of
directors respecting this Agreement, the Related Agreements and the
Transactions;
(b) Certified copies of Buyer's Charter Documents, together
with a certificate of Buyer's corporate secretary that none of such documents
have been amended;
(c) One or more certificates as to the incumbency of each
officer of Buyer who has signed the Agreement, any Related Agreement, or any
certificate, document or instrument delivered pursuant to the Agreement or any
Related Agreement;
(d) Good standing certificates for Buyer and for each Buyer
Subsidiary from the Secretaries of State of the State of Delaware dated as of a
date not earlier than 30 days prior to the Closing Date;
(e) Copies of all third party and governmental consents,
permits and authorizations that Buyer has received in connection with the
Agreement, the Related Agreements and the Transactions; and
(f) A certificate of Buyer executed on its behalf by the Chief
Executive Officer, the Chief Financial Officer or the Treasurer of Buyer stating
that to the best of their knowledge and belief, specifying in reasonable detail
their basis for same, after giving effect to the Transaction, neither Buyer nor
any of its Subsidiaries is insolvent or will be rendered insolvent by
obligations incurred in connection therewith, or will be left with unreasonably
small capital with which to engage in their businesses, or will have incurred
obligations beyond their respective abilities to perform the same as and when
due.
ARTICLE 10
TERMINATION
Section 10.1 Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing:
(a) By mutual consent of Seller and Buyer; or
(b) By either Buyer or Seller upon written notice to the other
party, if (i) the Closing shall not have occurred by the later of April 30,
1995, the fifth business day following the expiration of the HSR waiting period,
or such later date as may be provided for in this Agreement or agreed upon by
the parties (the "Termination Date"); or (ii)(A) in the case of termination by
Seller, the conditions set forth in Article 9 cannot reasonably be met by the
Termination Date, and (B) in the case of termination by Buyer, the conditions
set forth in Article 8 cannot reasonably be met by the Termination Date, unless
in either of the cases described in clauses (A) or (B), the failure of the
condition is the result of the material breach of this Agreement by the party
seeking to terminate.
<PAGE>
Each party's right of termination hereunder is in addition to any other rights
it may have hereunder or otherwise.
Section 10.2 Effect of Termination. In the event this Agreement is
terminated pursuant to Section 10.1, all further obligations of the parties
hereunder shall terminate, except that the obligations set forth in Sections,
5.5 and 5.6 and in Articles 11 and 12 shall survive. In the event of termination
of this Agreement as provided above, there shall be no liability on the part of
a party to another under and by reason of this Agreement or the transactions
contemplated hereby except as set forth in Article 11 and except for fraudulent
acts by a party, the remedies for which shall not be limited by the provisions
of this Agree- ment. The foregoing provisions shall not, however, limit or
restrict the availability of specific performance or other injunctive or
equitable relief to the extent that specific performance or such other relief
would otherwise be available to a party hereunder.
ARTICLE 11
SURVIVAL AND REMEDIES; INDEMNIFICATION
Section 11.1 Survival. Except as may be otherwise expressly set forth
in this Agreement, the representations, warranties, covenants and agreements of
Buyer and Seller set forth in this Agreement, or in any writing required to be
delivered in connection with this Agreement, shall survive the Closing and the
consummation of the Transactions.
Section 11.2 Exclusive Remedy. Absent fraud, the sole exclusive remedy
for damages of a party hereto for any breach of the representations, warranties,
covenants and agreements of the other party contained in this Agreement and the
Agreements shall be the remedies contained in this Article 11.
Section 11.3 Indemnity by Seller.
(a) Seller shall indemnify Buyer and hold Buyer harmless from
and against any and all loss, liability, damage and expense, including
reasonable attorneys' fees and costs of investigation, litigation, settlement
and judgment (collectively "Losses"), which Buyer may sustain or suffer or to
which Buyer may become subject as a result of:
(i) The inaccuracy of any representation or the
breach of any warranty made by Seller herein or in a Agreement,
provided that any such inaccuracy or breach shall be determined without
regard to any qualification of such representation or warranty based
upon the absence of a Material Adverse Effect on the Transferred
Assets; and
(ii) The nonperformance or breach of any covenant or
agreement made or undertaken by Seller in this Agreement or in any
Related Agreement.
<PAGE>
(b) The indemnification obligations of Seller provided above
shall, in addition to the qualifications and conditions set forth in Sections
11.5 and 11.6, be subject to the following qualifications:
(i) Buyer shall not be entitled to indemnity under
Section 11.3(a)(i) above unless:
(A) Written notice to Seller of such claim
specifying the basis thereof is made, or an action at law or
in equity with respect to such claim is served, before the
second anniversary of the earlier to occur of the Closing Date
or the date on which this Agreement is terminated, as the case
may be;
(B) If the Closing occurs, the Losses
sustained or suffered by Buyer or to which it may be subject
as a result of circumstances described in such Section
11.3(a)(i) exceeds, in the aggregate, $3,000,000 (the
"Deductible Amount"), provided, however, that individual
claims of $10,000 or less shall not be aggregated for purposes
of calculating the Deductible Amount or the excess of Losses
over the Deductible Amount; and
(C) If the Closing occurs, in no event shall
Seller be liable to Buyer under Section 11.3 for (1) amounts
which, in the aggregate, exceed 100% of the Purchase Price or
(2) amounts below the Deductible Amount.
(ii) If the Closing occurs, Buyer shall not be
entitled to indemnity under Subsection (a)(ii) above except for
out-of-pocket Losses actually suffered or sustained by Buyer or to
which Buyer may become subject as a result of circumstances described
in such Subsections (a)(ii), and such indemnity shall not include
Losses in the nature of consequential damages, lost profits, diminution
in value, damage to reputation or the like.
Section 11.4 Indemnity by Buyer.
(a) Buyer shall indemnify Seller and hold Seller harmless from
and against any and all Losses which they may sustain or suffer or to which it
may become subject as a result of:
(i) The inaccuracy of any representation or the
breach of any warranty made by Buyer herein or in a Agreement;
(ii) The nonperformance or breach of any covenant or
agreement made or undertaken by Buyer in this Agreement or in any
Related Agreement;
(iii) If the Closing occurs, the ongoing operations
of Buyer, RSC, the Subsidiaries and the Facilities after the Closing
Date.
(b) The indemnification obligations of Buyer provided above
shall, in addition to the qualifications and conditions set forth in Sections
11.5 and 11.6, be subject to the following qualifications:
<PAGE>
(i) Seller shall not be entitled to indemnity under
Section 11.4(a)(i) above unless:
(A) Written notice to Buyer of such claim
specifying the basis thereof is made, or an action at law or
in equity with respect to such claim is served, before the
first anniversary of the earlier to occur of the Closing Date
or the date on which this Agreement is terminated, as the case
may be; and
(B) If the Closing occurs, the Losses
sustained or suffered by Seller or to which it may be subject
as a result of circumstances described in such Section
11.4(a)(i) exceeds, in the aggregate, the Deductible Amount,
provided, however, that individual claims of $10,000 or less
shall not be aggregated for purposes of calculating the
Deductible Amount or the excess of Losses over the Deductible
Amount; and
(C) If the Closing occurs, in no event shall
Buyer be liable to Seller under Section 11.4(a)(i) for amounts
below the Deductible Amount.
(ii) If the Closing occurs, Seller and the
Subsidiaries shall not be entitled to indemnity under Sections
11.4(a)(ii)-(iii) above except for out-of-pocket Losses actually
suffered or sustained by them or to which they may become subject as a
result of circumstances described in such Sections 11.4(a)(ii)-(iii),
and such indemnity shall not include Losses in the nature of
consequential damages, lost profits, diminution in value, damage to
reputation or the like.
Section 11.5 Further Qualifications Respecting Indemnification. The
right of a party (an "Indemnitee") to indemnity hereunder shall be subject to
the following additional qualifications:
(a) The Indemnitee shall promptly upon its discovery of facts
or circumstances giving rise to a claim for indemnification, including receipt
by it of notice of any demand, assertion, claim, action or proceeding, judicial,
governmental or otherwise, by any third party (such third party actions being
collectively referred to herein as "Third Party Claims"), give notice thereof to
the indemnifying party (the "Indemnitor"), such notice in any event to be given
within 60 days from the date the Indemnitee obtains actual knowledge of the
basis or alleged basis for the right of indemnity or such shorter period as may
be necessary to avoid material prejudice to the Indemnitor; and
(b) In computing Losses, such amounts shall be computed net of
any related recoveries to which the Indemnitee is entitled under insurance
policies or other related payments received or receivable from third parties and
net of any tax benefits actually received by the Indemnitee or for which it is
eligible, taking into account the income tax treatment of the receipt of
indemnification.
<PAGE>
Section 11.6 Procedures Respecting Third Party Claims. In providing
notice to the Indemnitor of any Third Party Claim (the "Claim Notice"), the
Indemnitee shall provide the Indemnitor with a copy of such Third Party Claim or
other documents received and shall otherwise make available to the Indemnitor
all relevant information material to the defense of such claim and within the
Indemnitee's possession. The Indemnitor shall have the right, by notice given to
the Indemnitee within 15 days after the date of the Claim Notice, to assume and
control the defense of the Third Party Claim that is the subject of such Claim
Notice, including the employment of counsel selected by the Indemnitor after
consultation with the Indemnitee, and the Indemnitor shall pay all expenses of,
and the Indemnitee shall cooperate fully with the Indemnitor in connection with,
the conduct of such defense. The Indemnitee shall have the right to employ
separate counsel in any such proceeding and to participate in (but not control)
the defense of such Third Party Claim, but the fees and expenses of such counsel
shall be borne by the Indemnitee unless the Indemnitor shall agree otherwise. If
the Indemnitor shall have failed to assume the defense of any Third Party Claim
in accordance with the provisions of this Section, then the Indemnitee shall
have the absolute right to control the defense of such Third Party Claim, and,
if and when it is finally determined that the Indemnitee is entitled to
indemnification from the Indemnitor hereunder, the fees and expenses of
Indemnitee's counsel shall be borne by the Indemnitor, provided that the
Indemnitor shall be entitled, at its expense, to participate in (but not
control) such defense. The Indemnitor shall have the right to settle or
compromise any such Third Party Claim for which it is providing indemnity so
long as such settlement does not impose any obligations on the Indemnitee
(except with respect to providing releases of the third party). The Indemnitor
shall not be liable for any settlement effected by the Indemnitee without the
Indemnitor's consent. The Indemnitor may assume and control, or bear the costs,
of any such defense subject to its reservation of a right to contest the
Indemnitee's right to indemnification hereunder, provided that it gives the
Indemnitee notice of such reservation within 15 days of the date of the Claim
Notice.
ARTICLE 12
GENERAL PROVISIONS
Section 12.1 Notices. All notices, requests, demands, waivers, consents
and other communications hereunder shall be in writing, shall be delivered
either in person, by telegraphic, facsimile or other electronic means, by
overnight air courier or by mail, and shall be deemed to have been duly given
and to have become effective (a) upon receipt if delivered in person or by
telegraphic, facsimile or other electronic means calculated to arrive on any
business day prior to 5:30 p.m. local time at the address of the addressee, or
on the next succeeding business day if delivered on a non-business day or after
5:30 p.m. local time, (b) one business day after having been delivered to an air
courier for overnight delivery or (c) five business days after having been
deposited in the mails as certified or registered mail, return receipt
requested, all fees prepaid, directed to the parties or their permitted
assignees at the following addresses (or at such other address as shall be given
in writing by a party hereto):
<PAGE>
If to NovaCare or Seller, addressed to:
NovaCare, Inc.
1016 West Ninth Avenue
King of Prussia, Pennsylvania 19406
Attention: Timothy E. Foster
President and Chief Operating Officer
Facsimile: (610) 992-3326
with a copy to counsel for Seller:
NovaCare, Inc.
1016 West Ninth Avenue
King of Prussia, Pennsylvania 19406
Attention: Peter D. Bewley, Esq.
Facsimile: (610) 902-3341
and
Tucci & Semes
Suite 206
Three Mill Road
Wilmington, Delaware 19806
If to Buyer, addressed to:
HEALTHSOUTH Corporation
Two Perimeter Park South
Birmingham, Alabama 35243
Attention: Richard M. Scrushy
Chairman of the Board, President and
Chief Executive Officer
Facsimile: (205) 969-4729
with a copy to counsel for Buyer:
HEALTHSOUTH Corporation
Two Perimeter Park South
Birmingham, Alabama 35243
Attention: William W. Horton, Esq.
Facsimile: (205) 969-4732
and
<PAGE>
J. Brooke Johnston, Jr., Esq.
Haskell Slaughter Young & Johnston,
Professional Association
1200 AmSouth/Harbert Plaza
1901 Sixth Avenue North
Birmingham, Alabama 35203
Facsimile: (205) 324-1133
Section 12.2 Attorneys' Fees. In any litigation or other proceeding
relating to this Agreement, including litigation with respect to any Agreement,
the prevailing party shall be entitled to recover its costs and reasonable
attorneys' fees. The term "prevailing party" shall mean the party in whose favor
final judgment after appeal (if any) is rendered with respect to the claims
asserted in such litigation or other proceeding. "Reasonable attorneys' fees"
are no greater than those attorneys' fees actually incurred in obtaining a
judgment or other determination in favor of the prevailing party.
Section 12.3 Successors and Assigns. The rights under this Agreement
shall not be assignable or transferable nor the duties delegable by either party
without the prior written consent of the other; and nothing contained in this
Agreement, express or implied, is intended to confer upon any person or entity,
other than the parties hereto and their permitted successors-in-interest and
permitted assignees, any rights or remedies under or by reason of this Agreement
unless so stated to the contrary.
Section 12.4 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 12.5 Captions and Paragraph Headings. Captions and paragraph
headings used herein are for convenience only and are not a part of this
Agreement and shall not be used in construing it.
Section 12.6 Entirety of Agreement; Amendments. This Agreement
(including the Schedules and Exhibits hereto) and the other documents and
instruments specifically provided for in this Agreement contain the entire
understanding between the parties concerning the subject matter of this
Agreement and such other documents and instruments and, except as expressly
provided for herein, supersede all prior understandings and agreements, whether
oral or written, between them with respect to the subject matter hereof and
thereof. There are no representations, warranties, agreements, arrangements or
under- standings, oral or written, between the parties hereto relating to the
subject matter of this Agreement and such other documents and instruments which
are not fully expressed herein or therein. This Agreement may be amended or
modified only by an agreement in writing signed by each of the parties hereto.
All Exhibits and Schedules attached to or delivered in connection with this
Agreement are integral parts of this Agreement as if fully set forth herein, and
all statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific provision in which they are explicitly
referenced.
<PAGE>
Section 12.7 Construction. This Agreement and any documents or
instruments delivered pursuant hereto shall be construed without regard to the
identity of the person who drafted the various provisions of the same. Each and
every provision of this Agreement and such other documents and instruments shall
be construed as though the parties participated equally in the drafting of the
same. Consequently, the parties acknowledge and agree that any rule of
construction that a document is to be construed against the drafting party shall
not be applicable either to this Agreement or such other documents and
instruments.
Section 12.8 Waiver. The failure of a party to insist, in any one or
more instances, on performance of any of the terms, covenants and conditions of
this Agreement shall not be construed as a waiver or relinquishment of any
rights granted hereunder or of the future performance of any such term, covenant
or condition, but the obligations of the parties with respect thereto shall
continue in full force and effect. No waiver of any provision or condition of
this Agreement by a party shall be valid unless in writing signed by such party
or operational by the terms of this Agreement. A waiver by one party of the
performance of any covenant, condition, representation or warranty of the other
party shall not invalidate this Agreement, nor shall such waiver be construed as
a waiver of any other covenant, condition, representation or warranty. A waiver
by any party of the time for performing any act shall not constitute a waiver of
the time for performing any other act or the time for performing an identical
act required to be performed at a later time.
Section 12.9 Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
Commonwealth of Pennsylvania, without regard to the principles of conflicts of
law thereof.
Section 12.10 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be valid, binding and
enforceable under applicable law, but if any provision of this Agreement is held
to be invalid, void (or voidable) or unenforceable under applicable law, such
provision shall be ineffective only to the extent held to be invalid, void (or
voidable) or unenforceable, without affecting the remainder of such provision or
the remaining provisions of this Agreement.
Section 12.11 Consents Not Unreasonably Withheld. Wherever the consent
or approval of any party is required under this Agreement, such consent or
approval shall not be unreasonably withheld, unless such consent or approval is
to be given by such party at the sole or absolute discretion of such party or is
otherwise similarly qualified.
Section 12.12 Time Is of the Essence. Time is hereby expressly made of
the essence with respect to each and every term and provision of this Agreement.
The parties acknowledge that each will be relying upon the timely performance by
the other of its obligations hereunder as a material inducement to each party's
execution of this Agreement. Consequently, the parties agree that they are bound
strictly by the provisions concerning timely performance of their respective
obligations contained in this Agreement and that if any attempt is made by
either party to perform an obligation required to be performed or comply with a
provision of this Agreement required to be complied with in a manner other than
in strict compliance with the time period applicable thereto, even if such
purported attempt is but one day late, then such purported attempt at
performance or compliance shall be deemed a violation of this Section, shall be
deemed in contravention of the intention of the parties hereto, and shall be
null and void and of no force or effect.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
HEALTHSOUTH Corporation
By: /s/ MICHEAL D. MARTIN
_______________________________
Its: Senior Vice President and Treasurer
______________________________
NOVACARE, INC.
By: /s/ TIMOTHY G. FOSTER
_______________________________
Its: President and Chief Operating Officer
______________________________
NC RESOURCES, INC.
By: /s/ JOSEPH C. O'NEILL
_______________________________
Its: President
______________________________
<PAGE>
EXHIBIT 4.1
HEALTHSOUTH Rehabilitation Corporation
TO
NationsBank of Georgia, National Association,
Trustee
Indenture
Dated as of March 24, 1994
$287,500,000
9.5 % Senior Subordinated Notes due 2001
<PAGE>
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
Section 310(a)(1) . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . Not Applicable
(a)(5) . . . . . . . . . . . . . . . 609
(b) . . . . . . . . . . . . . . . 608; 610
(c) . . . . . . . . . . . . . . . Not Applicable
Section 311(a) . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . 613
(c) . . . . . . . . . . . . . . . Not Applicable
Section 312(a) . . . . . . . . . . . . . . . 701; 702(a)
(b) . . . . . . . . . . . . . . . 702(b)
(c) . . . . . . . . . . . . . . . 702(c)
Section 313(a) . . . . . . . . . . . . . . . 703(a)
(b) . . . . . . . . . . . . . . . 703(a)
(c) . . . . . . . . . . . . . . . 703(a)
(d) . . . . . . . . . . . . . . . 703(b)
314(a) . . . . . . . . . . . . . . . 704
(a)(4) . . . . . . . . . . . . . . . 101; 1004
(b) . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . 102
Section 315(a) . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . 514
Section 316(a) (last sentence). . . . . . . . . . . 101
(a)(1)(A). . . . . . . . . . . . . . . . 502; 512
(a)(1)(B). . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . 104(c)
Section 317(a)(l) . . . . . . . . . . . . . . . 505
(a)(2) . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . 1003
Section 318(a) . . . . . . . . . . . . . . . 107
- --------------------
Note: This reconciliation and tie shall not, for any
purpose, be deemed to be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
Parties . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals of the Company . . . . . . . . . . . . . . . 1
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions . . . . . . . . . . . . . . . 1
"Accounts Receivable" . . . . . . . . . . . . . . . 2
"Acquired Indebtedness" . . . . . . . . . . . . . . 2
"Act" . . . . . . . . . . . . . . . . . . . . . . . 2
"Affiliate" . . . . . . . . . . . . . . . . . . . . 2
"Asset Sale". . . . . . . . . . . . . . . . . . . . 2
"Attributable Indebtedness" . . . . . . . . . . . . 3
"Authenticating Agent". . . . . . . . . . . . . . . 3
"Bank Debt" . . . . . . . . . . . . . . . . . . . . 3
"Board of Directors". . . . . . . . . . . . . . . . 3
"Board Resolution". . . . . . . . . . . . . . . . . 3
"Business Day". . . . . . . . . . . . . . . . . . . 4
"Capital Stock" . . . . . . . . . . . . . . . . . . 4
"Capitalized Lease Obligations" . . . . . . . . . . 4
"Change of Control" . . . . . . . . . . . . . . . . 4
"Commission". . . . . . . . . . . . . . . . . . . . 4
"Common Equity" . . . . . . . . . . . . . . . . . . 4
"Company" . . . . . . . . . . . . . . . . . . . . . 4
"Company Request" or "Company Order". . . . . . . . 4
"Consolidated Amortization Expense" . . . . . . . . 4
"Consolidated Depreciation Expense" . . . . . . . . 5
"Consolidated EBITDA" . . . . . . . . . . . . . . . 5
"Consolidated Income Tax Expense" . . . . . . . . . 5
"Consolidated Interest Expense" . . . . . . . . . . 5
"Consolidated Net Income" . . . . . . . . . . . . . 5
"Consolidated Net Worth". . . . . . . . . . . . . . 6
"Consolidated Tangible Assets". . . . . . . . . . . 7
"Convertible Debentures". . . . . . . . . . . . . . 7
"Corporate Trust Office". . . . . . . . . . . . . . 7
"Corporation" . . . . . . . . . . . . . . . . . . . 7
"Credit Agreements" . . . . . . . . . . . . . . . . 7
"Default" . . . . . . . . . . . . . . . . . . . . . 7
"Defaulted Interest". . . . . . . . . . . . . . . . 7
"Designated Senior Indebtedness". . . . . . . . . . 7
"Disqualified Stock". . . . . . . . . . . . . . . . 8
"EBITDA Coverage Ratio" . . . . . . . . . . . . . . 8
"Eligible Accounts Receivable". . . . . . . . . . . 8
"Eligible Investments". . . . . . . . . . . . . . . 8
"Exchange Act". . . . . . . . . . . . . . . . . . . 9
"Existing Indebtedness" . . . . . . . . . . . . . . 9
"Event of Default". . . . . . . . . . . . . . . . . 9
"GAAP". . . . . . . . . . . . . . . . . . . . . . . 9
"Hedging Obligations" . . . . . . . . . . . . . . . 9
"Holder". . . . . . . . . . . . . . . . . . . . . . 9
"Indebtedness". . . . . . . . . . . . . . . . . . . 9
"Interest Expense". . . . . . . . . . . . . . . . . 10
"Inventory" . . . . . . . . . . . . . . . . . . . . 10
"Indenture" . . . . . . . . . . . . . . . . . . . . 10
"Interest Payment Date" . . . . . . . . . . . . . . 10
"Investments" . . . . . . . . . . . . . . . . . . . 11
"Lien". . . . . . . . . . . . . . . . . . . . . . . 11
"Maturity". . . . . . . . . . . . . . . . . . . . . 11
"Net Proceeds". . . . . . . . . . . . . . . . . . . 11
"Officers' Certificate" . . . . . . . . . . . . . . 12
"Opinion of Counsel". . . . . . . . . . . . . . . . 12
"Outstanding" . . . . . . . . . . . . . . . . . . . 12
"Paying Agent". . . . . . . . . . . . . . . . . . . 13
"Permitted Liens" . . . . . . . . . . . . . . . . . 13
"Person". . . . . . . . . . . . . . . . . . . . . . 14
"PP&E". . . . . . . . . . . . . . . . . . . . . . . 14
"Predecessor Security". . . . . . . . . . . . . . . 14
"Preferred Stock" . . . . . . . . . . . . . . . . . 14
"Proceeding". . . . . . . . . . . . . . . . . . . . 14
"Refinancing Indebtedness". . . . . . . . . . . . . 14
"Redemption Date" . . . . . . . . . . . . . . . . . 15
"Redemption Price". . . . . . . . . . . . . . . . . 15
"Regular Record Date" . . . . . . . . . . . . . . . 15
"Repurchase Date" . . . . . . . . . . . . . . . . . 15
"Repurchase Event". . . . . . . . . . . . . . . . . 15
"Repurchase Price". . . . . . . . . . . . . . . . . 15
"Responsible Officer" . . . . . . . . . . . . . . . 15
"Restricted Payment". . . . . . . . . . . . . . . . 15
"Sale and Leaseback Transaction". . . . . . . . . . 16
"Securities Payment". . . . . . . . . . . . . . . . 16
"Security Register" and "Security Registrar". . . . 16
"Senior Indebtedness" . . . . . . . . . . . . . . . 16
"Senior Subordinated Debt". . . . . . . . . . . . . 17
"Significant Subsidiary". . . . . . . . . . . . . . 17
"Special Record Date" . . . . . . . . . . . . . . . 17
"Stated Maturity" . . . . . . . . . . . . . . . . . 17
"Subordinated Obligations". . . . . . . . . . . . . 17
"Subsidiary". . . . . . . . . . . . . . . . . . . . 17
"Trading Day" . . . . . . . . . . . . . . . . . . . 18
"Trustee" . . . . . . . . . . . . . . . . . . . . . 18
"Trust Indenture Act" . . . . . . . . . . . . . . . 18
"Vice President". . . . . . . . . . . . . . . . . . 18
"Weighted Average Life to Maturity" . . . . . . . . 18
"Wholly Owned Subsidiary" . . . . . . . . . . . . . 18
SECTION 102. Compliance Certificates and Opinions. . . 19
SECTION 103. Form of Documents Delivered to Trustee. . 19
SECTION 104. Acts of Holders; Record Dates . . . . . . 20
SECTION 105. Notices, Etc., to Trustee and Company . . 21
SECTION 106. Notice to Holders; Waiver . . . . . . . . 21
SECTION 107. Conflict with Trust Indenture Act . . . . 22
SECTION 108. Effect of Headings and Table of
Contents. . . . . . . . . . . . . . . . . 22
SECTION 109. Successors and Assigns. . . . . . . . . . 22
SECTION 110. Separability Clause . . . . . . . . . . . 23
SECTION 111. Benefits of Indenture . . . . . . . . . . 23
SECTION 112. Governing Law . . . . . . . . . . . . . . 23
SECTION 113. Legal Holidays. . . . . . . . . . . . . . 23
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally . . . . . . . . . . . . . 23
SECTION 202. Form of Face of Security. . . . . . . . . 24
SECTION 203. Form of Reverse of Security . . . . . . . 25
SECTION 204. Form of Trustee's Certificate of
Authentication. . . . . . . . . . . . . . 29
ARTICLE THREE
The Securities
SECTION 301. Title and Terms . . . . . . . . . . . . . 29
SECTION 302. Denominations . . . . . . . . . . . . . . 30
SECTION 303. Execution, Authentication, Delivery and
Dating. . . . . . . . . . . . . . . . . . 30
SECTION 304. Temporary Securities. . . . . . . . . . . 31
SECTION 305. Registration, Registration of Transfer
and Exchange. . . . . . . . . . . . . . . 31
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities. . . . . . . . . . . . . . . . 32
SECTION 307. Payment of Interest; Interest Rights
Preserved . . . . . . . . . . . . . . . . 33
SECTION 308. Persons Deemed Owners . . . . . . . . . . 35
SECTION 309. Cancellation. . . . . . . . . . . . . . . 35
SECTION 310. Computation of Interest . . . . . . . . . 35
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of
Indenture . . . . . . . . . . . . . . . . 35
SECTION 402. Application of Trust Money. . . . . . . . 37
ARTICLE FIVE
Remedies
SECTION 501. Events of Default . . . . . . . . . . . . 37
SECTION 502. Acceleration of Maturity; Rescission
and Annulment.. . . . . . . . . . . . . . 40
SECTION 503. Collection of Indebtedness and Suits
for Enforcement by Trustee. . . . . . . . 41
SECTION 504. Trustee May File Proofs of Claim. . . . . 41
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities. . . . . . . . . 42
SECTION 506. Application of Money Collected. . . . . . 42
SECTION 507. Limitation on Suits . . . . . . . . . . . 43
SECTION 508. Unconditional Right of Holders to
Receive Principal, Premium and
Interest. . . . . . . . . . . . . . . . . 44
SECTION 509. Restoration of Rights and Remedies. . . . 44
SECTION 510. Rights and Remedies Cumulative. . . . . . 44
SECTION 511. Delay or Omission Not Waiver. . . . . . . 44
SECTION 512. Control by Holders. . . . . . . . . . . . 45
SECTION 513. Waiver of Past Defaults . . . . . . . . . 45
SECTION 514. Undertaking for Costs . . . . . . . . . . 45
SECTION 515. Waiver of Stay or Extension Laws. . . . . 46
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities . . . 46
SECTION 602. Notice of Defaults. . . . . . . . . . . . 46
SECTION 603. Certain Rights of Trustee . . . . . . . . 47
SECTION 604. Not Responsible for Recitals or
Issuance of Securities. . . . . . . . . . 48
SECTION 605. May Hold Securities . . . . . . . . . . . 48
SECTION 606. Money Held in Trust . . . . . . . . . . . 48
SECTION 607. Compensation and Reimbursement. . . . . . 48
SECTION 608. Disqualification; Conflicting
Interests . . . . . . . . . . . . . . . . 50
SECTION 609. Corporate Trustee Required;
Eligibility . . . . . . . . . . . . . . . 50
SECTION 610. Resignation and Removal; Appointment of
Successor . . . . . . . . . . . . . . . . 50
SECTION 611. Acceptance of Appointment by Successor. . 52
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business. . . . . . . . . . 52
SECTION 613. Preferential Collection of Claims
Against Company . . . . . . . . . . . . . 52
SECTION 614. Appointment of Authenticating Agent.. . . 53
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and
Addresses of Holders. . . . . . . . . . . 54
SECTION 702. Preservation of Information;
Communications to Holders . . . . . . . . 55
SECTION 703. Reports by Trustee. . . . . . . . . . . . 55
SECTION 704. Reports by Company. . . . . . . . . . . . 55
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Limitations on Mergers, Consolidations
and Asset Transfers . . . . . . . . . . . 56
SECTION 802. Successor Substituted . . . . . . . . . . 57
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent
of Holders. . . . . . . . . . . . . . . . 57
SECTION 902. Supplemental Indentures With Consent of
Holders . . . . . . . . . . . . . . . . . 58
SECTION 903. Execution of Supplemental Indentures. . . 59
SECTION 904. Effect of Supplemental Indentures . . . . 59
SECTION 905. Conformity with Trust Indenture Act . . . 59
SECTION 906. Reference in Securities to Supplemental
Indentures. . . . . . . . . . . . . . . . 59
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and
Interest. . . . . . . . . . . . . . . . . 60
SECTION 1002. Maintenance of Office or Agency . . . . . 60
SECTION 1003. Money for Security to Be Held in Trust. . 61
SECTION 1004. Statement by Officers as to Default . . . 62
SECTION 1005. Existence . . . . . . . . . . . . . . . . 62
SECTION 1006. Maintenance of Properties . . . . . . . . 63
SECTION 1007. Payment of Taxes and Other Claims . . . . 63
SECTION 1008. Limitations on Additional Indebtedness. . 63
SECTION 1009. Limitations on Subsidiary Preferred
Stock . . . . . . . . . . . . . . . . . . 64
SECTION 1010. Limitations on Restricted Payments. . . . 64
SECTION 1011. Limitations on Investments and Loans. . . 65
SECTION 1012. Limitations on Restrictions on
Distributions from Subsidiaries . . . . . 66
SECTION 1013. Limitations on Certain Other
Subordinated Indebtedness . . . . . . . . 67
SECTION 1014. Limitations on Transactions with
Affiliates. . . . . . . . . . . . . . . . 67
SECTION 1015. Limitations on Liens. . . . . . . . . . . 68
SECTION 1016. Limitations on Asset Sales. . . . . . . . 68
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption . . . . . . . . . . . 69
SECTION 1102. Applicability of Article. . . . . . . . . 69
SECTION 1103. Election to Redeem; Notice to Trustee.. . 69
SECTION 1104. Selection by Trustee of Securities to
Be Redeemed . . . . . . . . . . . . . . . 69
SECTION 1105. Notice of Redemption. . . . . . . . . . . 70
SECTION 1106. Deposit of Redemption Price . . . . . . . 70
SECTION 1107. Securities Payable on Redemption Date . . 71
SECTION 1108. Securities Redeemed in Part . . . . . . . 71
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Securities Subordinate to Senior
Indebtedness. . . . . . . . . . . . . . . 71
SECTION 1202. Payment Over of Proceeds Upon
Dissolution, Etc. . . . . . . . . . . . . 72
SECTION 1203. Prior Payment to Senior Indebtedness
Upon Acceleration of Securities . . . . . 73
SECTION 1204. No Payment in Certain Circumstances . . . 74
SECTION 1205. Payment Permitted If No Default . . . . . 75
SECTION 1206. Subrogation to Rights of Holders of
Senior Indebtedness . . . . . . . . . . . 75
SECTION 1207. Provisions Solely to Define Relative
Rights. . . . . . . . . . . . . . . . . . 76
SECTION 1208. Trustee to Effectuate Subordination and
Payment Provisions. . . . . . . . . . . . 76
SECTION 1209. No Waiver of Subordination Provisions . . 76
SECTION 1210. Notice to Trustee . . . . . . . . . . . . 77
SECTION 1211. Reliance on Judicial Order or
Certificate of Liquidating Agent. . . . . 78
SECTION 1212. Trustee Not Fiduciary for Holders of
Senior Indebtedness . . . . . . . . . . . 78
SECTION 1213. Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's
Rights. . . . . . . . . . . . . . . . . . 79
SECTION 1214. Article Applicable to Paying Agents . . . 79
ARTICLE THIRTEEN
Repurchase of Securities at the Option of the
Holder Upon a Repurchase Event
SECTION 1301. Right to Require Repurchase . . . . . . . 79
SECTION 1302. Notices; Method of Exercising
Repurchase Right, Etc.. . . . . . . . . . 80
SECTION 1303. Definition of Repurchase Event. . . . . . 81
<PAGE>
INDENTURE, dated as of March 24, 1994, between HEALTHSOUTH
Rehabilitation Corporation, a corporation duly organized and existing under the
laws of the State of Delaware (herein called the "Company"), having its
principal office at Two Perimeter Park South, Birmingham, Alabama 35243, and
NationsBank of Georgia, National Association, a national banking association
duly organized and existing under the laws of the United States of America, as
Trustee (herein called the "Trustee"), having its principal office at 600
Peachtree Street, Suite 900, Atlanta, Georgia 30308.
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its 9.5
Senior Subordinated Notes due 2001 (herein called the "Securities") of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE, WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as
are generally accepted at the date of such computation; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Accounts Receivable" means all of the accounts receivable of the
Company and its Subsidiaries on a consolidated basis which, in accordance with
GAAP, would be set opposite the caption "accounts receivable" or any like
caption on a balance sheet of the Company.
"Acquired Indebtedness" means (a) with respect to any Person that
becomes a Subsidiary of the Company after the date of initial issuance of the
Securities, Indebtedness of such Person and its Subsidiaries existing at the
time such Person becomes a Subsidiary of the Company that was not incurred in
connection with, or in contemplation of, such Person becoming a Subsidiary of
the Company and (b) with respect to the Company or any of its Subsidiaries, any
Indebtedness assumed by the Company or any of its Subsidiaries in connection
with the acquisition of an asset from another Person that was not incurred by
such other person in connection with, or in contemplation of, such acquisition.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and 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 to the
foregoing.
"Asset Sale" for any Person means the sale, lease conveyance or other
disposition (including, without limitation, by merger or consolidation, and
whether by operation of law or otherwise) of any of that Person's assets
(including, without limitation, the sale or other disposition of Capital Stock
of any Subsidiary of such Person, whether by such Person or by such Subsidiary),
whether owned on the date of initial issuance of the Securities or subsequently
acquired, in one transaction or a series of related transactions, in which such
Person and/or its Subsidiaries sell, lease, convey or otherwise dispose of (i)
all or substantially all of the Capital Stock of any of such Person's
Subsidiaries, (ii) assets which constitute substantially all of an operating
unit or business of such Person or any of its Subsidiaries, or (iii) any health
care facility; provided, however, that the following shall not constitute Asset
Sales: (i) a transaction or series of related transactions that results in a
Change of Control, and (ii) transactions between the Company and any of its
Wholly Owned Subsidiaries or among such Wholly Owned Subsidiaries.
"Attributable Indebtedness" when used with respect to any Sale and
Leaseback Transaction or an operating lease with respect to a healthcare
facility means, as at the time of determination, the present value (discounted
at a rate equivalent to the interest rate implicit in the lease, compounded on a
semiannual basis) of the total obligations of the lessee for rental payments,
after excluding all amounts required to be paid on account of maintenance and
repairs, insurance, taxes, utilities and other similar expenses payable by the
lessee pursuant to the terms of the lease, during the remaining term of the
lease included in any such Sale and Leaseback Transaction or such operating
lease or until the earliest date on which the lessee may terminate such lease
without penalty or upon payment of a penalty (in which case the rental payments
shall include such penalty); provided, that the Attributable Indebtedness with
respect to a Sale and Leaseback Transaction shall be no less than the fair
market value of the property subject to such Sale and Leaseback Transaction.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities.
"Bank Debt" means all obligations of the Company and its Subsidiaries,
now or hereafter existing under (i) the Credit Agreements, whether for
principal, interest, reimbursement of amounts drawn under letters of credit
issued pursuant thereto, guarantees in respect thereof, fees, expenses,
premiums, indemnities or otherwise, and (ii) any Indebtedness incurred by the
Company to extend, refund or refinance, in whole or in part, the Bank Debt,
including any interest and premium on any such Indebtedness.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York
or the city in which the Corporate Trust Office is located are authorized or
obligated by law or executive order to close.
"Capital Stock" of any Person means any and all shares, rights to
purchase, warrants or options (whether or not currently exercisable);
participation or other equivalents of or interest in (however designated) the
equity (including without limitation common stock, preferred stock and
partnership and joint venture interests) of such Person (excluding any debt
securities that are convertible into, or exchangeable for, such equity).
"Capitalized Lease Obligations" of any Person means the obligation of
such Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such obligation shall be the capitalized amount thereof determined in
accordance with GAAP.
"Change of Control" shall have the meaning specified
in Section 1303.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Equity" of any Person means all Capital Stock of such Person
that is generally entitled to (i) vote in the election of directors of such
Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means, respectively, a written
request or order signed in the name of the Company by its Chairman of the Board,
its Vice Chairman of the Board, its President or a Vice President, and by its
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
"Consolidated Amortization Expense" of any Person for any period means
the amortization expense of such Person and its Subsidiaries for such period (to
the extent included in the computation of Consolidated Net Income of such
Person), determined on a consolidated basis in accordance with GAAP.
"Consolidated Depreciation Expense" of any Person means the
depreciation expense of such Person and its Subsidiaries for such period (to the
extent included in the computation of Consolidated Net Income of such Person),
determined on a consolidated basis in accordance with GAAP.
"Consolidated EBITDA" of any Person means, with respect to any
determination date, Consolidated Net Income before extraordinary losses and
losses realized in connection with Asset Sales, plus (i) Consolidated Income Tax
Expense, plus (ii) Consolidated Depreciation Expense, plus (iii) Consolidated
Amortization Expense, plus (iv) Consolidated Interest Expense, plus (v) all
other non-cash items reducing Consolidated Net Income of such Person and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP, plus
(vi) without duplication, for calculation of an EBITDA Coverage Ratio for
periods ending on or before December 31, 1994 the sum of $31,500,000
(representing expenses related to the Company's acquisition of certain
rehabilitation facilities and related assets from National Medical Enterprises,
Inc. effective December 31, 1993, net of Federal income tax effects), plus (vii)
without duplication, any amount, net of Federal income tax effects, representing
expenses relating to an acquisition, up to a maximum of 10% of the purchase
price thereof, determined on a consolidated basis in accordance with GAAP, and
less all non-cash items increasing Consolidated Net Income of such Person and
its Subsidiaries, determined on a consolidated basis in accordance with GAAP, in
each case, for such Person's prior four full fiscal quarters for which financial
results have been reported immediately preceding the determination date.
"Consolidated Income Tax Expense" means, for any Person for any
period, the provision for taxes based on income and profits of such Person and
its Subsidiaries to the extent such income or profits were included in computing
Consolidated Net Income of such Person for such Period.
"Consolidated Interest Expense" of any Person for any period means the
Interest Expense of such Person and its Subsidiaries for such period, determined
on a consolidated basis in accordance with GAAP, plus (to the extent not
otherwise included within the definition of Interest Expense as imputed
interest) one-third of the rental expense on Attributable Indebtedness of such
Person for such period determined on a consolidated basis.
"Consolidated Net Income" of any Person for any period means the net
income (or loss) of such Person and its Subsidiaries for such period determined
on a consolidated basis in accordance with GAAP, without giving effect to
dividends on any series of preferred stock of any Subsidiary of such Person,
whether or not in cash, to the extent such consolidated net income was reduced
thereby; provided that there shall be excluded from such net income (to the
extent otherwise included therein), without duplication; (i) the net income (or
loss) of any Person (other than a Subsidiary of the referent Person) in which
any Person other than the referent Person has an ownership interest, except to
the extent that any such income has actually been received by the referent
Person or any of its Wholly Owned Subsidiaries in the form of dividends or
similar distributions during such period; (ii) except to the extent includible
in the consolidated net income of the referent Person pursuant to the foregoing
clause (i), the net income (or loss) of any Person that accrued prior to the
date that (a) such Person becomes a Subsidiary of the referent Person or is
merged into or consolidated with the referent Person or any of its Subsidiaries
or (b) the assets of such Person are acquired by the referent Person or any of
its Subsidiaries; (iii) the net income of any Subsidiary of the referent Person
(other than a Wholly Owned Subsidiary) to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary of that income
is not permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary during such period; (iv) any gain (or loss),
together with any related provisions for taxes on any such gain, realized during
such period by the referent Person or any of it Subsidiaries upon (a) the
acquisition of any securities, or the extinguishment of any Indebtedness, of the
referent Person or any of its Subsidiaries or (b) any Asset Sale by the referent
Person or any of its Subsidiaries; (v) any extraordinary gain (or extra-ordinary
loss), together with any related provision for taxes or tax benefit resulting
from any such extraordinary gain or loss, realized by the referent Person or any
of its Subsidiaries during such period; and (vi) in the case of a successor to
such Person by consolidation, merger or transfer of its assets, any earnings of
the successor prior to such merger, consolidation or transfer of assets.
"Consolidated Net Worth" of any Person as of any date means the
stockholders' equity (including any preferred stock that is classified as equity
under GAAP, other than Disqualified Stock) of such person and its Subsidiaries
(excluding any equity adjustment for foreign currency translation for any period
subsequent to the date of initial issuance of the Securities) on a consolidated
basis at such date, as determined in accordance with GAAP, less all write-ups
subsequent to the date of initial issuance of the Securities in the book value
of any asset owned by such Person or any of its Subsidiaries; provided, however,
that in calculating the Consolidated Net Worth of the Company immediately prior
to a transaction covered by Article Eight hereof which is an acquisition by the
Company of another Person, there shall be subtracted from the Company's
Consolidated Net Worth immediately prior to such acquisition the lesser of (a)
such amount, net of Federal income tax effects, as represents expenses relating
to such acquisition, or (b) 10% of the purchase price or fair market value of
the consideration paid by the Company in connection with such acquisition.
"Consolidated Tangible Assets" of any Person as of any date means the
total assets of such Person and its Subsidiaries (excluding any assets that
would be classified as "intangible assets" under GAAP) on a consolidated basis
at such date, as determined in accordance with GAAP, less all write-ups
subsequent to the date of initial issuance of the Securities in the book value
of any asset owned by such Person or any of its Subsidiaries.
"Convertible Debentures" means the Company's 5% Convertible
Subordinated Debentures due 2001 to be issued under the Indenture dated as of
March 24, 1994 between the Company and PNC Bank, Kentucky, Inc., as Trustee, in
an aggregate principal amount not to exceed $100,000,000 ($115,000,000 if the
underwriters' over-allotment option is exercised in full).
"Corporate Trust Office" means the principal office of the Trustee in
the city at which at any particular time its corporate trust business shall be
administered. As of the date hereof, the Corporate Trust Office of the Trustee
is located at 600 Peachtree Street, Suite 900, Atlanta, Georgia 30308.
"Corporation" means a corporation, association,
company, joint-stock company or business trust.
"Credit Agreements" means the two Credit Agreements, one dated as of
November 20, 1992 and the other dated as of December 30, 1993, by and between
the Company, NationsBank of Georgia, National Association, as Agent, and the
lenders signatories thereto, together with the related documents thereto,
including, without limitation, any security documents and all exhibits and
schedules thereto and any agreement or agreements relating to any extension,
refunding, refinancing, successor or replacement facility, whether or not with
the same lender, and whether or not the principal amount or amount of letters of
credit outstanding thereunder or the interest rate payable in respect thereof
shall be thereby increased, in each case as amended and in effect from time to
time.
"Default" means any event, act or condition that is, or after notice
or the passage of time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in
Section 307.
"Designated Senior Indebtedness" means (i) the Bank Debt, without
regard to the amounts outstanding thereunder, and (ii) any Senior Indebtedness
which, at the time of determination, has an aggregate principal amount
outstanding of at least $20 million and is specifically designated in the
instrument evidencing such Senior Indebtedness as "Designated Senior
Indebtedness" by the Company.
"Disqualified Stock" means any Capital Stock 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, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final maturity date of the Securities.
"EBITDA Coverage Ratio" with respect to any period means the ratio of
(i) Consolidated EBITDA of the Company to (ii) the aggregate amount of
Consolidated Interest Expense of the Company for such period; provided, however,
that if any calculation of the Company's EBITDA Coverage Ratio requires the use
of any quarter prior to the date of initial issuance of the Securities, such
calculation shall be made on a pro forma basis, giving effect to the issuance of
the Securities and the use of the net proceeds therefrom as if the same had
occurred at the beginning of the four-quarter period used to make such
calculation; and provided further that if any such calculation requires the use
of any quarter prior to the date that any Asset Sale was consummated, or that
any Indebtedness was incurred, or that any acquisition of a hospital or other
healthcare facility or any assets purchased outside the ordinary course of
business was effected, by the Company or any of its Subsidiaries, such
calculation shall be made on a pro forma basis, giving effect to each such Asset
Sale, incurrence of Indebtedness or acquisition, as the case may be, and the use
of any proceeds therefrom, as if the same had occurred at the beginning of the
four-quarter period used to make such calculation.
"Eligible Accounts Receivable" means Accounts Receivable of the
Company and its Subsidiaries on a consolidated basis which arose within ninety
(90) days prior to any date of determination.
"Eligible Investments" of any Person means Investments of such Person
in (i) direct obligations of, or obligations the payment of which is guaranteed
by, the United States of America or an interest in any trust or fund that
invests solely in such obligations or repurchase agreements, properly secured,
with respect to such obligations; (ii) direct obligations of agencies or
instrumentalities of the United States of America having a rating of A or higher
by Standard & Poor's Corporation or A2 or higher by Moody's Investors Service,
Inc.; (iii) a certificate of deposit issued by, or other interest-bearing
deposits with, a bank having its principal place of business in the United
States of America and having equity capital of not less than $250 million; (iv)
a certificate of deposit by, or other interest-bearing deposits with, any other
bank organized under the laws of the United States of America or any state
thereof, provided that such deposit is either (A) insured by the Federal Deposit
Insurance Corporation or (B) properly secured by such bank by pledging direct
obligations of the United States of America having a market value of not less
than the face amount of such deposits; (v) prime commercial paper maturing
within 270 days of the acquisition thereof and, at the time of acquisition,
having a rating of A-1 or higher by Standard & Poor's Corporation, or P-1 or
higher by Moody's Investors Service, Inc.; (vi) eligible banker's acceptances,
repurchase agreements and tax-exempt municipal bonds having a maturity of less
than one year, in each case having a rating, or that is the full recourse
obligation of a person whose senior debt is rated A or higher by Standard &
Poor's Corporation or A2 or higher by Moody's Investors Service, Inc.; (vii) any
other investment having a rating of A or higher or A-1 or higher by Standard &
Poor's Corporation or A2 or higher or P-1 or higher by Moody's Investors
Service, Inc.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Existing Indebtedness" means all of the Indebtedness
of the Company and its Subsidiaries that is outstanding on the
date of initial issuance of the Securities.
"Event of Default" has the meaning specified in
Section 501.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as from time to time in effect.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any interest rate swap agreement, foreign currency exchange
agreement, interest rate collar agreement, option or futures contract or other
similar agreement or arrangement relating to interest rates or foreign exchange
rates.
"Holder" means a Person in whose name a Security is
registered in the Security Register.
"Indebtedness" of any Person at any date means, without duplication:
(i) all indebtedness of such Person for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof); (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments; (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (or
reimbursement obligations with respect thereto); (iv) all obligations of such
Person with respect to Hedging Obligations (other than those that fix the
interest rate on variable rate indebtedness otherwise permitted by the Indenture
or that protect the Company and/or its Subsidiaries against changes in foreign
exchange rates); (v) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services, except trade payables and accrued
expenses incurred in the ordinary course of business; (vi) all Capitalized Lease
Obligations of such Person; (vii) all indebtedness of others secured by a Lien
on any asset of such Person, whether or not such indebtedness is assumed by such
Person; (viii) all indebtedness of others guaranteed by such Person to the
extent of such guarantee; and (ix) all Attributable Indebtedness. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above, the maximum liability
of such Person for any such contingent obligations at such date and, in the case
of clause (vii), the amount of the Indebtedness secured.
"Interest Expense" of any Person for any period means the aggregate
amount of interest which, in accordance with GAAP, would be set opposite the
caption "interest expense" or any like caption on an income statement for such
Person (including, without limitation or duplication, imputed interest included
in Capitalized Lease Obligations, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, the net costs associated with Hedging Obligations, amortization of
financing fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount and all other non-cash interest expense
other than interest amortized to cost of sales) plus the aggregate amount, if
any, by which such interest expense was reduced as a result of the amortization
of deferred debt restructuring credits for such period.
"Inventory" means all of the inventory of the Company and each of its
Subsidiaries which, in accordance with GAAP, would be set opposite the caption
"inventory" or any like caption on a balance sheet of the Company.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Interest Payment Date" means the Stated Maturity of
an installment of interest on the Securities.
"Investments" of any Person means (i) all investments by such Person
in any other Person in the form of loans, advances or capital contributions
(excluding commission, travel and similar advances to officers and employees
made in the ordinary course of business), (ii) all guarantees of Indebtedness or
other obligations of any other Person by such Person, (iii) all purchases (or
other acquisitions for consideration) by such Person of Indebtedness, Capital
Stock or other securities of any other Person and (iv) all other items that
would be classified as investments (including, without limitation, purchases of
assets outside the ordinary course of business) on a balance sheet of such
Person prepared in accordance with GAAP.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or other similar encumbrance of any kind in respect of
such asset, whether or not filed, recorded or otherwise perfected under
applicable law (including, without limitation, any conditional sale or other
title retention agreement, and any financing lease in the nature thereof, any
agreement to sell, and any filing of, or agreement to give, any financing
statement (other than notice filings not perfecting a security interest) under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Net Proceeds" with respect to any Asset Sale means (i) cash (in U.S.
dollars or freely convertible into U.S. dollars) received by the Company or any
of its Subsidiaries from such Asset Sale (including, without limitation, cash
received as consideration for the assumption or incurrence of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale or the transfer of the proceeds of such Asset Sale to the Company or any of
its Subsidiaries, (b) payment of all brokerage commissions and the underwriting
and other fees and expenses related to such Asset Sale and (c) deduction of an
appropriate amount to be provided by the Company or any of its Subsidiaries as a
reserve, in accordance with GAAP, against any liabilities associated with the
assets sold or otherwise disposed of in such Asset Sale and retained by the
Company or any of its Subsidiaries after such Asset Sale (including, without
limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters) or against any indemnification
obligations associated with the sale or other disposition of the assets sold or
otherwise disposed of in such Asset Sale and (ii) all non-cash consideration
received by the Company or any of its Subsidiaries from such Asset Sales upon
the liquidation or conversion of such consideration into cash.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 1004 shall be the
principal executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore cancelled by the
Trustee or delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and segregated
in trust by the Company (if the Company shall act as its own Paying Agent)
for the Holders of such Securities; provided that, if such Securities are
to be redeemed, notice of such redemption has been duly given pursuant to
this Indenture or provision therefor satisfactory to the Trustee has been
made; and
(iii) Securities which have been paid pursuant to Section 306 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid obligations of the
Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Permitted Liens" means (i) Liens for taxes, assessments or
governmental charges or claims that either (a) are not yet delinquent or (b) are
being contested in good faith by appropriate proceedings; (ii) statutory Liens
of landlords and carriers', warehousemen's, mechanics', suppliers',
materialmen's, repairmen's or other like Liens arising in the ordinary course of
business and with respect to amounts that either (a) are not yet delinquent or
(b) are being contested in good faith by appropriate proceedings; (iii) Liens
(other than any Lien imposed by the Employee Retirement Income Security Act of
1974, as amended) incurred or deposits due in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security; (iv) Liens incurred or deposits made to secure the performance
of tenders, bids, leases, statutory obligations, surety and appeal bonds,
progress payments, government contracts and other obligations of like nature
(exclusive of obligations for the payment of borrowed money), in each case,
incurred in the ordinary course of business; (v) attachment or judgment Liens
not giving rise to a Default or an Event of Default; (vi) easements,
rights-of-way, restrictions and other similar charges or encumbrances not
interfering with the ordinary conduct of the business of the Company or any of
its Subsidiaries; (vii) leases or subleases granted to others not interfering
with the ordinary conduct of the business of the Company or any of its
Subsidiaries; (viii) Liens with respect to any Acquired Indebtedness; provided
that such Liens only extend to assets that were subject to such Liens prior to
the acquisition of such assets by the Company or its Subsidiaries; (ix) Liens
securing Senior Indebtedness or Refinancing Indebtedness; provided, in the case
of Refinancing Indebtedness, that such Liens only extend to the assets securing
the Indebtedness being refinanced and such refinanced Indebtedness was
previously secured by such assets; (x) Liens on Accounts Receivable (and
guarantees by third parties of such Accounts Receivable or collateral pledged by
account obligors or other unrelated third parties securing such Accounts
Receivable) or Inventory; (xi) purchase money mortgages (including Capitalized
Lease Obligations); (xii) Liens existing on the date of initial issuance of the
Securities; (xiii) Liens on assets of any Subsidiary of the Company securing
Indebtedness of such Subsidiary; provided that such Indebtedness is permitted to
be incurred by the terms of the Indenture; (xiv) bankers' liens with respect to
the right of set-off arising in the ordinary course of business against amounts
maintained in bank accounts or certificates of deposit in the name of the
Company or any Subsidiary; (xv) the interest of any issuer of a letter of credit
in any cash or Eligible Investment deposited with or for the benefit of such
issuer as collateral for such letter of credit; provided that the Indebtedness
so collateralized is permitted to be incurred by the terms of the Indenture;
(xvi) any Lien consisting of a right of first refusal or option to purchase the
Company's ownership interest in any Subsidiary, which right of first refusal or
option is entered into in the ordinary course of business; and (xvii) the Lien
granted to the Trustee pursuant to Section 607 hereof and any substantially
equivalent Lien granted to the respective trustees under the indentures for
other debt securities of the Company.
"Person" means any individual, corporation, partnership, joint
venture, incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.
"PP&E" means the amount shown for "Property, plant and equipment, net"
on a consolidated balance sheet for the Company and its Subsidiaries.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Preferred Stock" means with respect to any Person all Capital Stock
of such Person which has a preference in liquidation or a preference with
respect to the payment of dividends or distributions of operating profit or
cash.
"Proceeding" has the meaning specified in Section
1202.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances
or extends any Existing Indebtedness, provided that: (i) the Refinancing
Indebtedness is the obligation of the same Person and is subordinated to the
Securities, if at all, to the same extent as the Indebtedness being refunded,
refinanced or extended; (ii) the Refinancing Indebtedness is scheduled to mature
no earlier than the Indebtedness being refunded, refinanced or extended; (iii)
the Refinancing Indebtedness has a Weighted Average Life to Maturity at the time
such Refinancing Indebtedness is incurred that is equal to or greater than the
Weighted Average Life to Maturity of the portion of the Indebtedness being
refunded, refinanced or extended; (iv) the Refinancing Indebtedness is secured
only to the extent, if at all, by the assets that the Indebtedness being
refunded, refinanced or extended is secured; and (v) such Refinancing
Indebtedness is in an aggregate principal amount that is equal to or less than
the aggregate principal amount then outstanding under the Indebtedness being
refunded, refinanced or extended (except for issuance costs and increases in
Attributable Indebtedness due solely to increases in the present value
calculations resulting from renewals or extensions of the terms of the
underlying leases in effect on the date of initial issuance of the Securities).
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture and includes any Repurchase Date as defined in Section 1301.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the March 15 or September 15 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Repurchase Date" has the meaning specified in Section
1301.
"Repurchase Event" shall have the meaning specified in
Section 1303.
"Repurchase Price" has the meaning specified in
Section 1301.
"Responsible Officer", when used with respect to the Trustee, means
any officer within the Corporate Trust Office including without limitation any
vice president, any assistant vice president, any trust officer, any 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
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"Restricted Payment" means with respect to any Person: (i) the
declaration of any dividend or the making of any other payment or distribution
of cash, securities or other property or assets in respect of such Person's
Capital Stock (except that a dividend payable solely in Capital Stock (other
than Disqualified Stock) of such Person shall not constitute a Restricted
Payment); (ii) any payment on account of the purchase, redemption, retirement or
other acquisition for value of such Person's Capital Stock or any other payment
or distribution made in respect thereof, either directly or indi- rectly; or
(iii) any payment on account of the purchase, redemption, retirement, defeasance
or other acquisition for value of Indebtedness of the Company or its
Subsidiaries which is pari passu with or subordinated in right of payment to the
Securities and has a scheduled maturity date subsequent to the maturity of the
Securities; provided, however, that with respect to the Company and its
Subsidiaries, Restricted Payments shall not include any payment described (a) in
clause (i), (ii) or (iii) above made (1) to the Company or any of its Wholly
Owned Subsidiaries by any of the Company's Subsidiaries or (2) by the Company to
any of its Wholly Owned Subsidiaries or (3) by any Subsidiary provided that the
Company or another Subsidiary receives its proportionate share thereof or (b) in
clause (ii) above if the payment is made to purchase or redeem a partnership
interest in a Subsidiary and the Company's EBITDA Coverage Ratio on the date
thereof would be at least 2.0 to 1, determined on a pro forma basis as if such
payment had been made, and the acquisition of the partnership interest, had
occurred at the beginning of the four-quarter period used to calculate the
Company's EBITDA Coverage Ratio or (c) in clause (iii) above made with the Net
Proceeds from any Asset Sale remaining after completion of the Asset Sale Offer
made in connection with such Asset Sale, all as contemplated under "Limitations
on Asset Sales."
"Sale and Leaseback Transaction" means, with respect to any Person, an
arrangement with any bank, insurance company or other lender or investor or to
which such lender or investor is a party, providing for the leasing by such
Person or any of its Subsidiaries of any property or asset of such Person or any
of its Subsidiaries which has been or is being sold or transferred by such
Person or such Subsidiary to such lender or investor or to any Person to whom
funds have been or are to be advanced by such lender or investor on the security
of such property or asset.
"Securities Payment" has the meaning specified in
Section 1202.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Indebtedness" means the principal of and premium, if any, and
interest on (such interest on Senior Indebtedness, wherever referred to in the
Indenture, is deemed to include interest accruing after the filing of a petition
initiating any proceeding pursuant to any bankruptcy law in accordance with and
at the rate (including any rate applicable upon any default or event of default,
to the extent unlawful) specified in any document evidencing the Senior
Indebtedness, whether or not the claim for such interest is allowed as a claim
after such filing in any proceeding under such bankruptcy law) and other amounts
due on or in connection with any Indebtedness of the Company existing on the
date of initial issuance of the Securities or any Indebtedness of the Company
thereafter created, incurred or assumed and permitted under Section 1008,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Securities.
"Senior Subordinated Debt" means the Securities and any other
indebtedness, guarantee or obligation of the Company that specifically provides
that such indebtedness, guarantee or obligation is to rank pari passu with other
Senior Subordinated Debt of the Company and is not subordinated by its terms to
any indebtedness, guarantee or obligation of the Company which is not Senior
Indebtedness.
"Significant Subsidiary" means a Subsidiary of the Company which at
the time of determination either (i) had tangible assets which, as of the
Company's most recent quarterly consolidated balance sheet, constituted at least
5% of Consolidated Tangible Assets as of such date, or (ii) had revenues for the
12-month period ending on the date of the Company's most recent quarterly
consolidated statement of income which constituted at least 5% of the Company's
total consolidated revenues for such period.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subordinated Obligations" means any principal of, premium, if any,
and interest on the Securities payable pursuant to the terms of the Securities
or upon acceleration, including any amounts received upon the exercise of rights
of rescission or other rights of action (including claims for damages) or
otherwise, to the extent relating to the purchase price of the Securities or
amounts corresponding to such principal, premium, if any, or interest on the
Securities.
"Subsidiary" of any Person means (i) any corporation of which Common
Equity having ordinary voting power to elect a majority of the directors of such
corporation is owned by such Person directly or through one or more other
subsidiaries of such Person and (ii) any entity other than a corporation in
which such Person, directly or indirectly, owns at least 50% of the Common
Equity of such entity and has the authority to manage such entity on a
day-to-day basis.
"Trading Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday, other than any day on which securities are not traded on the applicable
securities exchange or in the applicable securities market.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or portion thereof at any date, the number of years obtained by
dividing (i) the then outstanding principal amount of such Indebtedness or
portion thereof (if applicable) into (ii) the sum of the products obtained by
multiplying (a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including payment at
final maturity, in respect thereof, by (b) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment.
"Wholly Owned Subsidiary" of any person means (i) a Subsidiary of
which 100% of the Common Equity (except for director's qualifying shares or
certain minority interests owned by other Persons solely due to local law
requirements that there be more than one stockholder, but which interest is not
in excess of what is required for such purpose) is owned directly by such Person
or through one or more other Wholly Owned Subsidiaries of such Person and (ii)
any entity other than a corporation in which such Person, directly or
indirectly, owns all of the Common Equity of such entity.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirement set forth in
this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than an Officers'
Certificate provided pursuant to Section 1004 hereof) shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, 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
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, by Board Resolution fix any day as the record date for the
purpose of determining the Holders entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to vote on
any action, authorized or permitted to be given or taken by Holders. If not set
by the Company prior to the first solicitation of a Holder made by any Person in
respect of any such action, or, in the case of any such vote, prior to such
vote, the record date for any such action or vote shall be the 30th day (or, if
later, the date of the most recent list of Holders required to be provided
pursuant to Section 701) prior to such first solicitation or vote, as the case
may be. With regard to any record date, only the Holders on such date (or their
duly designated proxies) shall be entitled to give or take, or vote on, the
relevant action.
(d) The ownership of Securities shall be proved by
the Security Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
SECTION 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company
shall be sufficient for every purpose hereunder if
made, given, furnished or filed in writing to or with
the Trustee at its Corporate Trust Office, Attention:
Corporate Trust Administration, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at such Holder's address as it appears in the Security Register,
not later than the latest date (if any), and not earlier than the earliest date
(if any), prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in 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 of Securities, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
such State's conflicts of laws principles.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Stated
Maturity or Repurchase Date of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, the Redemption Date, or the
Repurchase Date, or at the Stated Maturity, provided that no interest shall
accrue for the period from and after such Interest Payment Date, Redemption
Date, Repurchase Date or Stated Maturity, as the case may be.
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally.
The Securities and the Trustee's certificates of authentication shall
be in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities.
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods on steel engraved borders or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Securities may be listed, all as determined by the
officers executing such Securities, as evidenced by their execution of such
Securities.
SECTION 202. Form of Face of Security.
HEALTHSOUTH Rehabilitation Corporation
9.5% Senior Subordinated Notes due 2001
No. $
HEALTHSOUTH Rehabilitation Corporation, a corporation duly organized
and existing under the laws of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to , or registered assigns, the principal
sum of Dollars on April 1, 2001, and to pay interest thereon from and including
the date of initial issuance of Securities under the Indenture, or from and
including the most recent Interest Payment Date to which interest has been paid
or duly provided for, semiannually on April 1 and October 1 in each year,
commencing October 1, 1994, at the rate of 9,5% per annum, until the principal
hereof is paid or made available for payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest, which shall be the March 15 or
September 15 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of Securities not less
than 10 days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture. Payment
of the principal of (and premium, if any) and interest on this Security will be
made at the office or agency of the Company maintained for that purpose in the
Borough of Manhattan, The City of New York and in such other cities, if any, as
the Company may designate in writing to the Trustee, 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; provided, however, that at the option of
the Company 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.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
HEALTHSOUTH Rehabilitation Corporation
By
Attest:
Secretary
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of Securities of the
Company designated as its 9.5% Senior Subordinated Notes due 2001 (herein called
the "Securities"), limited in aggregate principal amount to $287,500,000
(including the underwriters' over-allotment option), issued and to be issued
under an Indenture, dated as of March , 1994 (herein called the "Indenture"),
between the Company and NationsBank of Georgia, National Association, as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee, the
holders of Senior Indebtedness and the Holders of the Securities, and of the
terms upon which the Securities are, and are to be, authenticated and delivered.
The Securities are subject to redemption upon not less than 30 nor
more than 60 days' notice by first class mail, at any time on or after April 1,
1998, as a whole or in part, at the election of the Company, at the following
Redemption Prices (expressed as percentages of the principal amount):
If redeemed during the 12-month period beginning April 1 of the
years indicated,
Redemption
Year Price
1998 . . . 104.750%
1999 . . . 102.375%
2000 . . . 100.000%
together in the case of any such redemption with accrued interest to the
Redemption Date, but interest installments whose Stated Maturity is on or prior
to such Redemption Date will be payable to the Holders of such Securities, or
one or more Predecessor Securities, of record at the close of business on the
Regular Record Dates referred to on the face hereof, all as provided in the
Indenture.
The Indenture provides that if a Repurchase Event (as defined therein)
occurs, each Holder of Securities shall have the right, in accordance with the
provisions of the Indenture, to require the Company to repurchase all of such
Holder's Securities, or any portion thereof that is an integral multiple of
$1,000, for cash at a price equal to 101% of the principal amount of such
Securities to be repurchased, together with accrued interest to the Repurchase
Date, but any interest installment the Stated Maturity of which is on or prior
to such Repurchase Date will be payable to the Holders of such Securities, or
one or more Predecessor Securities, of record at the close of business on the
Regular Record Dates referred to on the face hereof, all as provided in the
Indenture.
In the event of redemption or repurchase of this Security in part
only, a new Security or Securities for the portion hereof not redeemed or
repurchased will be issued in the name of the Holder hereof upon the
cancellation hereof.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes.
If an Event of Default shall occur and be continuing, the principal of
all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25% in principal amount of the
Securities at the time Outstanding shall have made written request to the
Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not
have received from the Holders of a majority in principal amount at the time
Outstanding a written direction inconsistent with such request, and shall have
failed to institute any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to any
suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or any premium or interest hereon on or after the
respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of (and
premium, if any) and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the absolute
owner hereof for all purposes, whether or not this Security be overdue, and
neither the Company, the Trustee nor any such agent shall be affected by notice
to the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
SECTION 204. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially
the following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
NATIONSBANK OF GEORGIA, NATIONAL
ASSOCIATION
as Trustee
By
Authorized Signatory
ARTICLE THREE
The Securities
SECTION 301. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $287,500,000
(including $37,500,000 aggregate principal amount of Securities that may be sold
by the Company pursuant to the Underwriting Agreement, dated March 17, 1994,
between the Company and Smith Barney Shearson Inc.), except for Securities
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Securities pursuant to Section 304, 305, 306, 906,
1108 or 1302.
The Securities shall be known and designated as the " 9.5% Senior
Subordinated Notes due 2001" of the Company. Their Stated Maturity shall be
April 1, 2001, and they shall bear interest at the rate of 9.5% per annum, from
and including the date of initial issuance of the Securities under this
Indenture, or from and including the most recent Interest Payment Date to which
interest has been paid or duly provided for, as the case may be, payable
semiannually on April 1 and October 1, commencing October 1, 1994, until the
principal thereof is paid or made available for payment. Each payment of
interest shall include interest accrued to but excluding the Interest Payment
Date on which payment is to be made.
The principal of (and premium, if any) and interest on the Securities
shall be payable at the office or agency of the Company in the Borough of
Manhattan, The City of New York maintained for such purpose and at any other
office or agency maintained by the Company for such purpose; provided, however,
that at the option of the Company 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.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Twelve.
The Securities shall be subject to repurchase at the option of the
Holder as provided in Article Thirteen.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
Each Security shall be dated March __, 1994 and shall also bear the
date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company shall cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities of
authorized denominations. Until so exchanged the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as definitive
Securities.
SECTION 305. Registration, Registration of Transfer and
Exchange.
(a) The Company shall cause to be kept at the Corporate Trust Office
of the Trustee a register (the register maintained in such office and in any
other office or agency designated pursuant to Section 1002 being herein
sometimes collectively referred to as the "Security Register") in which, subject
to such reasonable regulations as it may prescribe, the Company shall provide
for the registration of Securities and of transfers of Securities. The Trustee
is hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers of Securities as herein provided. At all reasonable
times the Security Register shall be open for inspection by the Company.
Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
(b) All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed, by the Holder thereof or his attorney duly authorized
in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906, 1108 or 1302 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning 15 days before the day of
the mailing of a notice of redemption of Securities selected for redemption
under Section 1104 and ending on the day of such mailing, or (ii) to register
the transfer of or exchange any Security so selected for redemption in whole or
in part, except the unredeemed portion of any Security being redeemed in part.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest. At the
option of the Company, interest on any Security may be paid by mailing a check
to the address of the Holder thereof as such address appears in the Securities
Register.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Security and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder at his address as it appears in the Security Register, not
less than 10 days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor
having been so mailed, such Defaulted Interest shall be paid to the Persons
in whose names the Securities (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
The Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the absolute
owner of such Security for the purpose of receiving payment of principal of (and
premium, if any) and (subject to Section 307) interest on such Security and for
all other purposes whatsoever, whether or not such Security be overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled Securities held
by the Trustee shall be disposed of as directed by a Company Order.
SECTION 310. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 306 and (ii)
Securities for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore
delivered to the Trustee for cancellation
(i) have become due and payable,
or
(ii) will become due and payable
at their Stated Maturity within one
year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the
purpose an amount in cash sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the Trustee
for cancellation, for principal (and premium, if any) and interest to the
date of such deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may be;
provided, however, that the Company shall be deemed to have made the
deposit required herein as to any Securities in respect of which the
Company has mailed a check to the address of the Holder thereof as such
address appears in the Security Register;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company (including all fees and expenses of the Trustee
required to be paid by the Company hereunder); and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Twelve or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon any Security when it
becomes due and payable, and continuance of such default for a period of 30
days; or
^
default in the payment of the principal of
(or premium, if any, on) any Security at its Maturity;
or
(3) default in the performance, or breach, of the
provisions of Article Eight hereof; or
(4) default in the performance, or breach, of any covenant or warranty
of the Company contained in Sections 1008 through 1016 of this Indenture,
and continuance of such default or breach for a period of 30 days after
there has been given, by registered or certified mail, to the Company by
the Trustee or to the Company and the Trustee by the Holders of at least
25% in principal amount of the Outstanding Securities a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
(5) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty a
default in whose performance or whose breach is elsewhere in this Section
specifically dealt with), and continuance of such default or breach for a
period of 45 days after there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% in principal amount of the Outstanding
Securities a written notice specifying such default or breach and requiring
it to be remedied and stating that such notice is a "Notice of Default"
hereunder; or
(6) any acceleration of the maturity of Indebtedness of the Company or
any Significant Subsidiary or any two or more Subsidiaries of the Company
which, if merged, would be a Significant Subsidiary having a principal
amount outstanding in excess of $5,000,000, or a failure to pay such
Indebtedness at its stated maturity, provided that such acceleration or
failure to pay is not cured within 10 days after such acceleration or
failure to pay;
(7) the entry by a court or courts of competent jurisdiction of a
final judgment or final judgments for the payment of money against the
Company or any Significant Subsidiary or any two or more Subsidiaries of
the Company which, if merged, would be a Significant Subsidiary, which
remain undischarged for a period (during which execution shall not be
effectively stayed, the posting of any required bond not being deemed an
execution for purposes hereof) of 30 days after all rights to appeal have
been exhausted, provided that the aggregate amount of all such judgments
exceeds $5,000,000; or
(8) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company or any Significant
Subsidiary or any two or more Subsidiaries of the Company which, if merged,
would be a Significant Subsidiary, in an involuntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company or any Significant Subsidiary or any two or more Subsidiaries of
the Company which, if merged, would be a Significant Subsidiary, a bankrupt
or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company or any Significant Subsidiary or any two or more Subsidiaries
of the Company which, if merged, would be a Significant Subsidiary, under
any applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Company or any Significant Subsidiary or any two or more Subsidiaries
of the Company which, if merged, would be a Significant Subsidiary, or of
any substantial part of their respective property, or ordering the winding
up or liquidation of affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect
for a period of 90 consecutive days; or
(9) the commencement by the Company or any Significant Subsidiary or
any two or more Subsidiaries of the Company which, if merged, would be a
Significant Subsidiary, of a voluntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be adjudicated a bankrupt
or insolvent, or the consent to the entry of a decree or order for relief
in respect of the Company or any Significant Subsidiary or any two or more
Subsidiaries of the Company which, if merged, would be a Significant
Subsidiary, in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar
law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing of a petition or answer or consent
seeking reorganization or relief under any applicable Federal or State law,
or the consent to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Significant
Subsidiary or any two or more Subsidiaries of the Company which, if merged,
would be a Significant Subsidiary, or of any substantial part of their
respective property, or the making of an assignment for the benefit of
creditors, or the admission in writing of inability to pay debts generally
as they become due, or the taking of corporate action by the Company or any
Significant Subsidiary or any two or more Subsidiaries of the Company
which, if merged, would be a Significant Subsidiary, in furtherance of any
such action; or
(10) a default in the payment of the Repurchase Price in respect of
any Security on the Repurchase Date therefor in accordance with the
provisions of Article Thirteen.
SECTION 502. Acceleration of Maturity; Rescission and
Annulment.
If an Event of Default occurs and is continuing, then and in any such
case the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the principal of all the Securities to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal shall
become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the
Trustee a sum sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any Securities
which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities,
and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default, other than the non-payment of the principal
of Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the
principal of (or premium, if any, on) any Security at
the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the rate
borne by the Securities, and, in addition thereto, 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.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding by filing
proofs of claim or otherwise, to take any and all actions authorized under the
Trust Indenture Act in order to have claims of the Holders and the Trustee
allowed in any such proceeding. In particular, the Trustee shall be authorized
to collect and receive any moneys or other property payable or deliverable on
any such claims and to distribute the same; and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due 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 607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
Subject to Article Twelve, any money collected by the Trustee pursuant
to this Article shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on account
of principal (or premium, if any) or interest, upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the
Trustee under Section 607;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal (and premium, if
any) and interest, respectively; and
THIRD: The balance, if any, to the Company or any
other Person or Persons determined to be entitled thereto.
SECTION 507. Limitation on Suits.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written
notice to the Trustee of a continuing Event of
Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 307) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date or, in the case of a repurchase pursuant to Article Thirteen, on the
Repurchase Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with
any rule of law or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default
(1) in the payment of the principal of (or
premium, if any) or interest on any Security, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected.
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 514. 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, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided, that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company.
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any default hereunder
known to the Trustee as and to the extent provided by the Trust Indenture Act;
provided, however, that in the case of any default of the character specified in
Section 501(5), no such notice to Holders shall be given until at least 45 days
after the occurrence thereof. For the purpose of this Section, the term
"default" means any event which is, or after notice or lapse of time or both
would become, an Event of Default.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney; and
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
SECTION 604. Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture, the Securities or any registration statement or other disclosure
document prepared in connection with the same. The Trustee shall not be
accountable for the use or application by the Company of Securities or the
proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar, any
Authenticating Agent or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 608 and 613, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Paying Agent, Security Registrar,
Authenticating Agent or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee and each predecessor Trustee, as the case may be, upon its request
for all reasonable expenses, disbursements and advances incurred or made by
the Trustee or any such predecessor Trustee, as the case may be, in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel
and other persons not regularly in its employ and the reasonable fees of
in-house counsel in the regular employ of the Trustee which are allocable
to this trust and the expenses and disbursements of such counsel), except
any such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(3) to indemnify the Trustee and each predecessor Trustee and the
officers, directors, employees and agents of the Trustee or any such
predecessor Trustee (the Trustee, each predecessor Trustee and such
officers, directors, employees and agents being hereinafter referred to in
this Section collectively as the "Indemnified Parties" and individually as
an "Indemnified Party") for, and to hold each Indemnified Party harmless
against, any loss, liability, tax, assessment, or other governmental charge
(other than taxes applicable to the Trustee's compensation hereunder) or
expenses incurred without negligence or bad faith on the part of such
Indemnified Party, arising out of or in connection with the acceptance or
administration of the Indenture or the trusts hereunder and the duties of
the Trustee hereunder, including enforcement of this Section.
To secure the Company's payment obligations in this Section 607, 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,
premium, if any, interest, Redemption Price or Repurchase Price, as the case may
be, on Securities.
The Company's payment obligations pursuant to this Section 607 shall
survive the discharge of this Indenture. When the Trustee incurs expenses and
provides services after the occurrence of an Event of Default specified in
Section 501(8) or (9), the expenses and compensation for the services will be
intended to constitute expenses of administration under Title 11 of the United
States Bankruptcy Code or any other applicable federal or state law for the
relief of debtors.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
either (a) has a combined capital and surplus of at least $50,000,000 or (b) is
a wholly owned subsidiary of a parent that is a bank, a trust company or a bank
holding company having a combined capital and surplus of at least $50,000,000
and such wholly owned subsidiary's obligations as a Trustee hereunder are fully
and unconditionally guaranteed by such parent. If such Person publishes reports
of condition at least annually, pursuant to law or to the requirements of
applicable supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of
Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and shall
fail to resign after written request therefor by the Company or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within 90 days after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to all Holders in the
manner provided in Section 106. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession
to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against
Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 614. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents which shall
be authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer, partial
redemption, partial repurchase or pursuant to Section 306, and Securities so
authenticated shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Whenever reference is made in this Indenture to the authentication
and delivery of Securities by the Trustee or the Trustee's certificate of
authentication, such references shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be a corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination
by Federal or State authority. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section.
Any Person into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such Person shall be otherwise eligible under
this Section, without the execution or filing of any paper or any further act on
the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment to all Holders in the manner provided in Section 106. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities described in the within-mentioned
Indenture.
----------------------------,
As Trustee
By__________________________,
As Authenticating Agent
By___________________________
Authorized Signatory
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of
Holders.
The Company will furnish or cause to be furnished to the
Trustee
(a) semiannually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications to
Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when the Securities are listed on any stock exchange.
SECTION 704. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Limitations on Mergers, Consolidations and Asset
Transfers.
The Company shall not consolidate or merge with or into, or sell, lease,
convey or otherwise dispose of all or substantially all of its assets, or assign
any of its obligations under the Securities or this Indenture, to any Person
unless:
(1) the Person formed by or surviving such consolidation or merger (if
other than the Company), or to which such sale, lease, conveyance or other
disposition or assignment shall be made, is a corporation organized and
existing under the laws of the United States or any State thereof or the
District of Columbia, and such Person assumes by supplemental indenture in
a form satisfactory to the Trustee all of the obligations of the Company
under the Securities and this Indenture;
(2) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing;
(3) immediately after giving effect to such transaction and the use of
any net proceeds therefrom on a pro forma basis, the Consolidated Net Worth
of the Company would be at least equal to the Consolidated Net Worth of the
Company immediately prior to such transaction;
(4) the EBITDA Coverage Ratio of the Company immediately after giving
effect to such transaction, would, on a pro forma basis, be such that the
Company would be entitled to incur at least $1 of additional Indebtedness
under the restriction set forth in the first sentence of Section 1008; and
(5) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Article and that all conditions precedent herein provided
for relating to such transaction have been satisfied.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any sale, lease, conveyance or other disposition or
assignment of all or substantially all of the assets of the Company in
accordance with Section 801, the successor Person formed by such consolidation
or into which the Company is merged or to which such sale, lease, conveyance or
other disposition or assignment is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture
with the same effect as if such successor Person had been named as the Company
herein, and thereafter, except in the case of a lease, the predecessor Person
shall be relieved of all obligations and covenants under this Indenture and the
Securities.
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of
Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person
to the Company and the assumption by any such
successor of the covenants of the Company herein and
in the Securities; or
(2) to add to the covenants of the Company for
the benefit of the Holders, or to surrender any right
or power herein conferred upon the Company; or
(3) to secure the Securities; or
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities and to add
to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by
more than one Trustee; or
(5) to add any additional Events of Default; or
(6) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the provisions of
this Indenture, provided that such action pursuant to this clause (6) shall
not adversely affect the interests of the Holders in any material respect;
or
(7) to cause the Indenture and the Securities to comply with
applicable law, including the Trust Indenture Act.
SECTION 902. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any Security, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where, or the coin or currency in
which, any Security or any premium or interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date), or adversely affect the right to cause the
Company to repurchase any Security pursuant to Article Thirteen, or modify
the provisions of this Indenture with respect to the subordination of the
Securities in a manner adverse to the Holders, or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture,
or
(3) modify any of the provisions of this Section or Section 513,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental
Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of (and
premium, if any) and interest on the Securities in accordance with the terms of
the Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New
York an office or agency where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of transfer or
exchange, and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company will 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, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside the Borough of Manhattan, The City of New
York) where the Securities may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of 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.
SECTION 1003. Money for Security to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (and premium, if any) or interest
on any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and premium, if
any) or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and will promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of (and premium, if any) or interest on
any Securities, deposit with a Paying Agent a sum sufficient to pay such amount,
such sum to be held as provided by the Trust Indenture Act, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease.
SECTION 1004. Statement by Officers as to Default.
(a) The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year of the Company ending after the date hereof, an
Officers' Certificate, stating whether or not to the best knowledge of the
signers thereof the Company is in default in the performance and observance of
any of the terms, provisions and conditions of this Indenture (without regard to
any period of grace or requirement of notice provided hereunder) and, if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge. The first Officers' Certificate
to be delivered pursuant to this Section 1004(a) shall be for the fiscal year
ending December 31, 1994.
(b) The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year of the Company ending after the date hereof, a
certificate signed by the Company's independent certified public accountants
stating (i) that their audit examination has included a review of this Indenture
and the Securities as they relate to accounting matters, (ii) that they have
read the most recent Officers' Certificates delivered to the Trustee pursuant to
paragraph (a) of this Section 1004 and (iii) whether, in connection with their
audit examination, anything came to their attention that caused them to believe
that the Company was not in compliance with any of the terms, covenants,
provisions or conditions of Sections 1008, 1010, 1011 and 1016 of this Indenture
as they pertain to accounting matters and, if any Default or Event of Default
has come to their attention, specifying the nature and period of existence
thereof; provided that such independent certified public accountants shall not
be liable in respect of such statement by reason of any failure to obtain
knowledge of any such Default or Event of Default that would not be disclosed in
the course of an audit examination conducted in accordance with GAAP in effect
at the date of such examination.
SECTION 1005. Existence.
Subject to Article Eight, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1006. Maintenance of Properties.
The Company shall cause all properties used or useful in the conduct
of its business or the business of any Subsidiary to be maintained and kept in
good condition, repair and working order and supplied with all necessary
equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.
SECTION 1007. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and as to which appropriate reserves or other provisions have been
made in accordance with GAAP.
SECTION 1008. Limitations on Additional Indebtedness.
(A) The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee, extend the maturity of, or otherwise become liable with respect to
(collectively, "incur"), any Indebtedness (including, without limitation,
Acquired Indebtedness), and (B) the Company shall not permit any of its
Subsidiaries to issue (except to the Company or any of its Wholly Owned
Subsidiaries) any Preferred Stock, unless, after giving effect thereto, the
Company's EBITDA Coverage Ratio on the date thereof would be at least 2.0 to 1,
determined on a pro forma basis as if the incurrence of such additional
Indebtedness or the issuance of such Preferred Stock, as the case may be, and
the application of the net proceeds therefrom, had occurred at the beginning of
the four-quarter period used to calculate the Company's EBITDA Coverage Ratio.
Notwithstanding the foregoing: (A) the Company and its Subsidiaries
may (i) incur Indebtedness under the Credit Agreements in an aggregate principal
amount at any time not to exceed $300,000,000 plus 50% of Eligible Accounts
Receivable; (ii) incur Refinancing Indebtedness; (iii) incur any Indebtedness of
the Company to any Wholly Owned Subsidiary or of any Subsidiary to the Company
or to any Wholly Owned Subsidiary; (iv) incur any Indebtedness evidenced by
letters of credit which are used in the ordinary course of business of the
Company and its Subsidiaries to secure workers' compensation and other insurance
coverages; and (v) incur Capitalized Lease Obligations and Attributable
Indebtedness of the Company and its Subsidiaries in an aggregate principal
amount at any one time outstanding not to exceed 5% of Consolidated Tangible
Assets; (B) the Company may issue the Convertible Debentures; and (C) any
Subsidiary may issue or create Preferred Stock if permitted under Section 1009
hereof.
The Company will not be in default under the covenant set forth in this
Section 1008 by reason of the fact that the outstanding Indebtedness under the
Credit Agreements at any time exceeds $300,000,000 plus 50% of Eligible Accounts
Receivable unless during such time the Company increases the amount of
outstanding Indebtedness under the Credit Agreements and at the time of such
increase does not meet the EBITDA Coverage Ratio test of 2.0 to 1 on a pro forma
basis with respect to such additional Indebtedness as provided above.
SECTION 1009. Limitations on Subsidiary Preferred Stock.
The Company shall not permit any of its Subsidiaries to issue or
create any Preferred Stock (other than to the Company or a Wholly Owned
Subsidiary) or permit any Person (other than the Company or a Wholly Owned
Subsidiary) to own or hold any interest in any Preferred Stock of any such
Subsidiary, unless the Subsidiary would be permitted to incur Indebtedness
pursuant to the provisions of Section 1008 in the aggregate principal amount
equal to the aggregate liquidation value of such Preferred Stock.
Notwithstanding the foregoing, the Company may permit any Subsidiary
which is a partnership formed to operate a single health care facility to issue
or create Preferred Stock, provided that the aggregate amount of all such
Preferred Stock outstanding after giving effect to such issuance or creation
shall not exceed 1% of Consolidated Tangible Assets as of the date of such
issuance or creation.
SECTION 1010. Limitations on Restricted Payments.
(a) The Company shall not, and shall not permit any of its
Subsidiaries, directly or indirectly, to make any Restricted Payment if at the
time of such Restricted Payment:
(i) a Default or Event of Default shall have occurred
and be continuing or shall occur as a consequence thereof;
(ii) after giving effect to the proposed Restricted Payment, the
amount of such Restricted Payment, when added to the aggregate amount of
all Restricted Payments made after the date of the Indenture plus
Investments made after such date pursuant to clause (vi)(b) of Section
1011, exceeds the sum of: (1) 50% of the Company's Consolidated Net Income
accrued during the period (taken as a single period) commencing with the
date of initial issuance of the Securities to and including the fiscal
quarter ended immediately prior to the date of such Restricted Payment (or,
if such aggregate Consolidated Net Income shall be a deficit, minus 100% of
such aggregate deficit); and (2) the net cash proceeds from the issuance
and sale of the Company's Capital Stock that is not Disqualified Stock
(other than to a Subsidiary of the Company) during such period; or
(iii) the Company would not be able to incur an additional $1.00 of
Indebtedness pursuant to the first sentence of Section 1008.
(b) The provisions of subsection (a) of this Section
1010 shall not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof if the payment thereof would have complied with the
limitations of this covenant on the date of declaration; or
(ii) the retirement of shares of the Company's Capital Stock or the
Company's or a Subsidiary of the Company's Indebtedness out of the proceeds
of a substantially concurrent sale (other than to a Subsidiary of the
Company) of shares of the Company's Capital Stock (other than Disqualified
Stock).
SECTION 1011. Limitations on Investments and Loans.
The Company shall not, and shall not permit any of its Subsidiaries
to, make any Investments in any other Person, except (i) capital contributions,
advances or loans to the Company by any Subsidiary or by the Company to a Wholly
Owned Subsidiary; (ii) the Company and each of its Subsidiaries may acquire and
hold receivables owing to it, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
(iii) the Company and its Subsidiaries may acquire and hold cash and Eligible
Investments; (iv) the Company and its Subsidiaries may make Investments in
Persons at least a majority of whose revenues result from health care-related
businesses or facilities; (v) the Company, directly or through a Wholly Owned
Subsidiary, may make an Investment in a Wholly Owned Subsidiary formed solely
for the purpose of insuring the health care business and facilities owned or
operated by the Company or a Subsidiary and any physician employed by or on the
staff of any such business or facility (the "Insurance Subsidiary"), provided
that the amount invested in such Insurance Subsidiary does not exceed $5
million; and (vi) Investments not otherwise permitted by clauses (i) through (v)
above in an aggregate amount not exceeding at any time the sum of (a) $10
million and (b) that amount equal to the amount of Restricted Payments permitted
to be made by the Company and its Subsidiaries under Section 1010.
SECTION 1012. Limitations on Restrictions on Distributions from
Subsidiaries.
The Company shall not, and shall not permit any of its Subsidiaries
to, create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction (other than encumbrances or restrictions
imposed by law or by judicial or regulatory action or by provisions in leases or
other agreements that restrict the assignability thereof) on the ability of any
Subsidiary of the Company to (i) pay dividends or make any other distributions
on its Capital Stock or any other interest or participation in, or measured by,
its profits, owned by the Company or any of its other Subsidiaries, or pay
interest on or principal of any Indebtedness owned to the Company or any of its
other Subsidiaries, (ii) make loans or advances to the Company or any of its
other Subsidiaries or (iii) transfer any of its properties or assets to the
Company or any of its other Subsidiaries, except for encumbrances or
restrictions existing under or by reason of (a) applicable law, (b) the Credit
Agreements, (c) Existing Indebtedness, (d) any restrictions under any agreement
evidencing any Acquired Indebtedness that was permitted to be incurred pursuant
to the Indenture, provided that such restrictions and encumbrances only apply to
assets that were subject to such restrictions and encumbrances prior to the
acquisition of such assets by the Company or its Subsidiaries, (e) restrictions
or encumbrances replacing those permitted by clause (b), (c) or (d) which, taken
as a whole, are not more restrictive, (f) the Indenture, (g) any restrictions
and encumbrances arising in connection with Refinancing Indebtedness; provided,
however, that any restrictions or encumbrances of the type described in this
paragraph that arise under such Refinancing Indebtedness are not, taken as a
whole, more restrictive than those under the agreement creating or evidencing
the Indebtedness being refunded or refinanced, (h) any restrictions with respect
to a Subsidiary of the Company imposed pursuant to an agreement that has been
entered into for the sale or other disposition of all or substantially all of
the Capital Stock or assets of such Subsidiary, (i) any agreement restricting
the sale or other disposition of property securing Indebtedness if such
agreement does not expressly restrict the ability of a Subsidiary of the Company
to pay dividends or make loans or advances, and (j) customary restrictions in
purchase money debt or leases relating to the property covered thereby.
SECTION 1013. Limitations on Certain Other Subordinated
Indebtedness.
The Company shall not create, incur, assume or suffer to exist any
Indebtedness that is subordinate in right of payment to any Senior Indebtedness
unless such Indebtedness by its terms or the terms of the instrument creating or
evidencing such Indebtedness is subordinate in right of payment to, or ranks
pari passu with, the Securities.
SECTION 1014. Limitations on Transactions with Affiliates.
Neither the Company nor any of its Subsidiaries shall make any loan,
advance, guarantee or capital contribution to, or for the benefit of, or sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
for the benefit of, or purchase or lease any property or assets from, or enter
into or amend any contract, agreement or understanding with, or for the benefit
of, any Affiliate of the Company or any of its Subsidiaries or any Person (or
any Affiliate of such Person) holding 10% or more of the Common Equity of the
Company or any of its Subsidiaries (each an "Affiliate Transaction"), unless (i)
such Affiliate Transactions are between or among the Company and its
Subsidiaries; (ii) such Affiliate Transactions are in the ordinary course of
business and consistent with past practice; or (iii) the terms of such Affiliate
Transactions are fair and reasonable to the Company or such Subsidiary, as the
case may be, and are at least as favorable as the terms which could be obtained
by the Company or such Subsidiary, as the case may be, in a comparable
transaction made on an arm's-length basis between unaffiliated parties. In the
event of any transaction or series of transactions occurring subsequent to the
date of the Indenture with an Affiliate of the Company which is not permitted
under clauses (i) or (ii) above and involves in excess of $5,000,000 the terms
of such transaction shall be in writing and a majority of the disinterested
members of the Board of Directors shall by resolution determine that such
business or transaction meets the criterion set forth in clause (iii) above.
SECTION 1015. Limitations on Liens.
The Company shall not create or suffer to exist any Lien (including
any Lien created to secure the Company's obligation to repay Senior Subordinated
Debt other than the Securities or to repay Subordinated Obligations), other than
Permitted Liens, on any of its assets unless all payments due under the
Indenture and the Securities are secured on an equal and ratable basis with the
obligation so secured until such time as such obligation is no longer secured by
a Lien.
SECTION 1016. Limitations on Asset Sales.
The Company shall not, and shall not permit any of its Subsidiaries
to, consummate any Asset Sale unless, with respect to Asset Sales other than
Asset Sales of health care facilities pursuant to a binding commitment existing
on the date of issuance of the Securities (i) the Company or its Subsidiaries
receive consideration at the time of such Asset Sale at least equal to the fair
market value of the assets or Capital Stock included in such Asset Sale (as
determined in good faith by the Board of Directors, whose determination shall be
conclusive and evidenced by a board resolution) and (ii) either (A) not less
than 75% of such consideration is in the form of cash received at the time of
such Asset Sale, or (B) after giving effect to such Asset Sale, the aggregate
amount or fair market value of other consideration received by the Company from
all Asset Sales since the date of issuance of the Securities, reduced by the
original amount of all deferred obligations to pay cash received from all such
Asset Sales which have then been satisfied and paid in full, would not exceed 5%
of the amount of Company's PP&E shown on its most recent balance sheet filed
with the Commission under Section 13(a) or Section 15(d) of the Exchange Act; or
(C) such Asset Sale occurs prior to eighteen (18) months after the date of
issuance of the Securities and is of a health care facility acquired from
National Medical Enterprises, Inc. or located in a geographic market so as to
compete with such a facility. The Net Proceeds of Assets Sales shall within 360
days, (i) be reinvested in the lines of business of the Company or any of its
Subsidiaries, immediately prior to such investment; (ii) be applied to the
payment of the principal of, and interest on, Senior Indebtedness; (iii) be
utilized to make any Investment in any other Person permitted under the
Indenture; or (iv) be applied to an offer (an "Asset Sale Offer") to repurchase
outstanding Securities. In any such Asset Sale Offer, the Company shall offer to
repurchase Securities on a pro rata basis or as selected by lot at a purchase
price equal to 100% of the aggregate principal amount of the Securities, plus
accrued and unpaid interest to the date of repurchase, in the manner set forth
in the Indenture. Any Asset Sale Offer will be conducted in compliance with
applicable tender offer rules, including Section 14(e) of the Exchange Act and
Rule 14e-1 thereunder. Any Net Proceeds remaining immediately after the
completion of any Asset Sale Offer may be used by the Company or its
Subsidiaries for any purpose not inconsistent with the other provisions of the
Indenture.
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption.
The Securities may be redeemed at the election of the Company, as a
whole or from time to time in part, at any time on or after April 1, 1998, at
the Redemption Prices specified in the form of Security hereinbefore set forth,
together with accrued interest to but excluding the Redemption Date.
SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the Company, as permitted
by any provision of this Indenture, shall be made in accordance with such
provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any redemption
at the election of the Company of less than all the Securities, the Company
shall, at least 60 days prior to the Redemption Date fixed by the Company
(unless a shorter notice shall be satisfactory to the Trustee), notify the
Trustee of such Redemption Date and of the principal amount of Securities to be
redeemed, which principal amount shall not be less than $1,000,000 in the
aggregate.
SECTION 1104. Selection by Trustee of Securities to Be
Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $1,000 or any integral multiple thereof) of the principal amount of
Securities of a denomination larger than $1,000.
The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 15 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the case of partial redemption of any
Securities, the principal amounts) of the particular Securities to be
redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date, and
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.
SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Security.
SECTION 1108. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at an office or agency of the Company designated for that purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company or
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by such
Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Securities Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Security, by
his acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article (subject to the provisions
of Article Four), the indebtedness represented by the Securities and the payment
of the principal of (and premium, if any) and interest on each and all of the
Securities (including any repurchases or payments pursuant to Section 1016 or
Article Thirteen) are hereby expressly made subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness.
SECTION 1202. Payment Over of Proceeds Upon Dissolution, Etc.
In the event of (1) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to a substantial part of its assets, or (2) any liquidation,
dissolution or other winding up of the Company, whether voluntary or involuntary
and whether or not involving insolvency or bankruptcy, or (3) any assignment for
the benefit of creditors or any other marshalling of assets and liabilities of
the Company, then and in any such event specified in (1), (2) or (3) above (each
such event, if any, herein sometimes referred to as a "Proceeding") the holders
of Senior Indebtedness shall be entitled to receive payment in full of all
amounts due or to become due on or in respect of all Senior Indebtedness, or
provision shall be made for such payment in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior Indebtedness, before
the Holders of the Securities are entitled to receive any payment or
distribution of any kind or character, whether in cash, property or securities,
on account of principal of (or premium, if any) or interest on the Securities or
on account of any purchase (including any repurchase pursuant to Section 1016 or
Article Thirteen) or other acquisition of Securities by the Company or any
Subsidiary of the Company (all such payments, distributions, purchases and
acquisitions herein referred to, individually and collectively, as a "Securities
Payment"), and to that end the holders of all Senior Indebtedness shall be
entitled to receive, for application to the payment thereof, any Securities
Payment which may be payable or deliverable in respect of the Securities in any
such Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
Securities Payment before all Senior Indebtedness is paid in full or payment
thereof provided for in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Indebtedness, and if such fact shall, at
or prior to the time of such Securities Payment, have been made known to the
Trustee pursuant to Section 1210 or, as the case may be, such Holder, then and
in such event such Securities Payment shall be paid over or delivered forthwith
to the trustee in bankruptcy, receiver, liquidating trustee, custodian,
assignee, agent or other Person making payment or distribution of assets of the
Company for application to the payment of all Senior Indebtedness remaining
unpaid, to the extent necessary to pay all Senior Indebtedness in full, after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness.
For purposes of this Article only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include a payment or distribution of stock or securities
of the Company provided for by a plan of reorganization or readjustment
authorized by an order or decree of a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy law or of any other
corporation provided for by such plan of reorganization or readjustment, which
stock or securities are subordinated in right of payment to all then outstanding
Senior Indebtedness to substantially the same extent as, or to a greater extent
than, the Securities are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution or the Company following the conveyance
or transfer of all or substantially all of its properties and assets as an
entirety to another Person upon the terms and conditions set forth in Article
Eight shall not be deemed a Proceeding for the purposes of this Section if the
Person formed by such consolidation or into which the Company is merged or the
Person which acquires by conveyance or transfer such properties and assets
substantially as an entirety, as the case may be, shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions set
forth in Article Eight.
SECTION 1203. Prior Payment to Senior Indebtedness Upon
Acceleration of Securities.
In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of the Senior
Indebtedness outstanding at the time such Securities so become due and payable
shall be entitled to receive payment in full of all amounts due or to become due
on or in respect of all Senior Indebtedness, or provision shall be made for such
payment in cash or cash equivalents or otherwise in a manner satisfactory to the
holders of such Senior Indebtedness, before the Holders of the Securities are
entitled to receive any Securities Payment (including any payment which may be
payable by reason of the payment of any other indebtedness of the Company being
subordinated to the payment of the Securities).
In the event that, notwithstanding the foregoing, the Company shall
make any Securities Payment to the Trustee or any Holder prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such Securities Payment, have been made known to the Trustee pursuant to
Section 1210 or, as the case may be, such Holder, then and in such event such
Securities Payment shall be paid over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any Securities
Payment with respect to which Section 1202 would be applicable.
SECTION 1204. No Payment in Certain Circumstances.
(a) In the event and during the continuation of any default in the
payment of any Senior Indebtedness in excess of $5,000,000 beyond any applicable
grace period with respect thereto, no Securities Payment shall be made unless
and until such default is cured or waived or ceases to exist or such Senior
Indebtedness is discharged.
(b) During the continuation of any non-payment event of default with
respect to any Designated Senior Indebtedness pursuant to which the maturity
thereof may be accelerated, no Securities Payment or other payment or
distribution of any assets of the Company of any kind or character (other than
payments of amounts already deposited in accordance with the defeasance
provisions of the Indenture) shall be made by the Company on account of
Subordinated Obligations or on account of the purchase, redemption or other
acquisition of the Securities for the period specified below (the "Payment
Blockage Period"). The Payment Blockage Period shall commence upon the receipt
of notice by the Company or the Trustee from any representative of a holder of
Designated Senior Indebtedness and shall end on the earlier of (i) 179 days
thereafter, (ii) the date on which such event is cured or waived or ceases to
exist or on which such Designated Senior Indebtedness is discharged, (iii) the
date on which the maturity of any Indebtedness (other than Senior Indebtedness)
shall have been accelerated by virtue of such event, or (iv) the date on which
such Payment Blockage Period shall have been terminated by notice to the Company
or the Trustee from the representative of holders of the Designated Senior
Indebtedness initiating such Payment Blockage Period, after which the Company
shall resume making any and all required payments in respect of the Securities,
including any missed payments. Only one Payment Blockage Period may be commenced
during any period of 365 consecutive days. No event of default with respect to
Designated Senior Indebtedness that existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period will be, or can be,
made the basis for the commencement of a second Payment Blockage Period whether
or not within a period of 365 consecutive days, unless such event of default has
been cured or waived for a period of not less than 90 consecutive days. In no
event may a Payment Blockage Period extend beyond 179 days.
In the event that, notwithstanding the foregoing, the Company shall
make any Securities Payment to the Trustee or any Holder prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such Securities Payment, have been made known to the Trustee pursuant to
Section 1210 or, as the case may be, such Holder, then and in such event such
Securities Payment shall be paid over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any Securities
Payment with respect to which Section 1202 would be applicable.
SECTION 1205. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent (1) the Company, at any time except during
the pendency of any Proceeding referred to in Section 1202 or under the
conditions described in Section 1203 or 1204, from making Securities Payments,
or (2) the application by the Trustee of any money deposited with it hereunder
to Securities Payments or the retention of such Securities Payment by the
Holders, if, at the time of such application by the Trustee, it did not have
knowledge that such Securities Payment would have been prohibited by the
provisions of this Article.
SECTION 1206. Subrogation to Rights of Holders of Senior
Indebtedness.
Subject to the payment in full of all amounts due or to become due on
or in respect of Senior Indebtedness, or the provision for such payment in cash
or cash equivalents or otherwise in a manner satisfactory to the holders of
Senior Indebtedness, the Holders of the Securities shall be subrogated to the
extent of the payments or distributions made to the holders of such Senior
Indebtedness pursuant to the provisions of this Article (equally and ratably
with the holders of all indebtedness of the Company which by its express terms
is subordinated to indebtedness of the Company to substantially the same extent
as the Securities are subordinated and is entitled to like rights of
subrogation) to the rights of the holders of such Senior Indebtedness to receive
payments and distributions of cash, property and securities applicable to the
Senior Indebtedness until the principal of (and premium, if any) and interest on
the Securities shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of the Senior Indebtedness of any cash,
property or securities to which the Holders of the Securities or the Trustee
would be entitled except for the provisions of this Article, and no payments
over pursuant to the provisions of this Article to the holders of Senior
Indebtedness by Holders of the Securities or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Indebtedness and the Holders
of the Securities, be deemed to be a payment or distribution by the Company to
or on account of the Senior Indebtedness.
SECTION 1207. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders on the one hand and the
holders of Senior Indebtedness on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Securities is intended to or
shall (1) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Securities, the obligation of the
Company, which is absolute and unconditional, to pay to the Holders of the
Securities the principal of (and premium, if any) and interest on the
Securities, and to make any repurchases of the Securities required by Article
Thirteen hereof, the Securities as and when the same shall become due and
payable in accordance with the terms hereof; or (2) affect the relative rights
against the Company of the Holders of the Securities and creditors of the
Company other than the holders of Senior Indebtedness; or (3) prevent the
Trustee or the Holder of any Security from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article of the holders of Senior Indebtedness to
receive cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder.
SECTION 1208. Trustee to Effectuate Subordination and Payment
Provisions.
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination and payment provisions provided in
this Article and appoints the Trustee his attorney-in-fact for any and all such
purposes.
SECTION 1209. No Waiver of Subordination Provisions.
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 on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following: (i) change the manner,
place or terms of payment or extend the time of payment of, or renew or alter,
Senior Indebtedness, or otherwise amend or supplement in any manner Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.
SECTION 1210. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until a Responsible Officer of the Trustee shall have received written
notice thereof from the Company or a holder of Senior Indebtedness or from any
trustee therefor; and, prior to the receipt of any such written notice, the
Trustee, subject to the provisions of Section 601, shall be entitled in all
respects to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section at least
three Business Days prior to the date upon which by the terms hereof any money
may become payable for any purpose (including, without limitation, the payment
of the principal of (and premium, if any) or interest on, or amounts payable
upon redemption or repurchase of, any Security), then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full power and authority
to receive such money and to apply the same to the purpose for which such money
was received and shall not be affected by any notice to the contrary which may
be received by it within three Business Days prior to such date.
Subject to the provisions of Section 601, the Trustee shall be
entitled to rely on the delivery to a Responsible Officer of a written notice by
a Person representing himself to be a holder of Senior Indebtedness (or a
trustee therefor) to establish that such notice has been given by a holder of
Senior Indebtedness (or a trustee therefor). In the event that the Trustee
determines in good faith that further evidence is required with respect to the
right of any Person as a holder of Senior Indebtedness to participate in any
payment or distribution pursuant to this Article, the Trustee may request such
Person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of Senior Indebtedness held by such Person, the extent to which such
person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 1211. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to the provisions of Section 601, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of Securities, for the purpose of ascertaining the Persons entitled to
participate in such payment or 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.
SECTION 1212. Trustee Not Fiduciary for Holders of Senior
Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of Securities
or to the Company or to any other Person cash, property or securities to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
or otherwise. With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Article Twelve against the Trustee.
SECTION 1213. Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 607.
SECTION 1214. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee; provided,
however, that Section 1213 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
ARTICLE THIRTEEN
Repurchase of Securities at the Option of the
Holder Upon a Repurchase Event
SECTION 1301. Right to Require Repurchase.
In the event that a Repurchase Event (as hereinafter defined) shall
occur, then each Holder shall have the right, at the Holder's option, to require
the Company to repurchase, and upon the exercise of such right the Company shall
repurchase, all of such Holder's Securities, or any portion of the principal
amount thereof that is an integral multiple of $1,000, on the date (the
"Repurchase Date") that is 60 calendar days after the date of the Company Notice
(as defined in Section 1302), for cash at a purchase price (the "Repurchase
Price")equal to 101% of the principal amount of the Securities to be purchased,
together with accrued and unpaid interest to the Repurchase Date. Prior to the
Repurchase Date, the Company shall pay in full all amounts outstanding under the
Credit Agreements or obtain the consents of the lenders signatories thereto to
the repurchase of Securities. Any failure by the Company to pay in full all
amounts outstanding under the Credit Agreements or to obtain the consents of the
lenders signatories thereto to the repurchase of Securities as described above,
shall not excuse a default by the Company under this Article Thirteen. Such
right to require the repurchase of the Securities shall not continue after a
discharge of the Company from its obligations with respect to the Securities in
accordance with Article Four, unless a Repurchase Event shall have occurred
prior to such discharge.
SECTION 1302. Notices; Method of Exercising Repurchase Right,
Etc.
(a) Unless the Company shall have theretofore called for redemption
all of the Outstanding Securities, on or before the 30th calendar day after the
occurrence of a Repurchase Event, the Company or, at the request (and expense)
of the Company, the Trustee, shall mail to all Holders a notice (the "Company
Notice") of the occurrence of the Repurchase Event and of the repurchase right
set forth herein arising as a result thereof.
Each notice of a repurchase right shall state:
(1) the Repurchase Date,
(2) the date by which the repurchase right must
be exercised,
(3) the Repurchase Price, and
(4) a description of the procedure which a Holder must follow to
exercise a repurchase right.
No failure of the Company to give the foregoing notices or defect
therein shall limit any Holder's right to exercise a repurchase right or affect
the validity of the proceedings for the repurchase of Securities.
If any of the foregoing provisions are inconsistent with applicable
law, such law shall govern.
(b) To exercise a repurchase right, a Holder shall deliver to the
Trustee on or before the close of business on the second Business Day prior to
the Repurchase Date (i) written notice of the Holder's exercise of such right,
which notice shall set forth the name of the Holder, the principal amount of the
Securities to be repurchased, a statement that an election to exercise the
repurchase right is being made thereby, and (ii) the Securities with respect to
which the repurchase right is being exercised, duly endorsed for transfer to the
Company.
Such written notice shall be irrevocable.
(c) In the event a repurchase right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid the Repurchase
Price in cash to the Holder on the Repurchase Date, together with accrued and
unpaid interest to the Repurchase Date payable with respect to the Securities as
to which the purchase right has been exercised; provided, however, that
installments of interest that mature on or prior to the Repurchase Date shall be
payable in cash to the Holders of such Securities, or one or more predecessor
Securities, registered as such at the close of business on the relevant Regular
Record Date according to the terms and provisions of Article Three.
(d) If any Security surrendered for repurchase shall not be so paid on
the Repurchase Date, the principal shall, until paid, bear interest to the
extent permitted by applicable law from the Repurchase Date at the rate borne by
the Security until the principal of such Security shall have been paid or duly
provided for.
(e) Any Security which is to be repurchased only in part shall be
surrendered to the Trustee (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities, containing identical terms and conditions,
of any authorized denomination as requested by such Holder in aggregate
principal amount equal to and in exchange for the unrepurchased portion of the
principal of the Security so surrendered.
(f) Prior to the Repurchase Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Repurchase Price of the Securities that are to be
repaid on the Repurchase Date.
SECTION 1303. Definition of Repurchase Event.
For purposes of this Article Thirteen, a "Repurchase Event" shall be a
"Change of Control," which means any of the following: (1) the sale, lease,
conveyance or other disposition of all or substantially all of the Company's
assets as an entirety or substantially as an entirety to any Person or "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) in one or a series
of transactions; (2) stockholders of the Company shall approve any plan or
proposal for the liquidation or dissolution of the Company; (3) any transaction
or series of transactions (as a result of a tender offer, merger, consolidation
or otherwise) that results in any Person, including a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) that includes such Person,
acquiring "beneficial ownership" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of 50% or more of the aggregate voting power of
all classes of Common Equity of the Company; or (4) individuals who at the
beginning of any period of two consecutive calendar years constituted the Board
of Directors (together with any new directors whose election to the Board of
Directors or whose nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the members of the Board of
Directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the members of the Board of Directors then in office.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
HEALTHSOUTH Rehabilitation
Corporation
By /s/ ANTHONY J. TANNER
-------------------------------------
Attest:
/s/ AARON BEAM, JR.
- ---------------------------
NATIONSBANK OF GEORGIA, NATIONAL
ASSOCIATION
By /s/ ELIZABETH T. TALLEY
-------------------------------------
Attest:
/s/ SABRINA FULLER
- ---------------------------
<PAGE>
EXHIBIT (4)-2
HEALTHSOUTH Rehabilitation Corporation
TO
PNC Bank, Kentucky, Inc.
--------------------
Trustee
Indenture
Dated as of March 24, 1994
$115,000,000
5% Convertible Subordinated Debentures due 2001
<PAGE>
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
Section 310(a)(1) . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . Not Applicable
(a)(5) . . . . . . . . . . . . . . . 609
(b) . . . . . . . . . . . . . . . 608; 610
(c) . . . . . . . . . . . . . . . Not Applicable
Section 311(a) . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . 613
(c) . . . . . . . . . . . . . . . Not Applicable
Section 312(a) . . . . . . . . . . . . . . . 701; 702(a)
(b) . . . . . . . . . . . . . . . 702(b)
(c) . . . . . . . . . . . . . . . 702(c)
Section 313(a) . . . . . . . . . . . . . . . 703(a)
(b) . . . . . . . . . . . . . . . 703(a)
(c) . . . . . . . . . . . . . . . 703(a)
(d) . . . . . . . . . . . . . . . 703(b)
314(a) . . . . . . . . . . . . . . . 704
(a)(4) . . . . . . . . . . . . . . . 101; 1004
(b) . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . 102
Section 315(a) . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . 514
Section 316(a)(last sentence) . . . . . . . . . . . 101
(a)(1)(A). . . . . . . . . . . . . . . . 502; 512
(a)(1)(B). . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . 104(c)
Section 317(a)(l) . . . . . . . . . . . . . . . 505
(a)(2) . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . 1003
Section 318(a) . . . . . . . . . . . . . . . 107
- --------------------
Note: This reconciliation and tie shall not, for any
purpose, be deemed to be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
Parties . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals of the Company . . . . . . . . . . . . . . . 1
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions . . . . . . . . . . . . . . . 1
"Act" . . . . . . . . . . . . . . . . . . . . . . . 2
"Affiliate" . . . . . . . . . . . . . . . . . . . . 2
"Authenticating Agent". . . . . . . . . . . . . . . 2
"Bank Debt" . . . . . . . . . . . . . . . . . . . . 2
"Board of Directors". . . . . . . . . . . . . . . . 2
"Board Resolution". . . . . . . . . . . . . . . . . 2
"Business Day". . . . . . . . . . . . . . . . . . . 2
"Capital Stock" . . . . . . . . . . . . . . . . . . 3
"Change of Control" . . . . . . . . . . . . . . . . 3
"Closing Price" . . . . . . . . . . . . . . . . . . 3
"Commission". . . . . . . . . . . . . . . . . . . . 3
"Common Equity" . . . . . . . . . . . . . . . . . . 3
"Common Stock". . . . . . . . . . . . . . . . . . . 3
"Company" . . . . . . . . . . . . . . . . . . . . . 3
"Company Request" or "Company Order". . . . . . . . 4
"Corporate Trust Office". . . . . . . . . . . . . . 4
"Corporation" . . . . . . . . . . . . . . . . . . . 4
"Credit Agreements" . . . . . . . . . . . . . . . . 4
"Current Market Price". . . . . . . . . . . . . . . 4
"Defaulted Interest". . . . . . . . . . . . . . . . 4
"Designated Senior Indebtedness". . . . . . . . . . 4
"Event of Default". . . . . . . . . . . . . . . . . 4
"Exchange Act". . . . . . . . . . . . . . . . . . . 4
"Holder". . . . . . . . . . . . . . . . . . . . . . 4
"Indenture" . . . . . . . . . . . . . . . . . . . . 5
"Interest Payment Date" . . . . . . . . . . . . . . 5
"Maturity". . . . . . . . . . . . . . . . . . . . . 5
"NASDAQ" and "NASDAQ/NMS" . . . . . . . . . . . . . 5
"Officers' Certificate" . . . . . . . . . . . . . . 5
"Opinion of Counsel". . . . . . . . . . . . . . . . 5
"Outstanding" . . . . . . . . . . . . . . . . . . . 5
"Paying Agent". . . . . . . . . . . . . . . . . . . 6
"Person". . . . . . . . . . . . . . . . . . . . . . 6
"Predecessor Security". . . . . . . . . . . . . . . 6
"Proceeding". . . . . . . . . . . . . . . . . . . . 6
"Redemption Date" . . . . . . . . . . . . . . . . . 6
"Redemption Price". . . . . . . . . . . . . . . . . 6
"Regular Record Date" . . . . . . . . . . . . . . . 7
"Repurchase Date" . . . . . . . . . . . . . . . . . 7
"Repurchase Event". . . . . . . . . . . . . . . . . 7
"Repurchase Price". . . . . . . . . . . . . . . . . 7
"Securities Payment". . . . . . . . . . . . . . . . 7
"Security Register" and "Security Registrar". . . . 7
"Senior Indebtedness" . . . . . . . . . . . . . . . 7
"Significant Subsidiary". . . . . . . . . . . . . . 7
"Special Record Date" . . . . . . . . . . . . . . . 7
"Stated Maturity" . . . . . . . . . . . . . . . . . 7
"Subordinated Obligations". . . . . . . . . . . . . 7
"Subsidiary". . . . . . . . . . . . . . . . . . . . 8
"Trading Day" . . . . . . . . . . . . . . . . . . . 8
"Trustee" . . . . . . . . . . . . . . . . . . . . . 8
"Trust Indenture Act" . . . . . . . . . . . . . . . 8
"Vice President". . . . . . . . . . . . . . . . . . 8
SECTION 102. Compliance Certificates and Opinions. . . 8
SECTION 103. Form of Documents Delivered to Trustee. . 9
SECTION 104. Acts of Holders; Record Dates . . . . . . 10
SECTION 105. Notices, Etc., to Trustee and Company . . 11
SECTION 106. Notice to Holders; Waiver . . . . . . . . 11
SECTION 107. Conflict with Trust Indenture Act . . . . 12
SECTION 108. Effect of Headings and Table of
Contents. . . . . . . . . . . . . . . . . 12
SECTION 109. Successors and Assigns. . . . . . . . . . 12
SECTION 110. Separability Clause . . . . . . . . . . . 12
SECTION 111. Benefits of Indenture . . . . . . . . . . 12
SECTION 112. Governing Law . . . . . . . . . . . . . . 12
SECTION 113. Legal Holidays. . . . . . . . . . . . . . 13
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally . . . . . . . . . . . . . 13
SECTION 202. Form of Face of Security. . . . . . . . . 14
SECTION 203. Form of Reverse of Security . . . . . . . 15
SECTION 204. Form of Trustee's Certificate of
Authentication. . . . . . . . . . . . . . 20
SECTION 205. Form of Conversion Notice . . . . . . . . 20
ARTICLE THREE
The Securities
SECTION 301. Title and Terms . . . . . . . . . . . . . 21
SECTION 302. Denominations . . . . . . . . . . . . . . 22
SECTION 303. Execution, Authentication, Delivery and
Dating. . . . . . . . . . . . . . . . . . 22
SECTION 304. Temporary Securities. . . . . . . . . . . 22
SECTION 305. Registration, Registration of Transfer
and Exchange. . . . . . . . . . . . . . . 23
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities. . . . . . . . . . . . . . . . 24
SECTION 307. Payment of Interest; Interest Rights
Preserved . . . . . . . . . . . . . . . . 25
SECTION 308. Persons Deemed Owners . . . . . . . . . . 27
SECTION 309. Cancellation. . . . . . . . . . . . . . . 27
SECTION 310. Computation of Interest . . . . . . . . . 27
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of
Indenture . . . . . . . . . . . . . . . . 28
SECTION 402. Application of Trust Money. . . . . . . . 29
ARTICLE FIVE
Remedies
SECTION 501. Events of Default . . . . . . . . . . . . 29
SECTION 502. Acceleration of Maturity; Rescission
and Annulment.. . . . . . . . . . . . . . 32
SECTION 503. Collection of Indebtedness and Suits
for Enforcement by Trustee. . . . . . . . 33
SECTION 504. Trustee May File Proofs of Claim. . . . . 33
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities. . . . . . . . . 34
SECTION 506. Application of Money Collected. . . . . . 34
SECTION 507. Limitation on Suits . . . . . . . . . . . 35
SECTION 508. Unconditional Right of Holders to
Receive Principal, Premium and Interest
and to Convert. . . . . . . . . . . . . . 35
SECTION 509. Restoration of Rights and Remedies. . . . 36
SECTION 510. Rights and Remedies Cumulative. . . . . . 36
SECTION 511. Delay or Omission Not Waiver. . . . . . . 36
SECTION 512. Control by Holders. . . . . . . . . . . . 37
SECTION 513. Waiver of Past Defaults . . . . . . . . . 37
SECTION 514. Undertaking for Costs . . . . . . . . . . 37
SECTION 515. Waiver of Stay or Extension Laws. . . . . 38
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities . . . 38
SECTION 602. Notice of Defaults. . . . . . . . . . . . 38
SECTION 603. Certain Rights of Trustee . . . . . . . . 39
SECTION 604. Not Responsible for Recitals or
Issuance of Securities. . . . . . . . . . 40
SECTION 605. May Hold Securities . . . . . . . . . . . 40
SECTION 606. Money Held in Trust . . . . . . . . . . . 40
SECTION 607. Compensation and Reimbursement. . . . . . 40
SECTION 608. Disqualification; Conflicting
Interests . . . . . . . . . . . . . . . . 41
SECTION 609. Corporate Trustee Required;
Eligibility . . . . . . . . . . . . . . . 41
SECTION 610. Resignation and Removal; Appointment of
Successor . . . . . . . . . . . . . . . . 42
SECTION 611. Acceptance of Appointment by Successor. . 43
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business. . . . . . . . . . 43
SECTION 613. Preferential Collection of Claims
Against Company . . . . . . . . . . . . . 44
SECTION 614. Appointment of Authenticating Agent.. . . 44
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and
Addresses of Holders. . . . . . . . . . . 46
SECTION 702. Preservation of Information;
Communications to Holders . . . . . . . . 46
SECTION 703. Reports by Trustee. . . . . . . . . . . . 47
SECTION 704. Reports by Company. . . . . . . . . . . . 47
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms . . . . . . . . . . . . . . 48
SECTION 802. Successor Substituted . . . . . . . . . . 49
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent
of Holders. . . . . . . . . . . . . . . . 49
SECTION 902. Supplemental Indentures With Consent of
Holders . . . . . . . . . . . . . . . . . 50
SECTION 903. Execution of Supplemental Indentures. . . 51
SECTION 904. Effect of Supplemental Indentures . . . . 51
SECTION 905. Conformity with Trust Indenture Act . . . 51
SECTION 906. Reference in Securities to Supplemental
Indentures. . . . . . . . . . . . . . . . 51
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and
Interest. . . . . . . . . . . . . . . . . 52
SECTION 1002. Maintenance of Office or Agency . . . . . 52
SECTION 1003. Money for Security to Be Held in Trust. . 53
SECTION 1004. Statement by Officers as to Default . . . 54
SECTION 1005. Existence . . . . . . . . . . . . . . . . 54
SECTION 1006. Maintenance of Properties . . . . . . . . 54
SECTION 1007. Payment of Taxes and Other Claims . . . . 54
SECTION 1008. Usury Laws. . . . . . . . . . . . . . . . 55
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption . . . . . . . . . . . 55
SECTION 1102. Applicability of Article. . . . . . . . . 55
SECTION 1103. Election to Redeem; Notice to Trustee.. . 55
SECTION 1104. Selection by Trustee of Securities to
Be Redeemed . . . . . . . . . . . . . . . 56
SECTION 1105. Notice of Redemption. . . . . . . . . . . 56
SECTION 1106. Deposit of Redemption Price . . . . . . . 57
SECTION 1107. Securities Payable on Redemption Date . . 57
SECTION 1108. Securities Redeemed in Part . . . . . . . 58
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Securities Subordinate to Senior
Indebtedness. . . . . . . . . . . . . . . 58
SECTION 1202. Payment Over of Proceeds Upon
Dissolution, Etc. . . . . . . . . . . . . 59
SECTION 1203. Prior Payment to Senior Indebtedness
Upon Acceleration of Securities . . . . . 60
SECTION 1204. No Payment in Certain Circumstances . . . 61
SECTION 1205. Payment Permitted If No Default . . . . . 62
SECTION 1206. Subrogation to Rights of Holders of
Senior Indebtedness . . . . . . . . . . . 62
SECTION 1207. Provisions Solely to Define Relative
Rights. . . . . . . . . . . . . . . . . . 63
SECTION 1208. Trustee to Effectuate Subordination and
Payment Provisions. . . . . . . . . . . . 63
SECTION 1209. No Waiver of Subordination Provisions . . 63
SECTION 1210. Notice to Trustee . . . . . . . . . . . . 64
SECTION 1211. Reliance on Judicial Order or
Certificate of Liquidating Agent. . . . . 65
SECTION 1212. Trustee Not Fiduciary for Holders of
Senior Indebtedness . . . . . . . . . . . 65
SECTION 1213. Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's
Rights. . . . . . . . . . . . . . . . . . 65
SECTION 1214. Article Applicable to Paying Agents . . . 66
SECTION 1215. Certain Conversions Deemed Payment. . . . 66
ARTICLE THIRTEEN
Conversion of Securities
SECTION 1301. Conversion Privilege and Conversion
Price . . . . . . . . . . . . . . . . . . 66
SECTION 1302. Exercise of Conversion Privilege. . . . . 67
SECTION 1303. Fractions of Shares . . . . . . . . . . . 68
SECTION 1304. Adjustment of Conversion Price. . . . . . 68
SECTION 1305. Notice of Adjustments of Conversion
Price . . . . . . . . . . . . . . . . . . 73
SECTION 1306. Notice of Certain Corporate Action. . . . 74
SECTION 1307. Company to Reserve Common Stock . . . . . 75
SECTION 1308. Taxes on Conversions. . . . . . . . . . . 75
SECTION 1309. Covenant as to Common Stock . . . . . . . 75
SECTION 1310. Cancellation of Converted Securities. . . 75
SECTION 1311. Provisions in Case of Consolidation,
Merger or Sale of Assets. . . . . . . . . 75
SECTION 1312. Trustee's Disclaimer. . . . . . . . . . . 76
ARTICLE FOURTEEN
Repurchase of Securities at the Option of the
Holder Upon a Repurchase Event
SECTION 1401. Right to Require Repurchase . . . . . . . 77
SECTION 1402. Notices; Method of Exercising
Repurchase Right, Etc.. . . . . . . . . . 77
SECTION 1403. "Change of Control" and "Repurchase
Event" Defined. . . . . . . . . . . . . . 79
<PAGE>
INDENTURE, dated as of March 24, 1994, between HEALTHSOUTH Rehabilitation
Corporation, a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office at
Two Perimeter Park South, Birmingham, Alabama 35243, and PNC Bank, Kentucky,
Inc., a state banking corporation duly organized and existing under the laws of
the Commonwealth of Kentucky, as Trustee (herein called the "Trustee"), having
its principal office at 500 West Jefferson Street, Louisville, Kentucky 40296.
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its 5%
Convertible Subordinated Debentures due 2001 (herein called the "Securities") of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary to make the Securities, when executed by the Company
and authenticated and delivered hereunder and duly issued by the Company, the
valid obligations of the Company, and to make this Indenture a valid agreement
of the Company, in accordance with their and its terms, have been done.
NOW, THEREFORE, THIS INDENTURE, WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually agreed, for the equal and proportionate
benefit of all Holders of the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as
are generally accepted at the date of such computation; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified in
Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and 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 to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 614 to act on behalf of the Trustee to authenticate Securities.
"Bank Debt" means all obligations of the Company and its Subsidiaries, now
or hereafter existing under (i) the Credit Agreements, whether for principal,
interest, reimbursement of amounts drawn under letters of credit issued pursuant
thereto, guarantees in respect thereof, fees, expenses, premiums, indemnities or
otherwise, and (ii) any Indebtedness incurred by the Company to extend, refund
or refinance, in whole or in part, the Bank Debt, including any interest and
premium on any such Indebtedness.
"Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in The City of New York or the
city in which the Corporate Trust Office is located are authorized or obligated
by law or executive order to close.
"Capital Stock" of any Person means any and all shares, rights to purchase,
warrants or options (whether or not currently exercisable); and participation or
other equivalents of or interest in (however designated) the equity (including
without limitation common stock, preferred stock and partnership and joint
venture interests) of such Person (excluding any debt securities that are
convertible into, or exchangeable for, such equity).
"Change of Control" shall have the meaning specified in
Section 1403.
"Closing Price" has the meaning specified in Section
1304(h).
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Equity" of any Person means all Capital Stock of such Person that
is generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management and policies of such Person.
"Common Stock" includes any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the Company
and which is not subject to redemption by the Company. However, subject to the
provisions of Section 1311, shares issuable on conversion of Securities shall
include only shares of the class designated as Common Stock of the Company at
the date of this instrument or shares of any class or classes resulting from any
reclassification or reclassifications thereof and which have no preference in
respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Company and which are
not subject to redemption by the Company; provided that if at any time there
shall be more than one such resulting class, the shares of each such class then
so issuable shall be substantially in the proportion which the total number of
shares of such class resulting from all such reclassifications bears to the
total number of shares of all such classes resulting from all such
reclassifications.
"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
"Company Request" or "Company Order" means, respectively, a written request
or order signed in the name of the Company by its Chairman of the Board, its
Vice Chairman of the Board, its President or a Vice President, and by its
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee in the
city at which at any particular time its corporate trust business shall be
administered. As of the date hereof, the Corporate Trust Office of the Trustee
is located at 500 West Jefferson Street, Louisville, Kentucky 40296.
"Corporation" means a corporation, association, company,
joint-stock company or business trust.
"Credit Agreements" means the two Credit Agreements, one dated as of
November 20, 1992 and the other dated as of December 30, 1993, by and between
the Company, NationsBank of North Carolina, National Association, as Agent, and
the lenders signatories thereto, together with the related documents thereto,
including, without limitation, any security documents and all exhibits and
schedules thereto and any agreement or agreements relating to any extension,
refunding, refinancing, successor or replacement facility, whether or not with
the same lender, and whether or not the principal amount or amount of letters of
credit outstanding thereunder or the interest rate payable in respect thereof
shall be thereby increased, in each case as amended and in effect from time to
time.
"Current Market Price" has the meaning specified in Section
1304(h).
"Defaulted Interest" has the meaning specified in Section
307.
"Designated Senior Indebtedness" means (i) the Bank Debt, without regard to
the amounts outstanding thereunder, and (ii) any Senior Indebtedness which, at
the time of determination, has an aggregate principal amount outstanding of at
least $20 million and is specifically designated in the instrument evidencing
such Senior Indebtedness as "Designated Senior Indebtedness" by the Company.
"Event of Default" has the meaning specified in Section
501.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Holder" means a Person in whose name a Security is
registered in the Security Register.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, including, for
all purposes of this instrument and any such supplemental indenture, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this instrument and any such supplemental indenture, respectively.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Maturity", when used with respect to any Security, means the date on which
the principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise.
"NASDAQ" and "NASDAQ/NMS" have the meanings specified in
Section 1304(h).
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, a Vice Chairman of the Board, the President or a Vice President, and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Company, and delivered to the Trustee. One of the officers signing an
Officers' Certificate given pursuant to Section 1004 shall be the principal
executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company, and who shall be acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(i) Securities theretofore cancelled by the
Trustee or delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by
the Company (if the Company shall act as its own Paying Agent) for the
Holders of such Securities; provided that, if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been made;
and
(iii) Securities which have been paid pursuant to Section 306 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid obligations of the
Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Proceeding" has the meaning specified in Section 1202.
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture and
includes any Repurchase Date as defined in Section 1401.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment Date
means the March 15 or September 15 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
"Repurchase Date" has the meaning specified in Section
1401.
"Repurchase Event" has the meaning specified in Section
1403(d).
"Repurchase Price" has the meaning specified in Section
1401.
"Securities Payment" has the meaning specified in Section
1202.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.
"Senior Indebtedness" means all indebtedness, liabilities or other
obligations of the Company, other than the Securities, whether existing on the
date of execution of this Indenture or thereafter created, incurred or assumed,
except any such other indebtedness, liabilities or other obligations that by
their terms or by operation of law are subordinated to, or subordinated on a
parity with, the Securities.
"Significant Subsidiary" means a Subsidiary of the Company which at the
time of determination either (i) had tangible assets which, as of the Company's
most recent quarterly consolidated balance sheet, constituted at least 5% of
Consolidated Tangible Assets as of such date, or (ii) had revenues for the
12-month period ending on the date of the most recent quarterly consolidated
statement of income which constituted at least 5] of the Company's total
consolidated revenues for such period.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subordinated Obligations" means any principal of, premium, if any, and
interest on the Securities payable pursuant to the terms of the Securities or
upon acceleration, including any amounts received upon the exercise of rights of
rescission or other rights of action (including claims for damages) or
otherwise, to the extent relating to the purchase price of the Securities or
amounts corresponding to such principal, premium, if any, or interest on the
Securities.
"Subsidiary" of any Person means (i) any corporation of which Common Equity
having ordinary voting power to elect a majority of the directors of such
corporation is owned by such Person directly or through one or more other
subsidiaries of such Person and (ii) any entity other than a corporation in
which such Person, directly or indirectly, owns at least 50% of the Common
Equity of such entity and has the authority to manage such entity on a
day-to-day basis.
"Trading Day" means each Monday, Tuesday, Wednesday, Thursday and Friday,
other than any day on which securities are not traded on the applicable
securities exchange or in the applicable securities market.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirement set forth in
this Indenture.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than an Officers' Certificate
provided pursuant to Section 1004 hereof) shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, 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
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 601) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust Indenture
Act, by Board Resolution fix any day as the record date for the purpose of
determining the Holders entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to vote on
any action, authorized or permitted to be given or taken by Holders. If not set
by the Company prior to the first solicitation of a Holder made by any Person in
respect of any such action, or, in the case of any such vote, prior to such
vote, the record date for any such action or vote shall be the 30th day (or, if
later, the date of the most recent list of Holders required to be provided
pursuant to Section 701) prior to such first solicitation or vote, as the case
may be. With regard to any record date, only the Holders on such date (or their
duly designated proxies) shall be entitled to give or take, or vote on, the
relevant action.
(d) The ownership of Securities shall be proved by the
Security Register.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
SECTION 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company
shall be sufficient for every purpose hereunder if
made, given, furnished or filed in writing to or with
the Trustee at its Corporate Trust Office, Attention:
Corporate Trust Administration, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at such Holder's address as it appears in the Security Register,
not later than the latest date (if any), and not earlier than the earliest date
(if any), prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision of
the Trust Indenture Act that is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
that may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in 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 of Securities, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to such
State's conflicts of laws principles.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Stated
Maturity or Repurchase Date of any Security or the last date on which a Holder
has the right to convert his Securities shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) or conversion of the
Securities need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest Payment
Date, Redemption Date, Repurchase Date, or at the Stated Maturity, or on such
last day for conversion, provided that no interest shall accrue for the period
from and after such Interest Payment Date, Redemption Date, Repurchase Date or
Stated Maturity, as the case may be.
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally.
The Securities, the conversion notice and the Trustee's certificates of
authentication shall be in substantially the forms set forth in this Article,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any securities exchange
or as may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods on steel engraved borders or may be
produced in any other manner permitted by the rules of any securities exchange
on which the Securities may be listed, all as determined by the officers
executing such Securities, as evidenced by their execution of such Securities.
SECTION 202. Form of Face of Security.
HEALTHSOUTH Rehabilitation Corporation
5% Convertible Subordinated Debenture Due 2001
No. $
HEALTHSOUTH Rehabilitation Corporation, a corporation duly organized and
existing under the laws of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to , or registered assigns, the principal
sum of Dollars on April 1, 2001, and to pay interest thereon from and including
the date of initial issuance of Securities under the Indenture, or from and
including the most recent Interest Payment Date to which interest has been paid
or duly provided for, semiannually on April 1 and October 1 in each year,
commencing October 1, 1994, at the rate of 5% per annum, until the principal
hereof is paid or made available for payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest, which shall be the March 15 or
September 15 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of Securities not less
than 10 days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture. Payment
of the principal of (and premium, if any) and interest on this Security will be
made at the office or agency of the Company maintained for that purpose in the
Borough of Manhattan, The City of New York and in such other cities, if any, as
the Company may designate in writing to the Trustee, 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; provided, however, that at the option of
the Company 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.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
HEALTHSOUTH Rehabilitation
Corporation
By
Attest:
Secretary
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of Securities of the
Company designated as its 5% Convertible Subordinated Debentures due 2001
(herein called the "Securities"), limited in aggregate principal amount to
$115,000,000 (including the underwriters' over-allotment option), issued and to
be issued under an Indenture, dated as of March 24, 1994 (herein called the
"Indenture"), between the Company and PNC Bank, Kentucky, Inc., as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee, the
holders of Senior Indebtedness and the Holders of the Securities, and of the
terms upon which the Securities are, and are to be, authenticated and delivered.
Subject to and upon compliance with the provisions of the Indenture, the
Holder of this Security is entitled, at his option, at any time on or before the
close of business on April 1, 2001, or in case this Security or a portion hereof
is called for redemption, then in respect of this Security or such portion
hereof until and including, but (unless the Company defaults in making the
payment due upon redemption or repurchase, as the case may be) not after, the
close of business on the Redemption Date or the Repurchase Date, respectively,
to convert this Security (or any portion of the principal amount hereof which is
$1,000 or an integral multiple thereof), at the principal amount hereof, or of
such portion, into fully paid and non-assessable shares (calculated as to each
conversion to the nearest 1/100 of a share) of Common Stock of the Company at a
conversion price equal to $37.625 aggregate principal amount of securities for
each share of Common Stock (or at the current adjusted conversion price if an
adjustment has been made as provided in the Indenture) by surrender of this
Security, duly endorsed or assigned to the Company or in blank, to the Company
at its office or agency in the Borough of Manhattan, The City of New York and in
such other cities, if any, as the Company may designate in writing to the
Trustee, with the form of conversion notice hereon executed by the Holder hereof
evidencing such Holder's election to convert this Security, or if less than the
entire principal amount hereof is to be converted, the portion hereof to be
converted, and, in case such surrender shall be made during the period from the
close of business on any Regular Record Date next preceding any Interest Payment
Date to the close of business on such Interest Payment Date (unless this
Security or the portion thereof being converted has been called for redemption
on a Redemption Date within such period), also accompanied by payment in New
York Clearing House or other funds acceptable to the Company of an amount equal
to the interest payable on such Interest Payment Date on the principal amount of
this Security then being converted. Subject to the aforesaid requirement for
payment and, in the case of a conversion after the Regular Record Date next
preceding any Interest Payment Date and on or before such Interest Payment Date,
to the right of the Holder of this Security (or any Predecessor Security) of
record at such Regular Record Date to receive an installment of interest (with
certain exceptions provided in the Indenture), no payment or adjustment is to be
made on conversion for interest accrued hereon or for dividends on the Common
Stock issued on conversion. No fractions of shares or scrip representing
fractions of shares will be issued on conversion, but instead of any fractional
interest the Company shall pay a cash adjustment as provided in the Indenture.
The conversion price is subject to adjustment as provided in the Indenture. In
addition, the Indenture provides that in case of certain consolidations or
mergers to which the Company is a party or the transfer of substantially all of
the assets of the Company, the Indenture shall be amended, without the consent
of any Holders of Securities, so that this Security, if then outstanding, will
be convertible thereafter, during the period this Security shall be convertible
as specified above, only into the kind and amount of securities, cash and other
property receivable upon the consolidation, merger or transfer by a holder of
the number of shares of Common Stock into which this Security might have been
converted immediately prior to such consolidation, merger or transfer (assuming
such holder of Common Stock failed to exercise any rights of election and
received per share the kind and amount received per share by a plurality of
non-electing shares).
The Securities are subject to redemption upon not less than 30 nor more
than 60 days' notice by first class mail, at any time on or after April 1, 1997,
as a whole or in part, at the election of the Company, at the following
Redemption Prices (expressed as percentages of the principal amount):
If redeemed during the 12-month period beginning April 1 of the
years indicated,
Redemption
Year Price
1997 102.86 %
1998 102.41 %
1999 101.43 %
2000 100.71 %
together in the case of any such redemption with accrued interest to the
Redemption Date, but interest installments whose Stated Maturity is on or prior
to such Redemption Date will be payable to the Holders of such Securities, or
one or more Predecessor Securities, of record at the close of business on the
Regular Record Dates referred to on the face hereof, all as provided in the
Indenture.
The Indenture provides that if a Repurchase Event (as defined therein)
occurs, each Holder of Securities shall have the right, in accordance with the
provisions of the Indenture, to require the Company to repurchase all of such
Holder's Securities, or any portion thereof that is an integral multiple of
$1,000, for cash at a price equal to 100% of the principal amount of such
Securities to be repurchased, together with accrued interest to the Repurchase
Date, but any interest installment the Stated Maturity of which is on or prior
to such Repurchase Date will be payable to the Holders of such Securities, or
one or more Predecessor Securities, of record at the close of business on the
Regular Record Dates referred to on the face hereof, all as provided in the
Indenture.
In the event of redemption, conversion or repurchase of this Security in
part only, a new Security or Securities for the portion hereof not redeemed,
converted or repurchased will be issued in the name of the Holder hereof upon
the cancellation hereof.
The indebtedness evidenced by this Security is, to the extent provided in
the Indenture, subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness (including, without limitation, the Company's
__% Senior Subordinated Notes due 2001), and this Security is issued subject to
the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes.
If an Event of Default shall occur and be continuing, the principal of all
the Securities may be declared due and payable in the manner and with the effect
provided in the Indenture.
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25% in principal amount of the
Securities at the time Outstanding shall have made written request to the
Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not
have received from the Holders of a majority in principal amount at the time
Outstanding a written direction inconsistent with such request, and shall have
failed to institute any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to any
suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or any premium or interest hereon on or after the
respective due dates expressed herein or of the right to convert this Security
in accordance with the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed or to convert this Security as provided in the
Indenture.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any place where the principal of (and premium, if any)
and interest on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
SECTION 204. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially the
following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
PNC BANK, KENTUCKY, INC.,
as Trustee
By
Authorized Officer
SECTION 205. Form of Conversion Notice.
The undersigned Holder of this Security hereby irrevocably exercises the
option to convert this Security, or portion hereof (which is $1,000 or an
integral multiple thereof) below designated, into shares of Common Stock in
accordance with the terms of the Indenture, and directs that the shares issuable
and deliverable upon such conversion, together with any check in payment for
fractional shares and any Securities representing any unconverted principal
amount hereof, be issued and delivered to the undersigned unless a different
name has been indicated below. If shares or Securities are to be issued in the
name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto. Any amount required to be paid by
the undersigned on account of interest accompanies this Security.
Dated: __________________
Signature
If shares or Securities are Principal amount to be converted
to be registered in the name (if less than all):
of a Person other than the $______,000
Holder, please print such
Person's name and address:
--------------------------------
Social Security or other
_____________________________ Taxpayer Identification Number
Name
- -----------------------------
Street Address
- -----------------------------
City, State and Zip Code
ARTICLE THREE
The Securities
SECTION 301. Title and Terms.
The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is limited to $115,000,000 (including $15,000,000
aggregate principal amount of Securities that may be sold by the Company
pursuant to the Underwriting Agreement, dated March 17, 1994, among the Company,
Smith Barney Shearson Inc., CS First Boston and Alex. Brown & Sons
Incorporated), except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Section 304, 305, 306, 906, 1108 or 1302 or 1402.
The Securities shall be known and designated as the " 5% Convertible
Subordinated Debentures due 2001" of the Company. Their Stated Maturity shall be
April 1, 2001, and they shall bear interest at the rate of 5% per annum, from
and including the date of initial issuance of the Securities under this
Indenture, or from and including the most recent Interest Payment Date to which
interest has been paid or duly provided for, as the case may be, payable
semiannually on April 1 and October 1, commencing October 1, 1994, until the
principal thereof is paid or made available for payment. Each payment of
interest shall include interest accrued to but excluding the Interest Payment
Date on which payment is to be made.
The principal of (and premium, if any) and interest on the Securities shall
be payable at the office or agency of the Company in the Borough of Manhattan,
The City of New York maintained for such purpose and at any other office or
agency maintained by the Company for such purpose; provided, however, that at
the option of the Company 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.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Twelve.
The Securities shall be convertible as provided in Article Thirteen.
The Securities shall be subject to repurchase at the option of the Holder
as provided in Article Fourteen.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form without coupons
and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its Vice Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities executed by the Company to the
Trustee for authentication, together with a Company Order for the authentication
and delivery of such Securities; and the Trustee in accordance with such Company
Order shall authenticate and deliver such Securities as in this Indenture
provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company may execute,
and upon Company Order the Trustee shall authenticate and deliver, temporary
Securities which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Securities in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company shall cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities of
authorized denominations. Until so exchanged the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as definitive
Securities.
SECTION 305. Registration, Registration of Transfer and
Exchange.
(a) The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided. At all reasonable times the Security
Register shall be open for inspection by the Company.
Upon surrender for registration of transfer of any Security at an office or
agency of the Company designated pursuant to Section 1002 for such purpose, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
any authorized denominations and of a like aggregate principal amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
(b) All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed, by the Holder thereof or
his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906, 1108 or 1302 or 1402 not involving any
transfer.
The Company shall not be required (i) to issue, register the transfer of or
exchange any Security during a period beginning at the opening of business 15
days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 1104 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Security of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest. At the option of
the Company, interest on any Security may be paid by mailing a check to the
address of the Holder thereof as such address appears in the Securities
Register.
Any interest on any Security which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Regular Record Date by virtue of having been such Holder, and such Defaulted
Interest may be paid by the Company, at its election in each case, as provided
in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Security and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder at his address as it appears in the Security Register, not
less than 10 days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor
having been so mailed, such Defaulted Interest shall be paid to the Persons
in whose names the Securities (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
In the case of any Security which is converted during the period after any
Regular Record Date and on or prior to the next succeeding Interest Payment Date
(other than any Security whose Maturity is prior to such Interest Payment Date),
interest whose Stated Maturity is on such Interest Payment Date shall be payable
on such Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided for) shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on such Regular Record Date; provided,
however, that Securities so registered for conversion shall (except in the case
of Securities or portions thereof which have been called for redemption on a
Redemption Date within such period) be accompanied by payment in New York
Clearing House Funds or other funds acceptable to the Company of an amount equal
to the interest payable on such Interest Payment Date on the principal amount
being surrendered for conversion. Except as otherwise expressly provided in the
immediately preceding sentence, in the case of any Security which is converted,
interest whose Stated Maturity is after the date of conversion of such Security
shall not be payable.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as the owner of such Security
for the purpose of receiving payment of principal of (and premium, if any) and
(subject to Section 307) interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or conversion shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly cancelled by the Trustee. No Securities shall be authenticated
in lieu of or in exchange for any Securities cancelled as provided in this
Section, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be disposed of as directed by a Company
Order.
SECTION 310. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day year
of twelve 30-day months.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of conversion, registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, on demand of and at
the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 306 and (ii)
Securities for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore
delivered to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at
their Stated Maturity within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for the purpose an amount in cash sufficient to pay and
discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal (and premium,
if any) and interest to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be; provided, however,
that the Company shall be deemed to have made the deposit required
herein as to any Securities in respect of which the Company has mailed
a check to the address of the Holder thereof, as such address appears
in the Security Register;
(2) the Company has paid or caused to be paid
all other sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee. All moneys deposited with the Trustee pursuant to Section 401 (and held
by it or any Paying Agent) for the payment of Securities subsequently converted
shall be returned to the Company upon Company Request.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
occasioned by the provisions of Article Twelve or be voluntary or involuntary or
be effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or governmental
body):
(1) default in the payment of any interest upon any Security when it
becomes due and payable, and continuance of such default for a period of 30
days; or
(2) default in the payment of the principal of
(or premium, if any, on) any Security at its Maturity;
or
(3) default in the performance, or breach, of the
provisions of Article Eight hereof; or
(4) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty a
default in whose performance or whose breach is elsewhere in this Section
specifically dealt with), and continuance of such default or breach for a
period of 60 days after there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% in principal amount of the Outstanding
Securities a written notice specifying such default or breach and requiring
it to be remedied and stating that such notice is a "Notice of Default"
hereunder; or
(5) any acceleration of the maturity of Indebtedness of the Company or
any Significant Subsidiary or any two or more Subsidiaries of the Company
which, if merged, would be a Significant Subsidiary having a principal
amount outstanding in excess of $5,000,000, or a failure to pay such
Indebtedness at its stated maturity, provided that such acceleration or
failure to pay is not cured within 10 days after such acceleration or
failure to pay;
(6) the entry by a court or courts of competent jurisdiction of a
final judgment or final judgments for the payment of money against the
Company or any Significant Subsidiary or any two or more Subsidiaries of
the Company which, if merged, would be a Significant Subsidiary, which
remain undischarged for a period (during which execution shall not be
effectively stayed, the posting of any required bond not being deemed an
execution for purposes hereof) of 30 days after all rights to appeal have
been exhausted, provided that the aggregate amount of all such judgments
exceeds $5,000,000; or
(7) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company or any Significant
Subsidiary or any two or more Subsidiaries of the Company which, if merged,
would be a Significant Subsidiary, in an involuntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company or any Significant Subsidiary or any two or more Subsidiaries of
the Company which, if merged, would be a Significant Subsidiary, a bankrupt
or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company or any Significant Subsidiary or any two or more Subsidiaries
of the Company which, if merged, would be a Significant Subsidiary, under
any applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Company or any Significant Subsidiary or any two or more Subsidiaries
of the Company which, if merged, would be a Significant Subsidiary, or of
any substantial part of their respective property, or ordering the winding
up or liquidation of affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect
for a period of 90 consecutive days; or
(8) the commencement by the Company or any Significant Subsidiary or
any two or more Subsidiaries of the Company which, if merged, would be a
Significant Subsidiary, of a voluntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be adjudicated a bankrupt
or insolvent, or the consent to the entry of a decree or order for relief
in respect of the Company or any Significant Subsidiary or any two or more
Subsidiaries of the Company which, if merged, would be a Significant
Subsidiary, in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar
law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing of a petition or answer or consent
seeking reorganization or relief under any applicable Federal or State law,
or the consent to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Significant
Subsidiary or any two or more Subsidiaries of the Company which, if merged,
would be a Significant Subsidiary, or of any substantial part of their
respective property, or the making of an assignment for the benefit of
creditors, or the admission in writing of inability to pay debts generally
as they become due, or the taking of corporate action by the Company or any
Significant Subsidiary or any two or more Subsidiaries of the Company
which, if merged, would be a Significant Subsidiary, in furtherance of any
such action; or
(9) a default in the payment of the Repurchase Price in respect of any
Security on the Repurchase Date therefor in accordance with the provisions
of Article Fourteen.
SECTION 502. Acceleration of Maturity; Rescission and
Annulment.
If an Event of Default occurs and is continuing, then and in any such case
the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the principal of all the Securities to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal shall
become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the
Trustee a sum sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any Securities
which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities,
and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default, other than the non-payment of the principal
of Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the
principal of (or premium, if any, on) any Security at
the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the rate
borne by the Securities, and, in addition thereto, 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.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any other
obligor upon the Securities), its property or its creditors, the Trustee shall
be entitled and empowered, by intervention in such proceeding or otherwise, to
take any and all actions authorized under the Trust Indenture Act in order to
have claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized to collect and receive any moneys or
other property payable or deliverable on any such claims and to distribute the
same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due 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 607.
No provision of this Indenture shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such judgment has been
recovered.
SECTION 506. Application of Money Collected.
Subject to Article Twelve, any money collected by the Trustee pursuant to
this Article shall be applied in the following order, at the date or dates fixed
by the Trustee and, in case of the distribution of such money on account of
principal (or premium, if any) or interest, upon presentation of the Securities
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the
Trustee under Section 607;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal (and premium, if
any) and interest, respectively; and
THIRD: The balance, if any, to the Company or
any other Person or Persons determined to be entitled
thereto.
SECTION 507. Limitation on Suits.
No Holder of any Security shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written
notice to the Trustee of a continuing Event of
Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest and to Convert.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of (and premium, if any) and (subject to Section 307)
interest on such Security on the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on the Redemption Date or, in the case
of a repurchase pursuant to Article Fourteen, on the Repurchase Date) and to
convert such Security in accordance with Article Thirteen and to institute suit
for the enforcement of any such payment and right to convert, and such rights
shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of Section
306, no right or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding Securities
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with
any rule of law or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default
(1) in the payment of the principal of (or
premium, if any) or interest on any Security, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected.
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 514. 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, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided, that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company or in any suit for the
enforcement of the right to convert any Security in accordance with Article
Thirteen.
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by the
Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any default hereunder known to
the Trustee as and to the extent provided by the Trust Indenture Act; provided,
however, that in the case of any default of the character specified in Section
501(4), no such notice to Holders shall be given until at least 60 days after
the occurrence thereof. For the purpose of this Section, the term "default"
means any event which is, or after notice or lapse of time or both would become,
an Event of Default.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney; and
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
SECTION 604. Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Securities. The Trustee shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar, any Authenticating
Agent or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Paying Agent, Security Registrar, Authenticating
Agent or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of this trust, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.
As security for the performance of the obligations of the Company under
this Section, the Trustee shall have a claim prior to the Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of amounts due on the Securities.
The obligations of the Company under this Section 607 to compensate and
indemnify the Trustee for expenses, disbursements and advances shall survive the
satisfaction and discharge of this Indenture.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000. If such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of applicable supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of
Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving written notice thereof to
the Company. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and shall
fail to resign after written request therefor by the Company or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, the Company,
by a Board Resolution, shall promptly appoint a successor Trustee. If, within 90
days after such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Securities delivered to the
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders and accepted
appointment in the manner hereinafter provided, any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee to all Holders in the
manner provided in Section 106. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder. Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession
to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against
Company.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 614. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents which shall be
authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer, partial
conversion, partial redemption, partial repurchase or pursuant to Section 306,
and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee hereunder. Whenever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such references shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating Agent,
having a combined capital and surplus of not less than $50,000,000 and subject
to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any Person into which an Authenticating Agent may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which such Authenticating Agent shall be a party,
or any corporation succeeding to the corporate agency or corporate trust
business of an Authenticating Agent, shall continue to be an Authenticating
Agent, provided such Person shall be otherwise eligible under this Section,
without the execution or filing of any paper or any further act on the part of
the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment to all Holders in the manner provided in Section 106. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section, and the Trustee
shall be entitled to be reimbursed for such payments, subject to the provisions
of Section 607.
If an appointment is made pursuant to this Section, the Securities may have
endorsed thereon, in addition to the Trustee's certificate of authentication, an
alternative certificate of authentication in the following form:
This is one of the Securities described in the within-mentioned Indenture.
----------------------------,
As Trustee
By__________________________,
As Authenticating Agent
By___________________________
Authorized Officer
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of
Holders.
The Company will furnish or cause to be furnished to the
Trustee
(a) semiannually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications to
Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights and duties of the Trustee, shall be as provided by the Trust Indenture
Act.
(c) Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when the Securities are listed on any stock exchange.
SECTION 704. Reports by Company.
The Company shall file with the Trustee and the Commission, and transmit to
Holders, such information, documents and other reports, and such summaries
thereof, as may be required pursuant to the Trust Indenture Act at the times and
in the manner provided pursuant to such Act; provided that any such information,
documents or reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act, shall be filed with the Trustee within
15 days after the same is so required to be filed with the Commission.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on Certain
Terms.
The Company shall not consolidate with or merge into any other Person, or
convey, transfer or lease its properties and assets substantially as an entirety
to any other Person, and the Company shall not permit any other Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
(1) if applicable, the Person formed by such consolidation or into
which the Company is merged or the Person which acquires the properties and
assets of the Company substantially as an entirety is a Person organized
and validly existing under the laws of the United States of America, any
state thereof or the District of Columbia and such Person (including any
such Person who is an individual) shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, all the
obligations of the Company under the Securities and this Indenture and
shall have provided for conversion rights in accordance with Section 1311
hereof;
(2) immediately after giving effect to such consolidation, merger,
conveyance, transfer or lease, no Event of Default, and no event which,
after notice or lapse of time or both, would become an Event of Default,
shall have happened and be continuing;
(3) such consolidation, merger, conveyance,
transfer or lease does not adversely affect the
validity or enforceability of the Securities; and
(4) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture (if any), comply with this Indenture and the
Securities and that all conditions precedent herein provided for relating
to such transaction have been satisfied.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company into,
any other Person or any conveyance, transfer or lease of the properties and
assets of the Company substantially as an entirety in accordance with Section
801, the successor Person formed by such consolidation or into which the Company
is merged or to which such conveyance, transfer or lease is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such successor Person
had been named as the Company herein, and thereafter, except in the case of a
lease, the predecessor Person shall be relieved of all obligations and covenants
under this Indenture and the Securities.
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of
Holders.
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:
(1) to evidence the succession of another Person
to the Company and the assumption by any such
successor of the covenants of the Company herein and
in the Securities; or
(2) to add to the covenants of the Company for
the benefit of the Holders, or to surrender any right
or power herein conferred upon the Company; or
(3) to secure the Securities; or
(4) to make provision with respect to the
conversion rights of Holders pursuant to the
requirements of Section 1311; or
(5) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities and to add
to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by
more than one Trustee; or
(6) to add any additional Events of Default; or
(7) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the provisions of
this Indenture, provided that such action pursuant to this clause (7) shall
not adversely affect the interests of the Holders in any material respect;
or
(8) to cause the Indenture and the Securities to comply with
applicable law, including the Trust Indenture Act.
SECTION 902. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities, by Act of said Holders delivered to the
Company and the Trustee, the Company, when authorized by a Board Resolution, and
the Trustee may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the rights
of the Holders under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any Security, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where, or the coin or currency in
which, any Security or any premium or interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date), or adversely affect the right to convert any
Security as provided in Article Thirteen (except as permitted by Section
901(4)), or adversely affect the right to cause the Company to repurchase
any Security pursuant to Article Fourteen, or modify the provisions of this
Indenture with respect to the subordination of the Securities in a manner
adverse to the Holders, or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture,
or
(3) modify any of the provisions of this Section or Section 513,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental
Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of (and premium, if
any) and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New York
an office or agency where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of transfer or
exchange, where Securities may be surrendered for conversion and where notices
and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company will 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, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other offices
or agencies (in or outside the Borough of Manhattan, The City of New York) where
the Securities may be presented or surrendered for any or all such purposes and
may from time to time rescind such designations; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The City
of 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.
SECTION 1003. Money for Security to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will, on
or before each due date of the principal of (and premium, if any) or interest on
any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and premium, if
any) or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and will promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will, prior
to each due date of the principal of (and premium, if any) or interest on any
Securities, deposit with a Paying Agent a sum sufficient to pay such amount,
such sum to be held as provided by the Trust Indenture Act, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section, that such Paying
Agent will (i) comply with the provisions of the Trust Indenture Act applicable
to it as a Paying Agent and (ii) during the continuance of any default by the
Company (or any other obligor upon the Securities) in the making of any payment
in respect of the Securities, upon the written request of the Trustee, forthwith
pay to the Trustee all sums held in trust by such Paying Agent as such.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of (and premium, if any)
or interest on any Security and remaining unclaimed for two years after such
principal (and premium, if any) or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Security shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease.
SECTION 1004. Statement by Officers as to Default.
The Company shall deliver to the Trustee, within 90 days after the end of
each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
SECTION 1005. Existence.
Subject to Article Eight, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1006. Maintenance of Properties.
The Company shall cause all properties used or useful in the conduct of its
business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.
SECTION 1007. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 1008. Usury Laws.
The Company covenants and agrees: (a) not to insist upon, or plead, or in
any manner whatsoever claim the benefit or the advantage of the usury law of any
jurisdiction against the Trustee or the Holders in connection with any claim,
action or proceeding which may be brought by the Trustee or the Holders in order
to enforce any right or remedy under this Indenture; and (b) to resist any and
all efforts to compel the Company to claim the benefit or the advantage of the
usury law of any jurisdiction against the Trustee or the Holders in connection
with any claim, action or proceeding which may be brought by the Trustee or the
Holders in order to enforce any right or remedy under this Indenture.
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption.
The Securities may be redeemed at the election of the Company, as a whole
or from time to time in part, at any time on or after April 1, 1997, at the
Redemption Prices specified in the form of Security hereinbefore set forth,
together with accrued interest to but excluding the Redemption Date.
SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the Company, as permitted by
any provision of this Indenture, shall be made in accordance with such provision
and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to Section
1101 shall be evidenced by a Board Resolution. In case of any redemption at the
election of the Company of less than all the Securities, the Company shall, at
least 60 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount of Securities to be redeemed, which
principal amount shall not be less than $1,000,000 in the aggregate.
SECTION 1104. Selection by Trustee of Securities to Be
Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $1,000 or any integral multiple thereof) of the principal amount of
Securities of a denomination larger than $1,000.
If any Security selected for partial redemption is converted in part before
termination of the conversion right with respect to the portion of the Security
so selected, the converted portion of such Security shall be deemed (so far as
may be) to be the portion selected for redemption. Securities which have been
converted during a selection of Securities to be redeemed shall be treated by
the Trustee as Outstanding for the purpose of such selection.
The Trustee shall promptly notify the Company and each Security Registrar
in writing of the Securities selected for redemption and, in the case of any
Securities selected for partial redemption, the principal amount thereof to be
redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion
of the principal amount of such Securities which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 15 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities to be redeemed, at his address appearing in the
Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the case of partial redemption of any
Securities, the principal amounts) of the particular Securities to be
redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date,
(5) the conversion price, the date on which the right to convert the
Securities to be redeemed will terminate and the place or places where such
Securities may be surrendered for conversion, and
(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the Trustee or
with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1003) an amount of money
sufficient to pay the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date) accrued interest on, all the Securities which
are to be redeemed on that date other than any Securities (or portions thereof)
called for redemption on that date which have been converted prior to the date
of such deposit.
If any Security (or portion thereof) called for redemption is converted,
any money deposited with the Trustee or with any Paying Agent or so segregated
and held in trust for the redemption of such Security shall (subject to any
right of the Holder of such Security or any Predecessor Security to receive
interest as provided in the last paragraph of Section 307) be paid to the
Company upon Company Request or, if then held by the Company, shall be
discharged from such trust.
SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate borne by the Security.
SECTION 1108. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered at
an office or agency of the Company designated for that purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company or
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by such
Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Securities Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Security, by his
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article (subject to the provisions of
Article Four), the indebtedness represented by the Securities and the payment of
the principal of (and premium, if any) and interest on each and all of the
Securities (including any repurchases or payments pursuant to Article Fourteen)
are hereby expressly made subordinate and subject in right of payment to the
prior payment in full of all Senior Indebtedness.
SECTION 1202. Payment Over of Proceeds Upon Dissolution, Etc.
In the event of (1) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company or to its creditors, as such, or
to a substantial part of its assets, or (2) any liquidation, dissolution or
other winding up of the Company, whether voluntary or involuntary and whether or
not involving insolvency or bankruptcy, or (3) any assignment for the benefit of
creditors or any other marshalling of assets and liabilities of the Company,
then and in any such event specified in (1), (2) or (3) above (each such event,
if any, herein sometimes referred to as a "Proceeding") the holders of Senior
Indebtedness shall be entitled to receive payment in full of all amounts due or
to become due on or in respect of all Senior Indebtedness, or provision shall be
made for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Indebtedness, before the Holders of the
Securities are entitled to receive any payment or distribution of any kind or
character, whether in cash, property or securities, on account of principal of
(or premium, if any) or interest on the Securities or on account of any purchase
(including any repurchase pursuant to Article Fourteen) or other acquisition of
Securities by the Company or any Subsidiary of the Company (all such payments,
distributions, purchases and acquisitions herein referred to, individually and
collectively, as a "Securities Payment"), and to that end the holders of all
Senior Indebtedness shall be entitled to receive, for application to the payment
thereof, any Securities Payment which may be payable or deliverable in respect
of the Securities in any such Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
Securities Payment before all Senior Indebtedness is paid in full or payment
thereof provided for in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Indebtedness, and if such fact shall, at
or prior to the time of such Securities Payment, have been made known to the
Trustee or, as the case may be, such Holder, then and in such event such
Securities Payment shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company for application
to the payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all Senior Indebtedness in full, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness.
For purposes of this Article only, the words "any payment or distribution
of any kind or character, whether in cash, property or securities" shall not be
deemed to include a payment or distribution of stock or securities of the
Company provided for by a plan of reorganization or readjustment authorized by
an order or decree of a court of competent jurisdiction in a reorganization
proceeding under any applicable bankruptcy law or of any other corporation
provided for by such plan of reorganization or readjustment, which stock or
securities are subordinated in right of payment to all then outstanding Senior
Indebtedness to substantially the same extent as, or to a greater extent than,
the Securities are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution or the Company following the conveyance
or transfer of all or substantially all of its properties and assets as an
entirety to another Person upon the terms and conditions set forth in Article
Eight shall not be deemed a Proceeding for the purposes of this Section if the
Person formed by such consolidation or into which the Company is merged or the
Person which acquires by conveyance or transfer such properties and assets
substantially as an entirety, as the case may be, shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions set
forth in Article Eight.
SECTION 1203. Prior Payment to Senior Indebtedness Upon
Acceleration of Securities.
In the event that any Securities are declared due and payable before their
Stated Maturity, then and in such event the holders of the Senior Indebtedness
outstanding at the time such Securities so become due and payable shall be
entitled to receive payment in full of all amounts due or to become due on or in
respect of all Senior Indebtedness, or provision shall be made for such payment
in cash or cash equivalents or otherwise in a manner satisfactory to the holders
of such Senior Indebtedness, before the Holders of the Securities are entitled
to receive any Securities Payment (including any payment which may be payable by
reason of the payment of any other indebtedness of the Company being
subordinated to the payment of the Securities).
In the event that, notwithstanding the foregoing, the Company shall make
any Securities Payment to the Trustee or any Holder prohibited by the foregoing
provisions of this Section, and if such fact shall, at or prior to the time of
such Securities Payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such Securities Payment shall be paid
over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any Securities Payment
with respect to which Section 1202 would be applicable.
SECTION 1204. No Payment in Certain Circumstances.
(a) In the event and during the continuation of any default in the payment
of any Senior Indebtedness in excess of $5,000,000 beyond any applicable grace
period with respect thereto, no Securities Payment shall be made unless and
until such default is cured or waived or ceases to exist or such Senior
Indebtedness is discharged.
(b) During the continuation of any non-payment event of default with
respect to any Designated Senior Indebtedness pursuant to which the maturity
thereof may be accelerated, no Securities Payment or other payment or
distribution of any assets of the Company of any kind or character (other than
payments of amounts already deposited in accordance with the defeasance
provisions of the Indenture) shall be made by the Company on account of
Subordinated Obligations or on account of the purchase, redemption or other
acquisition of the Securities for the period specified below (the "Payment
Blockage Period"). The Payment Blockage Period shall commence upon the receipt
of notice by the Company or the Trustee from any representative of a holder of
Designated Senior Indebtedness and shall end on the earlier of (i) 179 days
thereafter, (ii) the date on which such event is cured or waived or ceases to
exist or on which such Designated Senior Indebtedness is discharged, (iii) the
date on which the maturity of any Indebtedness (other than Senior Indebtedness)
shall have been accelerated by virtue of such event, or (iv) the date on which
such Payment Blockage Period shall have been terminated by notice to the Company
or the Trustee from the representative of holders of the Designated Senior
Indebtedness initiating such Payment Blockage Period, after which the Company
shall resume making any and all required payments in respect of the Securities,
including any missed payments. Only one Payment Blockage Period may be commenced
during any period of 365 consecutive days. No event of default with respect to
Designated Senior Indebtedness that existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period will be, or can be,
made the basis for the commencement of a second Payment Blockage Period whether
or not within a period of 365 consecutive days, unless such event of default has
been cured or waived for a period of not less than 90 consecutive days. In no
event may a Payment Blockage Period extend beyond 179 days.
In the event that, notwithstanding the foregoing, the Company shall make
any Securities Payment to the Trustee or any Holder prohibited by the foregoing
provisions of this Section, and if such fact shall, at or prior to the time of
such Securities Payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such Securities Payment shall be paid
over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any Securities Payment
with respect to which Section 1202 would be applicable.
SECTION 1205. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Indenture or in any
of the Securities shall prevent (1) the Company, at any time except during the
pendency of any Proceeding referred to in Section 1202 or under the conditions
described in Section 1203 or 1204, from making Securities Payments, or (2) the
application by the Trustee of any money deposited with it hereunder to
Securities Payments or the retention of such Securities Payment by the Holders,
if, at the time of such application by the Trustee, it did not have knowledge
that such Securities Payment would have been prohibited by the provisions of
this Article.
SECTION 1206. Subrogation to Rights of Holders of Senior
Indebtedness.
Subject to the payment in full of all amounts due or to become due on or in
respect of Senior Indebtedness, or the provision for such payment in cash or
cash equivalents or otherwise in a manner satisfactory to the holders of Senior
Indebtedness, the Holders of the Securities shall be subrogated to the extent of
the payments or distributions made to the holders of such Senior Indebtedness
pursuant to the provisions of this Article (equally and ratably with the holders
of all indebtedness of the Company which by its express terms is subordinated to
indebtedness of the Company to substantially the same extent as the Securities
are subordinated and is entitled to like rights of subrogation) to the rights of
the holders of such Senior Indebtedness to receive payments and distributions of
cash, property and securities applicable to the Senior Indebtedness until the
principal of (and premium, if any) and interest on the Securities shall be paid
in full. For purposes of such subrogation, no payments or distributions to the
holders of the Senior Indebtedness of any cash, property or securities to which
the Holders of the Securities or the Trustee would be entitled except for the
provisions of this Article, and no payments over pursuant to the provisions of
this Article to the holders of Senior Indebtedness by Holders of the Securities
or the Trustee, shall, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Securities, be deemed to be a payment
or distribution by the Company to or on account of the Senior Indebtedness.
SECTION 1207. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the purpose
of defining the relative rights of the Holders on the one hand and the holders
of Senior Indebtedness on the other hand. Nothing contained in this Article or
elsewhere in this Indenture or in the Securities is intended to or shall (1)
impair, as among the Company, its creditors other than holders of Senior
Indebtedness and the Holders of the Securities, the obligation of the Company,
which is absolute and unconditional, to pay to the Holders of the Securities the
principal of (and premium, if any) and interest on the Securities, and to make
any repurchases of the Securities required by Article Fourteen hereof, as and
when the same shall become due and payable in accordance with the terms hereof;
or (2) affect the relative rights against the Company of the Holders of the
Securities and creditors of the Company other than the holders of Senior
Indebtedness; or (3) prevent the Trustee or the Holder of any Security from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article of the holders
of Senior Indebtedness to receive cash, property and securities otherwise
payable or deliverable to the Trustee or such Holder.
SECTION 1208. Trustee to Effectuate Subordination and Payment
Provisions.
Each Holder of a Security by his acceptance thereof authorizes and directs
the Trustee on his behalf to take such action as may be necessary or appropriate
to effectuate the subordination and payment provisions provided in this Article
and appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 1209. No Waiver of Subordination Provisions.
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 on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to the Trustee or the Holders of the Securities,
without incurring responsibility to the Holders of the Securities and without
impairing or releasing the subordination provided in this Article or the
obligations hereunder of the Holders of the Securities to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness
or any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii)
release any Person liable in any manner for the collection of Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Company and any other Person.
SECTION 1210. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Securities. Notwithstanding the provisions of this
Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Indebtedness or from any trustee therefor; and,
prior to the receipt of any such written notice, the Trustee, subject to the
provisions of Section 601, shall be entitled in all respects to assume that no
such facts exist; provided, however, that if the Trustee shall not have received
the notice provided for in this Section at least two Business Days prior to the
date upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of (and premium, if
any) or interest on, or amounts payable upon redemption or repurchase of, any
Security), then, anything herein contained to the contrary notwithstanding, the
Trustee shall have full power and authority to receive such money and to apply
the same to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by it within two
Business Days prior to such date.
Subject to the provisions of Section 601, the Trustee shall be entitled to
rely on the delivery to it of a written notice by a Person representing himself
to be a holder of Senior Indebtedness (or a trustee therefor) to establish that
such notice has been given by a holder of Senior Indebtedness (or a trustee
therefor). In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 1211. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee, subject to the provisions of Section 601, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of Securities, for the purpose of ascertaining the Persons entitled to
participate in such payment or 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.
SECTION 1212. Trustee Not Fiduciary for Holders of Senior
Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Indebtedness and shall not be liable to any such holders if it shall in
good faith mistakenly pay over or distribute to Holders of Securities or to the
Company or to any other Person cash, property or securities to which any holders
of Senior Indebtedness shall be entitled by virtue of this Article or otherwise.
SECTION 1213. Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article with respect to any Senior Indebtedness which may at
any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 607.
SECTION 1214. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article shall in such case (unless the context otherwise requires)
be construed as extending to and including such Paying Agent within its meaning
as fully for all intents and purposes as if such Paying Agent were named in this
Article in addition to or in place of the Trustee; provided, however, that
Section 1213 shall not apply to the Company or any Affiliate of the Company if
it or such Affiliate acts as Paying Agent.
SECTION 1215. Certain Conversions Deemed Payment.
For the purposes of this Article only, (1) the issuance and delivery of
junior securities upon conversion of Securities in accordance with Article
Thirteen shall not be deemed to constitute a payment or distribution on account
of the principal of or premium or interest on Securities or on account of the
purchase or other acquisition of Securities, and (2) the payment, issuance or
delivery of cash, property or securities (other than junior securities) upon
conversion of a Security shall be deemed to constitute payment on account of the
principal of such Security. For the purposes of this Section, the term "junior
securities" means (a) shares of any stock of any class of the Company and (b)
securities of the Company which are subordinated in right of payment to all
Senior Indebtedness which may be outstanding at the time of issuance or delivery
of such securities to substantially the same extent as, or to a greater extent
than, the Securities are so subordinated as provided in this Article. Nothing
contained in this Article or elsewhere in this Indenture or in the Securities is
intended to or shall impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders of the Securities, the right,
which is absolute and unconditional, of the Holder of any Security to convert
such Security in accordance with Article Thirteen.
ARTICLE THIRTEEN
Conversion of Securities
SECTION 1301. Conversion Privilege and Conversion Price.
Subject to and upon compliance with the provisions of this Article, at the
option of the Holder thereof, any Security or any portion of the principal
amount thereof which is $1,000 or an integral multiple of $1,000 may be
converted at the principal amount thereof, or of such portion thereof, into
fully paid and nonassessable shares (calculated as to each conversion to the
nearest 1/100 of a share) of Common Stock of the Company at the conversion
price, determined as hereinafter provided, in effect at the time of conversion.
Such conversion right shall expire at the close of business on April 1, 2001. In
case a Security or portion thereof is called for redemption at the election of
the Company or delivered for repurchase pursuant to Article Fourteen, such
conversion right in respect of the Security or portion so called shall expire at
the close of business on the Redemption Date or the Repurchase Date (as defined
in Article Fourteen), as the case may be, unless the Company defaults in making
the payment due upon redemption or repurchase.
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "conversion price") shall be initially $_____ per
share of Common Stock. The conversion price shall be adjusted in certain
instances as provided in this Article Thirteen.
SECTION 1302. Exercise of Conversion Privilege.
In order to exercise the conversion privilege, the Holder of any Security
to be converted shall surrender such Security, duly endorsed or assigned to the
Company or in blank, at any office or agency of the Company maintained for that
purpose pursuant to Section 1002, accompanied by written notice of conversion in
the form provided on the Security (or such other notice as is acceptable to the
Company) at such office or agency that the Holder elects to convert such
Security or, if less than the entire principal amount thereof is to be
converted, the portion thereof to be converted. Securities surrendered for
conversion during the period from the close of business on any Regular Record
Date next preceding any Interest Payment Date through and including the close of
business on such Interest Payment Date shall (except in the case of Securities
or portions thereof which have been called for redemption on a Redemption Date
within such period) be accompanied by payment in New York Clearing House funds
or other funds acceptable to the Company of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of Securities
being surrendered for conversion. Subject to the provisions of Section 307
relating to the payment of Defaulted Interest by the Company, the interest
payment with respect to a Security called for redemption on a Redemption Date
during the period from the close of business on any Regular Record Date next
preceding any Interest Payment Date through and including the close of business
on such Interest Payment Date shall be payable on such Interest Payment Date to
the Holder of such Security at the close of business on such Regular Record Date
notwithstanding the conversion of such Security after such Regular Record Date
and on or prior to such Interest Payment Date, and the Holder converting such
Security need not include a payment of such interest payment amount upon
surrender of such Security for conversion. Except as provided in the preceding
sentence and subject to the final paragraph of Section 307, no payment or
adjustment shall be made upon any conversion on account of any interest accrued
on the Securities surrendered for conversion or on account of any dividends on
the Common Stock issued upon conversion.
Securities shall be deemed to have been converted immediately prior to the
close of business on the day of surrender of such Securities for conversion in
accordance with the foregoing provisions, and at such time the rights of the
Holders of such Securities as Holders shall cease, and the Person or Persons
entitled to receive the Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such Common Stock at such
time. As promptly as practicable on or after the conversion date, the Company
shall issue and shall deliver at such office or agency a certificate or
certificates for the number of full shares of Common Stock issuable upon
conversion, together with payment in lieu of any fraction of a share, as
provided in Section 1303.
In the case of any Security which is converted in part only, upon such
conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations in aggregate principal amount equal to
the unconverted portion of the principal amount of such Security.
SECTION 1303. Fractions of Shares.
No fractional shares of Common Stock shall be issued upon conversion of
Securities. If more than one Security shall be surrendered for conversion at one
time by the same Holder, the number of full shares which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate principal
amount of the Securities (or specified portions thereof) so surrendered. Instead
of any fractional share of Common Stock which would otherwise be issuable upon
conversion of any Security or Securities (or specified portions thereof), the
Company shall pay a cash adjustment in respect of such fraction in an amount
equal to such fraction multiplied by the Closing Price per share of Common Stock
(consistent with Section 1304(h) below) at the close of business on the day of
conversion (or, if such day is not a Trading Day, on the Trading Day immediately
preceding such day).
SECTION 1304. Adjustment of Conversion Price.
(a) In case the Company shall pay or make a dividend or other distribution
on any class of capital stock of the Company in Common Stock, the conversion
price in effect at the opening of business on the day following the date fixed
for the determination of stockholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such conversion price by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such reduction to
become effective immediately after the opening of business on the day following
the date fixed for such determination. For the purposes of this paragraph (a),
the number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of Common
Stock. The Company will not pay any dividend or make any distribution on shares
of Common Stock held in the treasury of the Company.
(b) In case the Company shall issue rights, options or warrants to all
holders of its Common Stock (not being available on an equivalent basis to
Holders of the Securities upon conversion) entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price on the date fixed for the determination of stockholders entitled to
receive such rights, options or warrants, the conversion price in effect at the
opening of business on the day following the date fixed for such determination
shall be reduced by multiplying such conversion price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination plus the number of shares
of Common Stock which the aggregate of the offering price of the total number of
shares of Common Stock so offered for subscription or purchase would purchase at
such Current Market Price and the denominator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (b), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
will not issue any rights, options or warrants in respect of shares of Common
Stock held in the treasury of the Company.
(c) In case outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the conversion price in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and, conversely, in case
outstanding shares of Common Stock shall each be combined into a smaller number
of shares of Common Stock, the conversion price in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(d) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its indebtedness, shares of any class
of its capital stock or other assets (including securities, but excluding any
rights, options or warrants referred to in paragraph (b) of this Section, any
dividend or distribution paid exclusively in cash referred to in paragraph (e)
of this Section, any dividend or distribution referred to in paragraph (a) of
this Section and any merger or consolidation to which Section 1311 applies), the
conversion price shall be adjusted so that the same shall equal the price
determined by multiplying the conversion price in effect immediately prior to
the close of business on the date fixed for the determination of stockholders
entitled to receive such distribution by a fraction of which the numerator shall
be the Current Market Price on the date fixed for such determination less the
then fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution filed with
the Trustee) of the portion of the assets, shares or evidences of indebtedness
so distributed applicable to one share of Common Stock and the denominator shall
be such Current Market Price, such adjustment to become effective immediately
prior to the opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such distribution.
(e) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock cash (excluding any cash that is distributed upon a
merger or consolidation to which Section 1311 applies or as part of a
distribution referred to in paragraph (d) of this Section) in an aggregate
amount that, combined together with (1) the aggregate amount of any other
distributions to all holders of its Common Stock made exclusively in cash within
the 12 months preceding the date of payment of such distribution and in respect
of which no adjustment pursuant to this paragraph (e) has been made, and (2) the
aggregate of any cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution) of consideration payable in respect of any tender offer by the
Company or any of its Subsidiaries for all or any portion of the Common Stock
concluded within the 12 months preceding the date of payment of such
distribution and in respect of which no adjustment pursuant to paragraph (f) of
this Section has been made, exceeds 12.5% of the product of the Current Market
Price on the date for the determination of holders of shares of Common Stock
entitled to receive such distribution times the number of shares of Common Stock
outstanding on such date, then, and in each such case, immediately after the
close of business on such date for determination, the conversion price shall be
reduced so that the same shall equal the price determined by multiplying the
conversion price in effect immediately prior to the close of business on the
date fixed for determination of the stockholders entitled to receive such
distribution by a fraction (i) the numerator of which shall be equal to the
Current Market Price on the date fixed for such determination less an amount
equal to the quotient of (x) the excess of such combined amount over such 12.5%
and (y) the number of shares of Common Stock outstanding on such date for
determination and (ii) the denominator of which shall be equal to the Current
Market Price on such date for determination.
(f) In case a tender offer made by the Company or any Subsidiary for all or
any portion of the Common Stock shall expire and such tender offer (as amended
upon the expiration thereof) shall require the payment to stockholders (based on
the acceptance (up to any maximum specified in the terms of the tender offer) of
Purchased Shares (as defined below)) of an aggregate consideration having a fair
market value (as determined by the Board of Directors, whose determination shall
be conclusive and described in a Board Resolution) that combined together with
(1) the aggregate of the cash plus the fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and described in a
Board Resolution), as of the expiration of such tender offer, of consideration
payable in respect of any other tender offer, by the Company or any Subsidiary
for all or any portion of the Common Stock expiring within the 12 months
preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to this paragraph (f) has been made and (2) the aggregate
amount of any distributions to all holders of the Company's Common Stock made
exclusively in cash within 12 months preceding the expiration of such tender
offer and in respect of which no adjustment pursuant to paragraph (e) of this
Section has been made, exceeds 12.5% of the product of the Current Market Price
as of the last time (the "Expiration Time") tenders could have been made
pursuant to such tender offer (as it may be amended) times the number of shares
of Common Stock outstanding (including any tendered shares) on the Expiration
Time, then, and in each such case, immediately prior to the opening of business
on the day after the date of the Expiration Time, the conversion price shall be
adjusted so that the same shall equal the price determined by multiplying the
conversion price in effect immediately prior to close of business on the date of
the Expiration Time by a fraction (i) the numerator of which shall be equal to
(A) the product of (I) the current market price per share of the Common Stock
(determined as provided in paragraph (h) of this Section) on the date of the
Expiration Time and (II) the number of shares of Common Stock outstanding
(including any tendered shares) on the Expiration Time less (B) the amount of
cash plus the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased Shares, and (ii) the
denominator of which shall be equal to the product of (A) the current market
price per share of the Common Stock (determined as provided in paragraph (h) of
this Section) as of the Expiration Time and (B) the number of shares of Common
Stock outstanding (including any tendered shares) as of the Expiration Time less
the number of all shares validly tendered and not withdrawn as of the Expiration
Time (the shares deemed so accepted up to any such maximum, being referred to as
the "Purchased Shares").
(g) The reclassification of Common Stock into securities including
securities other than Common Stock (other than any reclassification upon a
consolidation or merger to which Section 1311 applies) shall be deemed to
involve (i) a distribution of such securities other than Common Stock to all
holders of Common Stock (and the effective date of such reclassification shall
be deemed to be "the date fixed for the determination of stockholders entitled
to receive such distribution" and the "date fixed for such determination" within
the meaning of paragraph (d) of this Section), and (ii) a subdivision or
combination, as the case may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification into the number of shares
of Common Stock outstanding immediately thereafter (and the effective date of
such reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (c) of this Section).
(h) For the purpose of any computation under paragraphs (b), (d), (e) and
(f) of this Section, the current market price per share of Common Stock (the
"Current Market Price") on any date shall be deemed to be the average of the
daily Closing Prices for the 5 consecutive Trading Days selected by the Company
commencing not more than 20 Trading Days before, and ending not later than, the
earlier of the day in question and the day before the "ex" date with respect to
the issuance or distribution requiring such computation. The "Closing Price" for
each Trading Day shall be the reported last sale price regular way or, in case
no such reported sale takes place on such day, the average of the reported
closing bid and asked prices regular way, in either case on the New York Stock
Exchange or, if the Common Stock is not listed or admitted to trading on such
Exchange, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or, if not listed or admitted to trading
on any national securities exchange, on the National Association of Securities
Dealers Automated Quotations system ("NASDAQ") National Market System
("NASDAQ/NMS") or, if not listed or admitted to trading on NASDAQ/NMS, on
NASDAQ, or, if the Common Stock is not listed or admitted to trading on any
national securities exchange or NASDAQ/NMS or quoted on NASDAQ, the average of
the closing bid and asked prices in the over-the-counter market as furnished by
any New York Stock Exchange member firm selected from time to time by the
Company for that purpose. For purposes of this paragraph, the term "'ex' date",
when used with respect to any issuance or distribution, shall mean the first
date on which the Common Stock trades regular way on such exchange or in such
market without the right to receive such issuance or distribution.
(i) No adjustment in the conversion price shall be required unless such
adjustment (plus any adjustments not previously made by reason of this paragraph
(i)) would require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of this paragraph (i)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this paragraph (i) shall be
made to the nearest cent.
(j) The Company may make such reductions in the conversion price, in
addition to those required by paragraphs (a), (b), (c), (d), (e) and (f) of this
Section, as it considers to be advisable in order to avoid or diminish any
income tax to any holders of shares of Common Stock resulting from any dividend
or distribution of stock or issuance of rights or warrants to purchase or
subscribe for stock or from any event treated as such for income tax purposes or
for any other reasons. The Company shall have the power to resolve any ambiguity
or correct any error in this paragraph (j) and its actions in so doing shall be
final and conclusive.
SECTION 1305. Notice of Adjustments of Conversion Price.
Whenever the conversion price is adjusted as herein provided:
(a) the Company shall compute the adjusted conversion price in
accordance with Section 1304 and shall prepare a certificate signed by the
Treasurer of the Company setting forth the adjusted conversion price and
showing in reasonable detail the facts upon which such adjustment is based,
and such certificate shall forthwith be filed at each office or agency
maintained for the purpose of conversion of Securities pursuant to Section
1002; and
(b) a notice stating that the conversion price has been adjusted and
setting forth the adjusted conversion price shall forthwith be required,
and as soon as practicable after it is required, such notice shall be
mailed by the Company to all Holders at their last addresses as they shall
appear in the Security Register.
SECTION 1306. Notice of Certain Corporate Action.
In case:
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock payable otherwise than in cash out of its earned
surplus; or
(b) the Company shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any other rights; or
(c) of any reclassification of the Common Stock of the Company (other
than a subdivision or combination of its outstanding shares of Common
Stock), or of any consolidation, merger or share exchange to which the
Company is a party and for which approval of any stockholders of the
Company is required, or of the sale or transfer of all or substantially all
of the assets of the Company; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) the Company or any Subsidiary shall commence a tender offer for
all or a portion of the Company's outstanding Common Stock (or shall amend
any such tender offer);
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Securities pursuant to Section 1002, and shall
cause to be mailed to all Holders at their last addresses as they shall appear
in the Security Register, at least 20 days (or 10 days in any case specified in
clause (a) or (b) above) prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, rights or warrants, or, if
a record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, rights or warrants are to
be determined, or (y) the date on which such reclassification, consolidation,
merger, share exchange, sale, transfer, dissolution, liquidation, winding up or
tender offer is expected to become effective, and the date or dates as of which
it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, share exchange,
sale, transfer, dissolution, liquidation, winding up or tender offer. Neither
the failure to give such notice nor any defect therein shall affect the legality
or validity of the proceedings described in clauses (a) through (d) of this
Section 1306. If at the time the Trustee shall not be the conversion agent, a
copy of such notice shall also forthwith be filed by the Company with the
Trustee.
SECTION 1307. Company to Reserve Common Stock.
The Company shall at all times reserve and keep available out of its
authorized but unissued Common Stock, for the purpose of effecting the
conversion of Securities, the full number of shares of Common Stock then
issuable upon the conversion of all outstanding Securities.
SECTION 1308. Taxes on Conversions.
The Company will pay any and all taxes that may be payable in respect of
the issue or delivery of shares of Common Stock on conversion of Securities
pursuant hereto. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that of the Holder of
the Security or Securities to be converted, and no such issue or delivery shall
be made unless and until the Person requesting such issue has paid to the
Company the amount of any such tax, or has established to the satisfaction of
the Company that such tax has been paid.
SECTION 1309. Covenant as to Common Stock.
The Company covenants that all shares of Common Stock which may be issued
upon conversion of Securities will upon issue be fully paid and nonassessable
and, except as provided in Section 1308, the Company will pay all taxes, liens
and charges with respect to the issue thereof.
SECTION 1310. Cancellation of Converted Securities.
All Securities delivered for conversion shall be delivered to the Trustee
to be cancelled by or at the direction of the Trustee, which shall dispose of
the same as provided in Section 309.
SECTION 1311. Provisions in Case of Consolidation, Merger or
Sale of Assets.
In case of any consolidation of the Company with, or merger of the Company
into, any other Person, any merger of another Person into the Company (other
than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of the Company)
or any sale or transfer of all or substantially all of the assets of the
Company, the Person formed by such consolidation or resulting from such merger
or which acquires such assets, as the case may be, shall execute and deliver to
the Trustee a supplemental indenture providing that the Holder of each Security
then outstanding shall have the right thereafter, during the period such
Security shall be convertible as specified in Section 1301, to convert such
Security only into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock of the Company into which such Security might
have been converted immediately prior to such consolidation, merger, sale or
transfer, assuming such holder of Common Stock of the Company is not a Person
with which the Company consolidated or into which the Company merged or which
merged into the Company or to which such sale or transfer was made, as the case
may be ("constituent Person"), or an Affiliate of a constituent Person, and
failed to exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
sale or transfer (provided that if the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer is
not the same for each share of Common Stock of the Company held immediately
prior to such consolidation, merger, sale or transfer by others than a
constituent Person or an Affiliate thereof and in respect of which such rights
of election shall not have been exercised ("non-electing share"), then for the
purpose of this Section the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). Such supplemental indenture
shall provide for adjustments which, for events subsequent to the effective date
of such supplemental indenture, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article. The above
provisions of this Section shall similarly apply to successive consolidations,
mergers, sales or transfers.
SECTION 1312. Trustee's Disclaimer.
The Trustee has no duty to determine when an adjustment under this Article
should be made, how it should be made or what it should be. The Trustee makes no
representation as to the validity or value of any securities or assets issued
upon conversion of Securities. The Trustee shall not be responsible for the
Company's failure to comply with this Article.
ARTICLE FOURTEEN
Repurchase of Securities at the Option of the
Holder Upon a Repurchase Event
SECTION 1401. Right to Require Repurchase.
In the event that a Repurchase Event (as hereinafter defined) shall occur,
then each Holder shall have the right, at the Holder's option, to require the
Company to repurchase, and upon the exercise of such right the Company shall
repurchase, all of such Holder's Securities, or any portion of the principal
amount thereof that is an integral multiple of $1,000, on the date (the
"Repurchase Date") that is 75 calendar days after the date of the Company Notice
(as defined in Section 1402), for cash at a purchase price (the "Repurchase
Price") equal to 100% of the principal amount of the Securities to be
repurchased, together with accrued interest to the Repurchase Date. Prior to the
Repurchase Date, the Company shall pay in full all amounts outstanding under the
Credit Agreements or obtain the consents of the lenders signatories thereto to
the repurchase of Securities. Any failure by the Company to pay in full all
amounts outstanding under the Credit Agreements or to obtain the consents of the
lenders signatories thereto to the repurchase of Securities as described above,
shall not excuse a default by the Company under this Article Fourteen. Such
right to require the repurchase of the Securities shall not continue after a
discharge of the Company from its obligations with respect to the Securities in
accordance with Article Four, unless a Repurchase Event shall have occurred
prior to such discharge.
SECTION 1402. Notices; Method of Exercising Repurchase Right,
Etc.
(a) Unless the Company shall have theretofore called for redemption all of
the Outstanding Securities, on or before the 30th calendar day after the
occurrence of a Repurchase Event, the Company or, at the request (and expense)
of the Company, the Trustee, shall mail to all Holders a notice (the "Company
Notice") of the occurrence of the Repurchase Event and of the repurchase right
set forth herein arising as a result thereof.
Each notice of a repurchase right shall state:
(1) the Repurchase Date,
(2) the date by which the repurchase right must be
exercised,
(3) the Repurchase Price,
(4) a description of the procedure which a Holder
must follow to exercise a repurchase right, and
(5) the conversion price then in effect, the date on which the right
to convert the principal amount of the Securities to be repurchased will
terminate and the place or places where such Securities may be surrendered
for conversion.
No failure of the Company to give the foregoing notices or defect therein
shall limit any Holder's right to exercise a repurchase right or affect the
validity of the proceedings for the repurchase of Securities.
If any of the foregoing provisions are inconsistent with applicable law,
such law shall govern.
(b) To exercise a repurchase right, a Holder shall deliver to the Trustee
on or before the close of business on the second Business Day prior to the
Repurchase Date (i) written notice of the Holder's exercise of such right, which
notice shall set forth the name of the Holder, the principal amount of the
Securities to be repurchased, a statement that an election to exercise the
repurchase right is being made thereby, and (ii) the Securities with respect to
which the repurchase right is being exercised, duly endorsed for transfer to the
Company. Such written notice shall be irrevocable, except that the right of the
Holder to convert the Securities with respect to which the repurchase right is
being exercised shall continue until the close of business on the Repurchase
Date.
(c) In the event a repurchase right shall be exercised in accordance with
the terms hereof, the Company shall pay or cause to be paid the Repurchase Price
in cash to the Holder on the Repurchase Date, together with accrued and unpaid
interest to the Repurchase Date payable with respect to the Securities as to
which the purchase right has been exercised; provided, however, that
installments of interest that mature on or prior to the Repurchase Date shall be
payable in cash to the Holders of such Securities, or one or more predecessor
Securities, registered as such at the close of business on the relevant Regular
Record Date according to the terms and provisions of Article Three.
(d) If any Security surrendered for repurchase shall not be so paid on the
Repurchase Date, the principal shall, until paid, bear interest to the extent
permitted by applicable law from the Repurchase Date at the rate borne by the
Security and each Security shall remain convertible into Common Stock until the
principal of such Security shall have been paid or duly provided for.
(e) Any Security which is to be repurchased only in part shall be
surrendered to the Trustee (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities, containing identical terms and conditions,
of any authorized denomination as requested by such Holder in aggregate
principal amount equal to and in exchange for the unrepurchased portion of the
principal of the Security so surrendered.
(f) Prior to the Repurchase Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Repurchase Price of the Securities that are to be
repaid on the Repurchase Date.
SECTION 1403. "Change of Control" and "Repurchase Event"
Defined.
(a) For purposes of this Article, "Change of Control" means any of the
following: (1) the sale, lease, conveyance or other disposition of all or
substantially all of the Company's assets as an entirety or substantially as an
entirety to any Person or "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) in one or a series of transactions; (2) stockholders of the
Company shall approve any plan or proposal for the liquidation or dissolution of
the Company; (3) any transaction or series of transactions (as a result of a
tender offer, merger, consolidation or otherwise) that results in any Person,
including a "group" (within the meaning of Section 13(d)(3) of the Exchange Act)
that includes such Person, acquiring "beneficial ownership" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of 50% or more of the
aggregate voting power of all classes of Common Equity of the Company; or (4)
individuals who at the beginning of any period of two consecutive calendar years
constituted the Board of Directors (together with any new directors whose
election to the Board of Directors or whose nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
members of the Board of Directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the members of the Board of Directors then in
office.
(b) A Change of Control shall constitute a "Repurchase Event" giving rise
to the right under this Article on the part of each Holder of a Security to
require, at the Holder's option, to require the Company to repurchase such
Holder's Securities, unless:
(i) the Current Market Price of the Common Stock is at least equal to
105% of the Conversion Price in effect immediately preceding the time of
such Change of Control, or
(ii) all of the consideration (excluding cash payments for fractional
shares) in the transaction giving rise to such Change of Control to the
holders of Common Stock consists of shares of common stock that are, or
immediately upon issuance will be, listed on a national securities exchange
or quoted in the NASDAQ National Market System, and as a result of such
transaction the Securities become convertible solely into such common
stock, or
(iii) the consideration in the transaction giving rise to such Change
of Control to the holders of Common Stock consists of cash, securities that
are, or immediately upon issuance will be, listed on a national securities
exchange or quoted in the NASDAQ National Market System, or a combination
of cash and such securities, and the aggregate fair market value of such
consideration (which, in the case of such securities, shall be equal to the
average of the daily Closing Prices of such securities during the ten
consecutive Trading Days commencing with the sixth Trading Day following
consummation of such transaction) is at least 105% of the Conversion Price
in effect on the date immediately preceding the closing date of such
transaction.
For purposes of this definition, "Current Market Price" has the meaning
given to that term in the first sentence of Section 1304(h) of this Indenture,
except that the 5 consecutive Trading Days selected by the Company must commence
not more than 10 Trading Days before the date in question; "Closing Price" has
the meaning give to that term in Section 1304(h) of this Indenture, mutatis
mutandis to make such definition applicable to the securities in question; and
"Trading Day" has the meaning given to that term in Section 1304(h) of this
Indenture.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
HEALTHSOUTH Rehabilitation
Corporation
By /s/ ANTHONY J. TANNER
------------------------------
Attest:
/s/ AARON BEAM, JR.
- -----------------------------
PNC BANK, KENTUCKY, INC.
By /s/ DAVID G. METCALF
-------------------------------
Attest:
/s/ PATRICA C. MCFADDEN
- ------------------------------
<PAGE>
EXHIBIT 10-34
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of July 23, 1986, between HEALTHSOUTH
Rehabilitation Corporation, a Delaware corporation ("HEALTHSOUTH"), and RICHARD
M. SCRUSHY, a resident of Birmingham, Alabama ("Scrushy").
W I T N E S S E T H:
WHEREAS, HEALTHSOUTH is a healthcare concern engaged in providing
comprehensive rehabilitation care services to the public through a national
organization;
WHEREAS, HEALTHSOUTH desires to avail itself of Scrushy's talents and
expertise in the management of the rehabilitation business of HEALTHSOUTH, and
to employ him as the Chairman of the Board, President and Chief Executive
Officer of HEALTHSOUTH and certain of its subsidiaries and Scrushy is willing to
accept such employment.
NOW, THEREFORE, in consideration of the premises, and other mutual
promises and covenants hereinafter contained, HEALTHSOUTH and Scrushy do hereby
agree, for their mutual benefit, as follows:
Section 1. Employment.
Scrushy shall be employed by HEALTHSOUTH under this Agreement, effective
August 1, 1986, and Scrushy accepts such employment upon the terms and
conditions hereinafter set forth.
Section 2. Term.
The term of employment provided for in this Agreement shall commence on
August 1, 1986, and shall remain in full force and effect for a period of five
years thereafter.
Section 3. Powers and Duties.
Scrushy shall be employed by HEALTHSOUTH during the term of employment
under this Agreement as the Chairman of the Board, President and Chief Executive
Officer of HEALTHSOUTH, and shall also hold similar offices with HEALTHSOUTH's
subsidiaries and/or their successors. In addition, HEALTHSOUTH shall use its
best efforts to cause Scrushy to be nominated and elected as a Director of
HEALTHSOUTH and its subsidiaries or their successors during the term of this
Agreement. In addition, Scrushy shall perform such duties as may be assigned to
him from time to time by the Board of Directors of HEALTHSOUTH. In the event of
a reorganization of HEALTHSOUTH and its subsidiaries which results in Scrushy
not being elected Chairman of the Board, President and Chief Executive Officer
of the successor company, such event shall be deemed to be a termination of
Scrushy's employment pursuant to Section 8(f) of this Agreement. In the event
that Scrushy shall not be elected a Director of HEALTHSOUTH or any such
successor company, Scrushy may, at his sole option, treat such event as a
termination of Scrushy's employment pursuant to Section 8(c) of this Agreement.
In carrying out his duties under this Agreement, Scrushy shall have such
powers and duties usually incident to the office of Chairman of the Board,
President and Chief Executive Officer and shall have general responsibility for
the overall development, expansion and operations of HEALTHSOUTH and its
subsidiaries.
The performance by Scrushy of any duties assigned to him which are not of
the type provided for herein shall not constitute a waiver of his rights
hereunder or an abrogation, abandonment or termination of this Agreement.
Scrushy shall devote all of his working time and best efforts in the best
interest and behalf of HEALTHSOUTH throughout the term of this Agreement, such
working time and best efforts to be of the type and extent usually expended by
executives of similar caliber in similar situations. Scrushy shall not be
restricted from engaging in a business which is non-competitive with HEALTHSOUTH
and its subsidiaries after normal working hours or on weekends or from investing
his assets in such form or manner as will not require any services on his part
in the operation of the affairs of the companies in which such investments are
made.
Section 4. Place of Performance.
The headquarters for the performance of Scrushy's duties shall be located
in Birmingham, Alabama, but from time to time Scrushy shall be required to
travel to HEALTHSOUTH's other locations in the proper conduct of his
responsibilities under this Agreement. As it is HEALTHSOUTH's intention to
expand the business of HEALTHSOUTH on a national scale, HEALTHSOUTH may require
Scrushy to spend a reasonable amount of time traveling, as his duties and the
business of HEALTHSOUTH and its subsidiaries may require.
Section 5. Compensation.
For all services rendered by Scrushy pursuant to this Agreement,
HEALTHSOUTH shall pay Scrushy the following compensation:
(a) A base salary at the annual rate of $160,000 for the period
August 1, 1986 through December 31, 1986, and an annual base salary of
$180,000 thereafter, such salary to be paid semi-monthly. Such salary
shall be reviewed annually by the Board of Directors.
(b) Scrushy shall be entitled to participate in any bonus plan
approved by the Board of Directors for HEALTHSOUTH's management.
Compensation pursuant to this Section 5 or any other provision of this Agreement
shall be subject to reduction by all applicable withholding, social security and
other state, Federal and local taxes and deductions.
Section 6. Employee Benefits.
(a) Scrushy will be entitled to participate in any employee benefits
provided by HEALTHSOUTH and its subsidiaries, such as life insurance,
hospitalization and major medical insurance plans which HEALTHSOUTH has in
effect or may adopt from time to time. Without limiting the generality of the
foregoing, the benefits provided Scrushy during the term of this Agreement shall
also include the following elements:
(i) a four-week vacation during each year of this
Agreement;
(ii) a car allowance for an automobile owned by Scrushy for use by
Scrushy in connection with the execution of his duties under this
Agreement in the amount of $500 per month; and
(iii) HEALTHSOUTH shall provide Scrushy, either through a corporate
group disability insurance plan or otherwise, with disability insurance
coverage equal to at least 60% of his base salary.
(b) In addition, the Board of Directors shall consider Scrushy for the
grant of options to purchase Common Stock of HEALTHSOUTH, as Scrushy's
performance shall dictate, no less frequent than annually during the term of
this Agreement.
Section 7. Expenses.
Scrushy is authorized to incur reasonable expenses in promoting the
business of HEALTHSOUTH and its subsidiaries, including expenses, to the extent
used for business purposes, for entertainment, travel and similar items.
HEALTHSOUTH will reimburse Scrushy for all such expenses, upon the presentation
by him of an itemized account of such expenditures in accordance with
HEALTHSOUTH procedures.
Section 8. Termination.
(a) HEALTHSOUTH may terminate the employment of Scrushy (i) at any time
for just cause by written notice to Scrushy effective upon receipt, or (ii) if
Scrushy is unable to perform the services required of him under this Agreement
by reason of disability as defined in the disability insurance plan or plans
referred to in Section 5(a)(iii) of this Agreement. For purposes of Section
8(a)(i) above, the term "just cause" shall have the meaning prescribed in
HEALTHSOUTH's policy manual as approved from time to time by the Board of
Directors.
(b) In the event that Scrushy's employment by HEALTHSOUTH should be
terminated pursuant to Section 8(a)(i) of this Agreement prior to the conclusion
of the term of this Agreement, HEALTHSOUTH shall have no further obligation
hereunder, except for the payment of the compensation provided for in Section
5(a) of this Agreement for a period of one year following such termination,
which compensation shall be considered a debt of HEALTHSOUTH and shall not be
discharged by reason of termination of Scrushy's employment.
(c) In the event that Scrushy's employment by HEALTHSOUTH shall be
terminated for any reason other than as set forth in Section 8(a)(i), 8(d), 8(e)
or 8(f) of this Agreement, HEALTHSOUTH shall have no further obligation
hereunder, except for the payment of compensation provided for in Section 5(a)
of this Agreement for the remaining term of this Agreement, but in no event for
a period of less than two years, which compensation shall be considered a debt
of HEALTHSOUTH and shall not be discharged by reason of termination of Scrushy's
employment.
(d) In the event of the death of Scrushy during the term of this
Agreement, the Agreement shall terminate immediately and HEALTHSOUTH shall pay
to the widow or estate of Scrushy, or such other person or persons as may be
designated by Scrushy in writing, an amount equal to one year's annual base
salary payable in one lump sum.
(e) Scrushy may terminate his employment under this Agreement before the
expiration of its term by giving HEALTHSOUTH 180 days written notice of his
intention to terminate such employment, and at the expiration of said 180 days,
Scrushy's employment under this Agreement shall terminate and Scrushy shall be
entitled to receive, as severance compensation, an amount equal to one year's
annual base salary at the time of termination, payable at the time of
termination.
(f) In the event that HEALTHSOUTH shall be acquired, merged or reorganized
in such a manner as to result in a change in control of HEALTHSOUTH, Scrushy may
terminate this employment under this Agreement by giving HEALTHSOUTH 30 days
written notice of his intention to terminate such employment, and at the
expiration of said 30 days, Scrushy's employment under this Agreement shall
terminate and Scrushy shall be entitled to receive, as severance compensation,
an amount equal to two years' annual base salary at the time of termination,
payable at the time of termination.
Section 9. Non-Competition.
(a) In the event that Scrushy's employment under this Agreement shall
terminate during its term, for the period of time with respect to which Scrushy
is entitled to receive compensation hereunder after such termination, Scrushy
shall not, directly or indirectly, own, operate, be employed by, be a director
of, act as a consultant for, be associated with, or be a partner or have a
proprietary interest in, any enterprise, partnership, association, corporation,
joint venture or other entity, which is competitive with the rehabilitation
business of HEALTHSOUTH, or any subsidiary or affiliate thereof, in any county
in a state where HEALTHSOUTH or its subsidiaries or affiliates are conducting
such business at the time of such termination; provided, however, that if such
termination shall occur as a result of the causes enumerated in Section 8(f) of
this Agreement, this Section 9 shall be void and shall be of no further force
and effect.
(b) The parties have entered into this Section 9 of this Agreement in good
faith and for the reasons set forth in the recitals hereto and assume that this
Agreement is legally binding. If, for any reason, this Agreement is not binding
because of its geographical scope or because of its term, then the parties agree
that this Agreement shall be deemed effective to the widest geographical area
and/or the longest period of time (but not in excess of one year) as may be
legally enforceable.
(c) Scrushy acknowledges that the rights and privileges granted to
HEALTHSOUTH in this Section 9 are of special and unique character, which gives
them a peculiar value, the loss of which may not be reasonably or adequately
compensated for by damages in an action of law, and that a breach thereof by
Scrushy of this Agreement will cause HEALTHSOUTH great and irreparable injury
and damage. Accordingly, Scrushy hereby agrees that HEALTHSOUTH shall be
entitled to remedies of injunction, specific performance or other equitable
relief to prevent a breach of this Section 9 of this Agreement by Scrushy. This
provision shall not be construed as a waiver of any other rights or remedies
HEALTHSOUTH may have for damages or otherwise.
Section 10. Non-Assignability.
Scrushy shall not have the right to assign, transfer, pledge, hypothecate
or dispose of any right to receive payments hereunder or any rights, privileges
or interest hereunder, all of which are hereby expressly declared to be
non-assignable and non-transferable, except after termination of his employment
hereunder. In the event of a violation of the provisions of this Section 10, no
further sums shall hereafter become due or payable by HEALTHSOUTH or its
subsidiaries to Scrushy or his assignee, transferee, pledgee or to any other
person whatsoever, and HEALTHSOUTH shall have no further liability under this
Agreement to Scrushy.
Section 11. Binding Effect.
The rights and obligations of HEALTHSOUTH and its subsidiaries under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of HEALTHSOUTH. Scrushy shall not assign or alienate any interest of
his in this Agreement, except as provided in Section 10 hereof.
Section 12. Waiver of Breach.
The waiver by either party to this Agreement of a breach of any provision
thereof by the other party shall not operate or be construed as a waiver of any
subsequent breach of such party.
Section 13. Notices.
Any notice required or permitted to be given under this Agreement shall be
sufficient if in writing and if sent by certified or registered mail to
Scrushy's residence (if such notice is addressed to Scrushy), or to the
principal executive offices of HEALTHSOUTH in Birmingham, Alabama (if such
notice is addressed to HEALTHSOUTH).
Section 14. Entire Agreement.
This instrument shall be governed by the laws of the State of Delaware and
contains the entire agreement of the parties with respect to the subject matter
hereof and supersedes any other agreements, whether written or oral, between the
parties.
This Agreement may not be changed orally, but only by an instrument in
writing signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
Section 15. Counterparts.
This Agreement may be executed in two or more counterparts, each of which
shall for all purposes be deemed to be an original, but each of which, when so
executed, shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
HEALTHSOUTH Rehabilitation Corporation
By /s/ Aaron Beam, Jr.
___________________________________
Aaron Beam, Jr.
Executive Vice President and
Chief Financial Officer
/s/ Richard M. Scrushy
___________________________________
Richard M. Scrushy
<PAGE>
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT, dated as of January 5, 1987,
between HEALTHSOUTH Rehabilitation Corporation, a Delaware corporation
("HEALTHSOUTH"), and RICHARD M. SCRUSHY, a resident of Birmingham, Alabama
("Scrushy").
W I T N E S S E T H:
WHEREAS, the parties to this Agreement are parties to that certain
Employment Agreement, dated as of July 23, 1986 (the "Employment Agreement");
and
WHEREAS, the parties desire to amend the Employment Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, and the mutual promises
and covenants hereinafter contained, HEALTHSOUTH and Scrushy do hereby agree,
for their mutual benefit, as follows:
1. Section 5(a) of the Agreement is hereby amended by increasing the
annual base salary effective after December 31, 1986, previously $180,000, to
$200,000.
2. HEALTHSOUTH and Scrushy hereby reaffirm all of the other terms and
provisions of the Employment Agreement, which is amended only as specifically
set forth herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
HEALTHSOUTH Rehabilitation Corporation
By /s/ Aaron Beam, Jr.
___________________________________
Aaron Beam, Jr., Senior
Vice President and Chief Financial
Officer and Treasurer
/s/ Richard M. Scrushy
___________________________________
Richard M. Scrushy
<PAGE>
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT, dated as of December 16, 1987,
between HEALTHSOUTH Rehabilitation Corporation, a Delaware corporation
("HEALTHSOUTH"), and RICHARD M. SCRUSHY, a resident of Birmingham, Alabama
("Scrushy").
W I T N E S S E T H:
WHEREAS, the parties to this Agreement are parties to that certain
Employment Agreement, dated as of July 23, 1986, as amended as of January 5,
1987 (the "Employment Agreement"); and
WHEREAS, the parties desire to further amend the Employment Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, and the mutual promises
and covenants hereinafter contained, HEALTHSOUTH and Scrushy do hereby agree,
for their mutual benefit, as follows:
1. Section 5(a) of the Agreement is hereby amended by increasing the
annual base salary effective after December 31, 1987, previously $200,000 to
$260,000.
2. HEALTHSOUTH and Scrushy hereby reaffirm all of the other terms and
provisions of the Employment Agreement, which is amended only as specifically
set forth herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
HEALTHSOUTH Rehabilitation Corporation
By /s/ Aaron Beam, Jr.
___________________________________
Aaron Beam, Jr., Senior
Vice President and Chief Financial
Officer and Treasurer
/s/ Richard M. Scrushy
___________________________________
Richard M. Scrushy
<PAGE>
AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT, dated as of December 20, 1988,
between HEALTHSOUTH Rehabilitation Corporation, a Delaware corporation
("HEALTHSOUTH"), and RICHARD M. SCRUSHY, a resident of Birmingham, Alabama
("Scrushy").
W I T N E S S E T H:
WHEREAS, the parties to this Agreement are parties to that certain
Employment Agreement, dated as of July 23, 1986, as amended as of January 5,
1987 and as of December 16, 1987 (the "Employment Agreement"); and
WHEREAS, the parties desire to further amend the Employment Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, and the mutual promises
and covenants hereinafter contained, HEALTHSOUTH and Scrushy do hereby agree,
for their mutual benefit, as follows:
1. Section 5(a) of the Agreement is hereby amended by increasing the
annual base salary effective after December 31, 1988, previously $260,000 to
$325,000.
2. HEALTHSOUTH and Scrushy hereby reaffirm all of the other terms and
provisions of the Employment Agreement, which is amended only as specifically
set forth herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
HEALTHSOUTH Rehabilitation Corporation
By /s/ Aaron Beam, Jr.
___________________________________
Aaron Beam, Jr., Senior
Vice President and Chief Financial
Officer and Treasurer
/s/ Richard M. Scrushy
___________________________________
Richard M. Scrushy
<PAGE>
AMENDMENT NO. 4 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 4 TO EMPLOYMENT AGREEMENT, dated as of December 20, 1989,
between HEALTHSOUTH Rehabilitation Corporation, a Delaware corporation
("HEALTHSOUTH"), and RICHARD M. SCRUSHY, a resident of Birmingham, Alabama
("Scrushy").
W I T N E S S E T H:
WHEREAS, the parties to this Agreement are parties to that certain
Employment Agreement, dated as of July 23, 1986, as amended as of January 5,
1987, as of December 16, 1987 and as of December 20, 1988 (the "Employment
Agreement"); and
WHEREAS, the parties desire to further amend the Employment Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, and the mutual promises
and covenants hereinafter contained, HEALTHSOUTH and Scrushy do hereby agree,
for their mutual benefit, as follows:
1. Section 2 of the Agreement is hereby amended to extend the term of the
Agreement for a period of five years commencing January 1, 1990.
2. Section 5(a) of the Agreement is hereby amended by the substitution in
place thereof, the following new Section 5(a): "(a) A base salary at the annual
rate of $450,000 effective January 1, 1990, such salary to be paid semi-monthly.
Such salary shall be reviewed annually by the Board of Directors.
It is agreed between the parties that $60,000 of the above base salary
amount shall be considered to be an incentive portion thereof, payable only if
HEALTHSOUTH's operations meet the standards set forth in HEALTHSOUTH's annual
business plan, as approved for each year during the term of this Agreement by
the Board of Directors, it being agreed that the main criteria to be considered
is whether HEALTHSOUTH attains the level of net income set forth in such
business plan. The $60,000 incentive portion shall be payable on a monthly basis
(1/12 with respect to each month of the calendar year) and shall be payable in
$5,000 increments within five days of the date HEALTHSOUTH's internal financial
statements have been prepared and are considered by management to be complete
and accurate. In the event that any monthly increment shall not be paid during
the course of a calendar year because the business plan is not met, such amount
shall be due and payable at the time HEALTHSOUTH's annual results are announced
to the public if HEALTHSOUTH attains the net income set forth in the business
plan for the calendar year involved."
3. Section 8(f) of the Agreement is hereby amended by substituting in the
place of the words "two years' annual base salary" the words "three years'
annual base salary (including the gross incentive portion)".
4. HEALTHSOUTH and Scrushy hereby reaffirm all of the other terms and
provisions of the Employment Agreement, which is amended only as specifically
set forth herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
HEALTHSOUTH Rehabilitation Corporation
By /s/ Aaron Beam, Jr.
___________________________________
Aaron Beam, Jr., Senior
Vice President and Chief Financial
Officer and Treasurer
/s/ Richard M. Scrushy
___________________________________
Richard M. Scrushy
<PAGE>
AMENDMENT NO. 5 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 5 TO EMPLOYMENT AGREEMENT, dated as of January 8, 1991,
between HEALTHSOUTH Rehabilitation Corporation, a Delaware corporation
("HEALTHSOUTH"), and RICHARD M. SCRUSHY, a resident of Birmingham, Alabama
("Scrushy").
W I T N E S S E T H:
WHEREAS, the parties to this Agreement are parties to that certain
Employment Agreement, dated as of July 23, 1986, as amended as of January 5,
1987, as of December 16, 1987, as of December 20, 1988 and as of December 20,
1989 (the "Employment Agreement"); and
WHEREAS, the parties desire to further amend the Employment Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, and the mutual promises
and covenants hereinafter contained, HEALTHSOUTH and Scrushy do hereby agree,
for their mutual benefit, as follows:
1. Section 2 of the Employment Agreement is hereby amended by the
substitution in place thereof, the following new Section 2:
"The term of employment provided for in this Agreement shall commence on
January 1, 1991, and shall remain in full force and effect for a period of five
years thereafter. Such term shall be automatically extended for an additional
year on each December 31, during the term hereof, unless written notice of any
non-extension is provided Scrushy at least 30 days prior to such December 31."
2. Section 5(a) of the Employment Agreement is hereby amended by
increasing the annual base salary from $450,000 to $600,000, effective January
1, 1991. The incentive portion of this $600,000 base salary shall be $120,000,
payable in $10,000 increments on a monthly basis.
3. HEALTHSOUTH and Scrushy hereby reaffirm all of the other terms and
provisions of the Employment Agreement, which is amended only as specifically
set forth herein.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first above written.
HEALTHSOUTH Rehabilitation Corporation
By /s/ Aaron Beam, Jr.
___________________________________
Aaron Beam, Jr., Senior
Vice President and Chief Financial
Officer and Treasurer
/s/ Richard M. Scrushy
___________________________________
Richard M. Scrushy
<PAGE>
AMENDMENT NO. 6 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 6 TO EMPLOYMENT AGREEMENT, dated as of January 1, 1992,
between HEALTHSOUTH Rehabilitation Corporation, a Delaware corporation
("HEALTHSOUTH"), and RICHARD M. SCRUSHY, a resident of Birmingham, Alabama
("Scrushy").
W I T N E S S E T H:
WHEREAS, the parties to this Agreement are parties to that certain
Employment Agreement, dated as of July 23, 1986, as amended as of January 5,
1987, as of December 16, 1987, as of December 20, 1988, as of December 20, 1989,
and as of January 8, 1991 (the "Employment Agreement"); and
WHEREAS, the parties desire to further amend the Employment Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, and the mutual promises
and covenants hereinafter contained, HEALTHSOUTH and Scrushy do hereby agree,
for their mutual benefit, as follows:
1. Section 5(a) of the Employment Agreement is hereby amended by
increasing the annual base salary from $600,000 to $730,000, effective January
1, 1992. The incentive portion of this $600,000 base salary shall be $180,000,
payable in $15,000 increments on a monthly basis.
2. HEALTHSOUTH and Scrushy hereby reaffirm all of the other terms and
provisions of the Employment Agreement, which is amended only as specifically
set forth herein.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first above written.
HEALTHSOUTH Rehabilitation Corporation
By /s/ Aaron Beam, Jr.
___________________________________
Aaron Beam, Jr., Senior
Vice President and Chief Financial
Officer and Treasurer
/s/ Richard M. Scrushy
___________________________________
Richard M. Scrushy
<PAGE>
AMENDMENT NO. 7 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 7 TO EMPLOYMENT AGREEMENT, dated as of January 1, 1993,
between HEALTHSOUTH Rehabilitation Corporation, a Delaware corporation
("HEALTHSOUTH"), and RICHARD M. SCRUSHY, a resident of Birmingham, Alabama
("Scrushy").
W I T N E S S E T H:
WHEREAS, the parties to this Agreement are parties to that certain
Employment Agreement, dated as of July 23, 1986, as amended as of January 5,
1987, as of December 16, 1987, as of December 20, 1988, as of December 20, 1989,
as of January 8, 1991 and as of January 1, 1992 (the "Employment Agreement");
and
WHEREAS, the parties desire to further amend the Employment Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, and the mutual promises
and covenants hereinafter contained, HEALTHSOUTH and Scrushy do hereby agree,
for their mutual benefit, as follows:
1. Section 5(a) of the Employment Agreement is hereby amended by
increasing the annual base salary from $730,000 to $766,500, effective January
1, 1993. The incentive portion of this $730,000 base salary shall be $240,000,
payable in $20,000 increments on a monthly basis.
2. HEALTHSOUTH and Scrushy hereby reaffirm all of the other terms and
provisions of the Employment Agreement, which is amended only as specifically
set forth herein.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first above written.
HEALTHSOUTH Rehabilitation Corporation
By /s/ Aaron Beam, Jr.
___________________________________
Aaron Beam, Jr., Senior
Vice President and Chief Financial
Officer and Treasurer
/s/ Richard M. Scrushy
___________________________________
Richard M. Scrushy
<PAGE>
AMENDMENT NO. 8 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 8 TO EMPLOYMENT AGREEMENT, dated as of January 1, 1994,
between HEALTHSOUTH Rehabilitation Corporation, a Delaware corporation
("HEALTHSOUTH"), and RICHARD M. SCRUSHY, a resident of Birmingham, Alabama
("Scrushy").
W I T N E S S E T H:
WHEREAS, the parties to this Agreement are parties to that certain
Employment Agreement, dated as of July 23, 1986, as amended as of January 5,
1987, as of December 16, 1987, as of December 20, 1988, as of December 20, 1989,
as of January 8, 1991, as of January 1, 1992 and as of January 1, 1993 (the
"Employment Agreement"); and
WHEREAS, the parties desire to further amend the Employment Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, and the mutual promises
and covenants hereinafter contained, HEALTHSOUTH and Scrushy do hereby agree,
for their mutual benefit, as follows:
1. Section 5(a) of the Employment Agreement is hereby amended by
increasing the annual base salary to $800,000, effective January 1, 1994.
In addition to the above base salary, Scrushy shall be paid an incentive
bonus in the total amount of $400,000 per annum, payable only if HEALTHSOUTH's
operations meet the standards set forth in HEALTHSOUTH's annual business plan,
as approved for each year during the term of this Agreement by the Board of
Directors, it being agreed that the main criteria to be considered is whether
HEALTHSOUTH attains the level of net income set forth in such business plan. The
$400,000 incentive bonus shall be payable on a monthly basis (1/12 with respect
to each month of the calendar year) and shall be payable in $33,333.33
increments within five days of the date HEALTHSOUTH's internal financial
statements have been prepared and are considered by management to be complete
and accurate. In the event that any monthly increment shall not be paid during
the course of a calendar year because the business plan is not met, such amount
shall be due and payable at the time HEALTHSOUTH's annual results are announced
to the public if HEALTHSOUTH attains the net income set forth in the business
plan for the calendar year involved.
2. HEALTHSOUTH and Scrushy hereby reaffirm all of the other terms and
provisions of the Employment Agreement, which is amended only as specifically
set forth herein.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first above written.
HEALTHSOUTH Rehabilitation Corporation
By /s/ Aaron Beam, Jr.
___________________________________
Aaron Beam, Jr., Senior
Vice President and Chief Financial
Officer and Treasurer
/s/ Richard M. Scrushy
___________________________________
Richard M. Scrushy
<PAGE>
AMENDMENT NO. 9 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 9 TO EMPLOYMENT AGREEMENT, dated as of January 1, 1995,
between HEALTHSOUTH Corporation, a Delaware corporation ("HEALTHSOUTH"), and
RICHARD M. SCRUSHY, a resident of Birmingham, Alabama ("Scrushy").
W I T N E S S E T H:
WHEREAS, the parties to this Agreement are parties to that certain
Employment Agreement, dated as of July 23, 1986, as amended as of January 5,
1987, as of December 16, 1987, as of December 20, 1988, as of December 20, 1989,
as of January 8, 1991, as of January 1, 1992, as of January 1, 1993, and as of
January 1, 1994 (the "Employment Agreement"); and
WHEREAS, the parties desire to further amend the Employment Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, and the mutual promises
and covenants hereinafter contained, HEALTHSOUTH and Scrushy do hereby agree,
for their mutual benefit, as follows:
1. Section 5(a) of the Employment Agreement is hereby amended by
increasing the annual incentive bonus for 1995 to a total of $900,000, payable
only if HEALTHSOUTH's operations meet the standards set forth in HEALTHSOUTH's
annual business plan, as approved for each year during the term of this
Agreement by the Board of Directors, it being agreed that the main criteria to
be considered is whether HEALTHSOUTH attains the level of net income set forth
in such business plan. The $900,000 incentive bonus shall be payable on a
monthly basis (1/12 with respect to each month of the calendar year) and shall
be payable in $75,000 increments within five days of the date HEALTHSOUTH's
internal financial statements have been prepared and are considered by
management to be complete and accurate. In the event that any monthly increment
shall not be paid during the course of a calendar year because the business plan
is not met, such amount shall be due and payable at the time HEALTHSOUTH's
annual results are announced to the public if HEALTHSOUTH attains the net income
set forth in the business plan for the calendar year involved.
2. HEALTHSOUTH and Scrushy hereby reaffirm all of the other terms and
provisions of the Employment Agreement, which is amended only as specifically
set forth herein.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first above written.
HEALTHSOUTH Rehabilitation Corporation
By /s/ Aaron Beam, Jr.
___________________________________
Aaron Beam, Jr., Senior
Vice President and Chief Financial
Officer and Treasurer
/s/ Richard M. Scrushy
___________________________________
Richard M. Scrushy
<PAGE>
EXHIBIT (10)-35
AMENDED AND RESTATED
CREDIT AGREEMENT
among
HEALTHSOUTH REHABILITATION CORPORATION
and
NATIONSBANK OF NORTH CAROLINA, NATIONAL ASSOCIATION,
as Agent
and
LENDERS AS SIGNATORIES HERETO,
--------
$550,000,000 Revolving Credit and Term Loan Facility
Dated as of June 7, 1994
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
REVOLVING FACILITY TERMS, TERM LOAN AND COLLATERAL
SECTION 2.1 Syndicated Loans............................................. 24
SECTION 2.2 Advances of Syndicated Loans................................. 25
SECTION 2.3 Competitive Bid Loans........................................ 26
SECTION 2.4 Term Loan.................................................... 30
SECTION 2.5 Payments..................................................... 31
SECTION 2.6 Joint and Several Obligations................................ 31
SECTION 2.7 Pledge Agreement............................................. 32
SECTION 2.8 Prepayment................................................... 33
SECTION 2.9 Notes........................................................ 33
SECTION 2.10 Reduction in Revolving Facility.............................. 34
SECTION 2.11 Unused Fee................................................... 34
SECTION 2.12 Lending Offices.............................................. 34
SECTION 2.13 Letter of Credit Borrowings.................................. 34
SECTION 2.14 Pro Rata Payments............................................ 38
SECTION 2.15 Deficiency Advances.......................................... 38
SECTION 2.16 Adjustments by Agent......................................... 39
ARTICLE III
INTEREST ON SYNDICATED LOANS
SECTION 3.1 Applicable Interest Rates.................................... 40
SECTION 3.2 Procedure for Exercising Interest Rate Options............... 40
SECTION 3.3 Base Rate.................................................... 40
SECTION 3.4 Fixed Rate................................................... 41
SECTION 3.5 Changes in Syndicated Margin. .............................. 41
ARTICLE IV
TERMINATION OF LIBOR-BASED RATE AND YIELD PROTECTION
SECTION 4.1 Suspension of Loans.......................................... 42
SECTION 4.2 Compensation................................................. 43
SECTION 4.3 Taxes........................................................ 43
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Organization, Powers, Existence, etc......................... 46
SECTION 5.2 Authorization of Borrowing, etc.............................. 46
SECTION 5.3 Liabilities.................................................. 46
SECTION 5.4 Taxes........................................................ 47
SECTION 5.5 Litigation................................................... 47
SECTION 5.6 Agreements................................................... 47
SECTION 5.7 Use of Proceeds.............................................. 47
SECTION 5.8 ERISA Requirement............................................ 47
SECTION 5.9 Subsidiaries................................................. 47
SECTION 5.10 Principal Place of Business.................................. 48
SECTION 5.11 Environmental Laws........................................... 48
SECTION 5.12 Disclosure................................................... 48
SECTION 5.13 Licenses..................................................... 48
SECTION 5.14 Title to Properties.......................................... 48
<PAGE>
ARTICLE VI
GENERAL CONDITIONS OF LENDING
SECTION 6.1 Representations and Warranties............................... 50
SECTION 6.2 No Default................................................... 50
SECTION 6.3 Supporting Documents......................................... 50
ARTICLE VII
GENERAL COVENANTS OF THE BORROWER
SECTION 7.1 Existence, Properties, etc................................... 52
SECTION 7.2 Payment of Indebtedness, Taxes, etc.......................... 52
SECTION 7.3 Financial Statements, Reports, etc........................... 52
SECTION 7.4 Litigation Notice............................................ 54
SECTION 7.5 Default Notice............................................... 55
SECTION 7.6 Further Assurances........................................... 55
SECTION 7.7 Insurance.................................................... 55
SECTION 7.8 Covenants Regarding Financial Condition...................... 55
SECTION 7.9 Continuation of Current Business............................. 61
SECTION 7.10 Management Contracts......................................... 61
SECTION 7.11 Cooperation; Inspection of Properties........................ 61
SECTION 7.12 Use of Proceeds.............................................. 61
SECTION 7.13 Limit on Investment in HEALTHSOUTH of
Birmingham, Inc.............................................. 62
SECTION 7.14 Additional Consolidated Entities............................. 62
SECTION 7.15 ERISA. ..................................................... 62
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.1 Events of Default............................................ 64
SECTION 8.2 Agent to Act................................................. 67
SECTION 8.3 Cumulative Rights............................................ 67
SECTION 8.4 No Waiver.................................................... 67
SECTION 8.5 Default...................................................... 67
SECTION 8.6 Allocation of Proceeds....................................... 68
ARTICLE IX
THE AGENT
SECTION 9.1 Appointment.................................................. 69
SECTION 9.2 Attorneys-in-fact............................................ 69
SECTION 9.3 Limitation on Liability...................................... 69
SECTION 9.4 Reliance..................................................... 69
SECTION 9.5 Notice of Default............................................ 70
SECTION 9.6 No Representations........................................... 70
SECTION 9.7 Indemnification.............................................. 71
SECTION 9.8 Lender....................................................... 71
SECTION 9.9 Resignation.................................................. 71
SECTION 9.10 Sharing of Payments, etc..................................... 72
SECTION 9.11 Fees......................................................... 72
SECTION 9.12 Independent Agreements....................................... 72
<PAGE>
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Assignments and Participations.............................. 73
SECTION 10.2 Notices..................................................... 75
SECTION 10.3 No Waiver................................................... 76
SECTION 10.4 Setoff...................................................... 76
SECTION 10.5 Survival.................................................... 76
SECTION 10.6 Expenses.................................................... 77
SECTION 10.7 Amendments.................................................. 78
SECTION 10.8 Counterparts................................................ 78
SECTION 10.9 Waivers by Borrower......................................... 79
SECTION 10.10 Termination................................................. 79
SECTION 10.11 Governing Law............................................... 80
SECTION 10.12 Indemnification............................................. 80
SECTION 10.13 Agreement Controls.......................................... 81
SECTION 10.14 Integration................................................. 81
SECTION 10.15 Successors and Assigns...................................... 81
SECTION 10.16 Severability................................................ 81
Exhibit A - Applicable Commitment Percentage
Exhibit B - Form of Assignment and Acceptance
Exhibit C-1 - Form of Partnership Guaranty Agreement
Exhibit C-2 - Form of Subsidiary Guaranty Agreement
Exhibit D - Form of Request for Advance or Interest Rate
Election
Exhibit E - Form of Competitive Bid Quote Requests
Exhibit F - Form of Competitive Bid Quote
Exhibit G - Subsidiaries and Controlled Partnerships
Exhibit H-1 - Form of Syndicated Note
Exhibit H-2 - Form of Competitive Bid Note
Exhibit H-3 - Form of Term Note
Exhibit I - Form of Compliance Certificate and Schedules
Thereto
Exhibit J - Summary of Insurance
Exhibit K - Outstanding Letters of Credit
Exhibit L - Investments or Equity Interest
Exhibit M - Subsidiaries and Controlled Partnerships
Exhibit N - Existing Liens
Exhibit O - Disposal Properties
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 7, 1994
(this "Agreement") is entered into by and among HEALTHSOUTH REHABILITATION
CORPORATION, a Delaware corporation (the "Borrower"), the Lenders as signatories
hereto (the "Lenders") and NATIONSBANK OF NORTH CAROLINA, NATIONAL ASSOCIATION,
a national banking association (the "Agent").
RECITAL:
Pursuant to a Credit Agreement dated as of November 20, 1992 as amended
by Amendments No. 1 and No. 2 (the "Prior Agreement"), the lenders party thereto
(the "Prior Lenders") have agreed to make loans and cause to be issued letters
of credit all in an aggregate outstanding amount of not to exceed $390,000,000.
Pursuant to the terms of the Prior Agreement all Participating Subsidiaries and
Participating Partnerships (each defined in the Prior Agreement) have guaranteed
payment of all Credit Obligations (as defined in the Prior Agreement). In
addition, the Borrower, and certain of the Participating Subsidiaries have
executed and delivered to the Agent, for the benefit of the Lenders, Pledge
Agreements conveying the property described therein as security for the Credit
Obligations. The Borrower has requested that the Prior Agreement be amended and
restated in its entirety in order to increase the amount of the credit facility,
to change certain of the provisions contained therein and to increase the number
of lenders participating therein. Accordingly, the Borrower, the Lenders and the
Agent agree that the Prior Agreement is hereby amended and restated in its
entirety as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 For the purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
All accounting terms not otherwise defined herein have the
meanings assigned to them, and all computations herein provided for
shall be made, in accordance with generally accepted accounting
principles applied on a consistent basis. All references herein to
"GAAP" refer to such principles as they exist at the date of
application thereof.
All references in this instrument to designated "Articles",
"Sections" and other subdivisions are to the designated Articles,
Sections and subdivisions of this instrument as originally executed.
The terms "herein", "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
<PAGE>
The terms "include," "including" and similar terms shall be
construed as if followed by the phrase "without being limited to."
All Article and Section captions herein are used for
reference only and in no way limit or describe the scope or intent of,
or in any way affect, this Agreement.
Words importing the singular number shall mean and include
the plural number and visa versa.
All recitals set forth in this Agreement are hereby
incorporated in the operative provisions of this Agreement.
No inference in favor of or against either party shall be
drawn from the fact that such party or its counsel has drafted any
portion hereof.
The term "person" shall include individual, corporation,
partnership, joint venture, association, trust, unincorporated
organization and any government or any agency or political subdivision
thereof.
Absolute Rate shall have the meaning assigned to such term
in Section 2.3(c)(ii)(D) hereof.
Absolute Rate Auction shall mean a solicitation of
Competitive Bid Quotes setting forth Absolute Rates pursuant
to Section 2.3 hereof.
Absolute Rate Loans shall mean the Competitive Bid Loans the
interest rates on which are determined on the basis of Absolute Rates
set at Absolute Rate Auctions.
Acquisition means the acquisition, whether with cash,
property, stock or promise to pay all or a portion of a person or a
Facility or Facilities of a person, permitted under Sections 7.8(a)(8)
and 7.8(a)(17) hereof; provided (i) such Person or Facilities is in the
same line of business engaged in by Borrower or its Consolidated
Entities, (ii) the person or Facility to be acquired does not oppose
the acquisition, and (iii) at the time of giving effect to such
Acquisition such person or Facility is a Consolidated Entity.
Actual/360 Basis shall mean a method of computing interest
or other charges hereunder on the basis of an assumed year of 360 days
for actual number of days elapsed, meaning that interest or other
charges accrued for each day will be computed by multiplying the rate
applicable on that day by the unpaid principal balance (or other
relevant sum) on that day and dividing the result by 360.
Advance means a borrowing under the Revolving Facility
consisting of the aggregate principal amount of a Syndicated Loan or a
Competitive Bid Loan.
<PAGE>
Affiliate of any specified person shall mean any other
person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified person. For
purposes of this definition "control" when used with respect to any
specified person means the power to direct the management and 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 to the
foregoing.
Applicable Commitment Percentage means, for each Lender, a
fraction, the numerator of which shall be the then amount of such
Lender's Commitment and the denominator of which shall be the Revolving
Facility, which Applicable Commitment Percentage for each Lender as of
the Closing Date is as set forth in Exhibit A attached hereto and
incorporated herein by reference; provided that the Applicable
Commitment Percentage of each Lender shall be increased or decreased to
reflect any assignments to or by such Lender effected in accordance
with Section 10.1 hereof.
Applicable Lending Office shall mean, for each Lender and
for each Type of Loan, the "Lending Office" of such Lender (or of an
Affiliate of such Lender) designated for such Type of Loan on the
signature pages hereof or such other office of such Lender (or of an
Affiliate of such Lender) as such Lender may from time to time specify
to the Agent and the Borrower as the office by which its Loans of such
Type are to be made and maintained.
Application shall mean the Application and Agreement for
Letter of Credit pursuant to which the Borrower may apply for the
issuance of a Letter of Credit by NationsBank as provided in Section
2.13 hereof.
Asset Sale for any person means the sale, lease conveyance
or other disposition (including, without limitation, by merger or
consolidation, and whether by operation of law or otherwise) of any of
that person's assets (including, without limitation, the sale or other
disposition of Capital Stock of any Subsidiary of such person, whether
by such person or by such Subsidiary), whether owned on the date of
initial issuance of the Senior Subordinated Notes or subsequently
acquired, in one transaction or a series of related transactions, in
which such person and or its Subsidiaries sell, lease, convey or
otherwise dispose of (i) all or substantially all of the Capital Stock
of any of such person's Subsidiaries, (ii) assets which constitute
substantially all of an operating unit or business of such person or
any of its Subsidiaries, or (iii) any health care facility; provided,
however, that the following shall not constitute Asset Sales: (i) a
transaction or series of related transactions that results in a Change
of Control (as such term is defined in the Indenture dated March 24,
1994 relating to the Senior Subordinated Notes), and (ii) transactions
between the Borrower and any of its Wholly Owned Subsidiaries (as such
term is defined in the Indenture dated March 24, 1994 relating to the
Senior Subordinated Notes) or among such Wholly Owned Subsidiaries.
<PAGE>
Assignment and Acceptance shall mean an Assignment and
Acceptance in the form of Exhibit B (with blanks appropriately filled
in) delivered in connection with an assignment of a portion of the
Lender's interest under this Agreement pursuant to Section 10.1.
Attributable Indebtedness when used with respect to any Sale
and Leaseback Transaction or an operating lease with respect to a
healthcare facility means, as at the time of determination, the present
value (discounted at a rate equivalent to the interest rate implicit in
the lease, compounded on a semiannual basis) of the total obligations
of the lessee for rental payments, after excluding all amounts required
to be paid on account of maintenance and repairs, insurance, taxes,
utilities and other similar expenses payable by the lessee pursuant to
the terms of the lease, during the remaining term of the lease included
in any such Sale and Leaseback Transaction or such operating lease or
until the earliest date on which the lessee may terminate such lease
without penalty or upon payment of a penalty (in which case the rental
payments shall include such penalty); provided, that the Attributable
Indebtedness with respect to a Sale and Leaseback Transaction shall be
no less than the fair market value of the property subject to such Sale
and Leaseback Transaction.
Base Rate shall mean the higher of the (i) Prime Rate or
(ii) the Federal Funds Effective Rate plus 1/2% per annum.
Base Rate Loans shall mean Syndicated Loans that bear
interest at rates based upon the Base Rate.
Business Day shall mean (a) any day on which commercial
banks are not authorized or required to close in Charlotte, North
Carolina and New York City and (b) if such day relates to the giving of
notices or quotes in connection with a LIBOR Auction or to a borrowing
of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or an Interest Period for, a LIBOR Loan or a
LIBOR Market Loan or a notice by the Borrower with respect to any such
borrowing, payment, prepayment, Conversion or Interest Period, any day
on which dealings in Dollar deposits are carried out in the London
interbank market.
Capital Expenditure shall mean any expenditure or liability
that is properly charged to a capital account or otherwise capitalized
on the consolidated balance sheet in accordance with GAAP.
Capital Stock of any person means any and all shares, rights
to purchase, warrants or options (whether or not currently
exercisable); participation or other equivalents of or interest in
(however designated) the equity (including without limitation common
stock, preferred stock and partnership and joint venture interests) of
such Person (excluding any debt securities that are convertible into,
or exchangeable for, such equity).
<PAGE>
Capitalized Lease Obligations of any person means the
obligation of such person to pay rent or other amounts under a lease
that is required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
Cash Available for Capital Expenditures means the sum of (i)
Consolidated Net Income, (ii) Consolidated Depreciation Expense and
(iii) Consolidated Amortization Expense minus Consolidated Current
Maturities.
Class shall have the meaning assigned to such term in
Section 1.2 hereof.
Closing Date shall mean the date of this Agreement.
Collateral shall mean all property covered by the Pledge
Agreements or that otherwise at any time secures any of the Credit
Obligations.
Commitment shall mean, as to each Lender, the obligation of
such Lender to make Syndicated Loans pursuant to Section 2.1 hereof in
an aggregate amount at any one time outstanding up to but not exceeding
the amount set opposite such Lender's name on the signature pages
hereof under the caption "Commitment" (as the same may be reduced at
any time or from time to time pursuant to Section 2.10 hereof);
provided that the Commitment of each Lender shall be increased or
decreased to reflect any assignments to or by such Lender effected in
accordance with Section 10.1 hereof.
Competitive Bid Borrowing shall have the meaning assigned to
such term in Section 2.3(b) hereof.
Competitive Bid Loans shall mean the Loans provided for by
Section 2.3 hereof.
Competitive Bid Notes shall mean the promissory notes
provided for by Section 2.9(b) hereof and all promissory notes
delivered in substitution or exchange therefor, in each case as the
same shall be modified and supplemented and in effect from time to
time.
Competitive Bid Quote shall mean an offer in accordance with
Section 2.3(c) hereof by a Lender to make a Competitive Bid Loan with
one single specified interest rate.
<PAGE>
Competitive Bid Quote Request shall have the meaning
assigned to such term in Section 2.3(b) hereof.
Compliance Certificate shall have the meaning attributed to
that term in Section 7.3(3) below.
Consolidated Adjusted Interest Expense means Consolidated
Interest Expense plus (to the extent not otherwise included within the
definition of Interest Expense as imputed interest) one-third of the
rental expense on Attributable Indebtedness of the Borrower and its
Consolidated Entities for such period determined on a consolidated
basis.
Consolidated Amortization Expense of the Borrower for any
period means the amortization expense of the Borrower and its
Consolidated Entities for such period (to the extent included in the
computation of Consolidated Net Income), determined on a consolidated
basis in accordance with GAAP.
Consolidated Cash Flow means, for Borrower and its
Consolidated Entities for any Four-Quarter Period, Consolidated Net
Income, plus amounts that have been deducted in determining
Consolidated Net Income for such period for (i) Consolidated Income Tax
Expense, (ii) Consolidated Interest Expense, (iii) Consolidated
Depreciation Expense, (iv) Consolidated Amortization Expense and (v)
the minority interests of any person or persons in Consolidated
Entities.
Consolidated Current Assets means cash and all other assets
or resources of the Borrower and its Consolidated Entities which are
expected to be realized in cash, sold in the ordinary course of
business, or consumed within one year, determined on a consolidated
basis in accordance with GAAP.
Consolidated Current Liabilities means the amount of all
liabilities of the Borrower and its Consolidated Entities which by
their terms are payable within one year (including all Indebtedness
payable on demand or maturing not more than one year from the date of
computation) and the current portion of Indebtedness having a maturity
date in excess of one year, determined on a consolidated basis in
accordance with GAAP.
Consolidated Current Maturities means Principal Maturities
of the Borrower and its Consolidated Entities.
Consolidated Depreciation Expense of the Borrower means the
depreciation expense of the Borrower and its Consolidated Entities for
such period (to the extent included in the computation of Consolidated
Net Income of the Borrower), determined on a consolidated basis in
accordance with GAAP.
Consolidated EBITDA of the Borrower means, with respect to
any Four-Quarter Period, Consolidated Net Income before extraordinary
losses and losses realized in connection with sale of assets, plus (i)
Consolidated Income Tax Expense, plus (ii) Consolidated Depreciation
Expense, plus (iii) Consolidated Amortization Expense, plus (iv)
Consolidated Adjusted Interest Expense, plus (v) all other non-cash
items reducing Consolidated Net Income of the Borrower and its
Consolidated Entities, determined on a consolidated basis in accordance
with GAAP, plus (vi) without duplication, for calculation of an EBITDA
Coverage Ratio for periods ending on or before December 31, 1994 the
sum of $31,500,000 (representing expenses related to the Borrower's
acquisition of certain rehabilitation facilities and related assets
from National Medical Enterprises, Inc. effective December 31, 1993,
net of Federal income tax effect), plus (vii) without duplication, any
amount, net of Federal income tax effects, representing expenses
relating to an Acquisition, up to a maximum of 10% of the purchase
price thereof, determined on a consolidated basis in accordance with
GAAP, and less all non-cash items increasing Consolidated Net Income,
determined on a consolidated basis in accordance with GAAP.
<PAGE>
Consolidated Entity shall mean any person whose financial
statements are appropriately consolidated with the Borrower's financial
statements under GAAP.
Consolidated Income Tax Expense of the Borrower for any
period means the provision for taxes based on income and profits of the
Borrower and its Consolidated Entities to the extent such income or
profits were included in computing Consolidated Net Income for such
period.
Consolidated Interest Expense of the Borrower for any period
means the Interest Expense of the Borrower and its Consolidated
Entities for such period, determined on a consolidated basis in
accordance with GAAP.
Consolidated Lease Expense means for any period all Lease
Payments paid or accrued during such period under operating leases
(whether or not constituting rental expense) by the Borrower and its
Consolidated Entities determined on a consolidated basis in accordance
with GAAP.
<PAGE>
Consolidated Net Income of the Borrower for any period means
the net income (or loss) of the Borrower and its Consolidated Entities
for such period determined on a consolidated basis in accordance with
GAAP, without giving effect to dividends on any series of preferred
stock of any Consolidated Entity, whether or not in cash, to the extent
such consolidated net income was reduced thereby; provided that there
shall be excluded from such net income (for all purposes, other than
compliance with Section 7.8(a)(1)(A), to the extent otherwise included
therein), without duplication; (i) the net income of any person (other
than a Consolidated Entity) to the extent that any such income has not
actually been received by the Borrower or a Consolidated Entity in the
form of dividends or similar distributions during such period; (ii)
except to the extent includable in the consolidated net income of the
Borrower or a Consolidated Entity pursuant to the foregoing clause (i),
the net income of any person that accrued prior to the date that (a)
such Person becomes a Consolidated Entity or is merged into or
consolidated with a Consolidated Entity or (b) the assets of such
person are acquired by the Borrower or a Consolidated Entity; (iii) the
net income of any Consolidated Entity to the extent that the
declaration or payment of dividends or similar distributions by such
Subsidiary of that income is not permitted by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary
during such period; (iv) any gain (or loss), together with any related
provisions for taxes on any such gain, realized during such period by
the Borrower or its Consolidated Entities upon (a) the acquisition of
any securities, or the extinguishment of any Indebtedness, of the
Borrower or its Consolidated Entities or (b) any asset sale by the
referent person or any of its Subsidiaries; (v) any extraordinary gain
(or extraordinary loss), together with any related provision for taxes
or tax benefit resulting from any such extraordinary gain or loss,
realized by the Borrower or its Consolidated Entities during such
period; and (vi) in the case of a successor to such person by
consolidation, merger or transfer of its assets, any earnings of the
successor prior to such merger, consolidation or transfer of assets.
Consolidated Net Worth of the Borrower as of any date means
the Consolidated Stockholders' Equity (including any preferred stock
that is classified as equity under GAAP, other than Disqualified Stock)
of such person and its Subsidiaries (excluding any equity adjustment
for foreign currency translation for any period subsequent to the
Closing Date on a consolidated basis at such date, as determined in
accordance with GAAP, less all write-ups subsequent to the Closing Date
in the book value of any asset owned by such Borrower or any of its
Consolidated Entities; provided, however, that in calculating the
Consolidated Net Worth of the Borrower immediately prior to an
Acquisition by the Borrower of another person, there shall be
subtracted from the Borrower's Consolidated Net Worth immediately prior
to such Acquisition the lesser of (a) such amount, net of Federal
income tax effects, as represents expenses relating to such
Acquisition, or (b) 10% of the purchase price or fair market value of
the consideration paid by the Borrower in connection with such
Acquisition.
Consolidated Stockholders' Equity shall mean at any time as
at which the amount thereof is to be determined, the sum of the
following amounts in respect of the Borrower and the Consolidated
Entities (i) the par or stated value of all Capital Stock of the
Borrower, (ii) retained earnings, (iii) additional paid in capital,
(iv) capital surplus and (v) earned surplus minus treasury stock.
<PAGE>
Consolidated Total Capital shall mean the sum of (i)
Consolidated Stockholders' Equity and (ii) Indebtedness of the Borrower
and its Consolidated Entities.
Controlled Partnership shall mean a general partnership of
which the Borrower or a Subsidiary is a general partner (but not
including Alabama World Football), or a limited partnership whose
general partners include the Borrower or a Subsidiary (but not
including Vanderbilt), which partnership, whether general or limited,
has assets with a value in excess of $2,000.00, and with respect to
which partnership the Borrower or a Subsidiary is entitled to receive
not less than 50% of any distributions of cash made to the partners
thereof, other than any preferred cash distribution arrangement
approved by the Required Lenders in writing.
Convert, Conversion and Converted shall refer to a
conversion pursuant to Section 3.2 hereof of one Type of Syndicated
Loan into another Type of Syndicated Loan, which may be accompanied by
the transfer by a Lender (at its sole discretion) of a Loan from one
Applicable Lending Office to another.
Conversion Date means June 1, 1997, the date the Revolving
Facility shall convert to a Term Loan pursuant to Section 2.4 hereof.
Convertible Subordinated Debentures means the 5% Convertible
Subordinated Debentures due 2001 of the Borrower dated as of March 24,
1994 in the aggregate original principal amount of $115,000,000.
Credit Obligations shall mean the Revolving Facility
Obligations, the Letter of Credit Obligations, the Term Loan and all
other obligations and debts owing to the Lenders, and arising under the
terms of this Agreement, the Notes, the Applications and the other Loan
Documents, whether now or hereafter incurred, existing or arising,
including the principal amount of all Advances, all Letter of Credit
Borrowings, Reimbursement Obligations and the Term Loan with respect
thereto, any sums expended by the Agent or the Lenders in exercising
the rights and remedies described in Section 8.1, all accrued interest
on Advances, Letter of Credit Reimbursement Obligations and the Term
Loan, and all costs, fees, charges and expenses incurred and payable in
connection therewith, including fees payable under the terms of, or in
connection with, this Agreement, and all other obligations and debts
owing to the Agent or the Lenders arising in connection with, ancillary
to, or in support of Advances, Letter of Credit Borrowings and the Term
Loan, and all extensions, alterations, modifications, revisions and
renewals of any of the foregoing.
Debt Service Coverage Ratio with respect to any FourQuarter
Period means the ratio of (A) Consolidated Net Income plus amounts that
have been deducted in determining Consolidated Net Income for such
period for (i) Consolidated Depreciation Expense, (ii) Consolidated
Interest Expense, (iii) Consolidated Amortization Expense, (iv)
Consolidated Lease Expense, and (v) the minority interests of any
person or persons to (B) the sum of (i) Consolidated Interest Expense,
(ii) Consolidated Lease Expense and (iii) Consolidated Current
Maturities.
<PAGE>
Default shall mean an Event of Default or an event that with
notice or lapse of time or both would become an Event of Default.
Disqualified Stock means any Capital Stock 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,
matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder
thereof, in whole or in part, on or prior to the Maturity Date.
Dollars and the symbol $ shall mean dollars constituting
legal tender for the payment of public and private debts in the United
States of America.
EBITDA Coverage Ratio with respect to any period means the
ratio of (i) Consolidated EBITDA to (ii) the aggregate amount of
Consolidated Adjusted Interest Expense for such period; provided,
however, that if any calculation of the EBITDA Coverage Ratio requires
the use of any quarter prior to the date of initial issuance of the
Senior Subordinated Notes, such calculation shall be made on a pro
forma basis, giving effect to the issuance of the Senior Subordinated
Notes and the use of the net proceeds therefrom as if the same had
occurred at the beginning of the Four-Quarter Period used to make such
calculation; and provided further that if any such calculation requires
the use of any quarter prior to the date that any Asset Sale was
consummated, or that any Indebtedness was incurred, or that any
acquisition of a hospital or other healthcare facility or any assets
purchased outside the ordinary course of business was effected, by the
Borrower or any of its Subsidiaries, such calculation shall be made on
a pro forma basis, giving effect to each such Asset Sale, incurrence of
Indebtedness or acquisition, as the case may be, and the use of any
proceeds therefrom, as if the same had occurred at the beginning of the
Four-Quarter Period used to make such calculation.
ERISA shall mean the Employee Retirement Income Security Act
of 1974, as amended.
Event of Default shall have the meaning assigned to such
term in Article VIII hereof.
Facility shall mean an in-patient or out-patient
rehabilitation facility, a certified out-patient rehabilitation
facility, skilled nursing facility, specialty medical center, specialty
orthopedic hospital or acute care hospital, sub-acute in-patient
facility, transitional living center, medical office building,
outpatient surgery center and outpatient diagnostic center with all
buildings and improvements associated therewith, that is owned or
leased, in whole or part, by the Borrower or a Subsidiary or any
partnership controlled directly or indirectly by the Borrower.
<PAGE>
Federal Funds Effective Rate shall mean, for any day, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of
1%) equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day,
provided that (a) if the day for which such rate is to be determined is
not a Business Day, the Federal Funds Effective Rate for such day shall
be such rate on such transactions on the next preceding Business Day as
so published for any Business Day, and (b) if such rate is not so
published for any Business Day, the Federal Funds Effective Rate for
such Business Day shall be the average rate charged to the Agent on
such Business Day on such transactions as determined by the Agent.
Fiscal Year means the twelve month period of the Borrower
commencing on January 1 of each calendar year and ending December 31 of
each calendar year.
Fixed Rate shall mean the Absolute Rate or the LIBORBased
Rate.
Fixed Rate Segment shall mean a Segment to which a Fixed
Rate is (or is proposed to be) applicable.
Four-Quarter Period means a period of four full consecutive
fiscal quarter periods, taken together as one accounting period;
provided, however, for purposes of Sections 7.8(a)(5), 7.8(a)(6) and
7.8(a)(7) the results of operations for the three, six and nine month
periods of the Fiscal Year ending December 31, 1994 shall be
annualized.
GAAP means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards
Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the
United States, as from time to time in effect.
Governmental Authority shall mean any federal, state, county
or municipal agency, authority, department, commission, bureau, board
or court.
Governmental Requirements shall mean all laws, rules,
regulations, requirements, ordinances, judgments, decrees, codes and
orders of any Governmental Authority applicable to the Borrower, any
Consolidated Entity or any Facility.
<PAGE>
Guaranteed Obligations of any person shall mean all
guaranties (including guaranties of guaranties and guaranties of
dividends and other monetary obligations), endorsement, assumptions and
other contingent obligations with respect to, or to purchase or to
otherwise pay or acquire, Indebtedness of others; provided, however,
that such term shall not include obligations under leases and other
contracts initially incurred directly by another person and
subsequently directly assumed by the person in question, but such term
shall include obligations that, if the same had been initially incurred
directly by the person in question, would have constituted Guaranteed
Obligations.
Guaranty Agreements shall have the meaning attributed to
that term in Section 2.6(a).
Hedging Obligations of any person means the obligations of
such person pursuant to any interest rate swap agreement, foreign
currency exchange agreement, interest rate collar agreement, option or
futures contract or other similar agreement or arrangement relating to
interest rates or foreign exchange rates.
Indebtedness of any person at any date means, without
duplication: (i) all indebtedness of such person for borrowed money
(whether or not the recourse of the lender is to the whole of the
assets of such person or only to a portion thereof); (ii) all
obligations of such person evidenced by bonds, debentures, notes or
other similar instruments; (iii) all obligations of such person in
respect of letters of credit or other similar instruments (or
reimbursement obligations with respect thereto); (iv) all obligations
of such person with respect to Hedging Obligations (other than those
that fix the interest rate on variable rate indebtedness otherwise
permitted hereunder or that protect the Borrower and or its
Consolidated Entities against changes in foreign exchange rates); (v)
obligations of such person to pay the deferred and unpaid purchase
price of property or services, except trade payables and accrued
expenses incurred in the ordinary course of business; (vi) all
Capitalized Lease Obligations of such person; (vii) all indebtedness of
others secured by a Lien on any assets of such person, whether or not
such indebtedness is assumed by such person; and (viii) all Guaranteed
Obligations. The amount of Indebtedness of any person at any date shall
be the outstanding balance at such date of all unconditional
obligations as described above, the maximum liability of such person
for any such contingent obligations at such date and, in the case of
clause (vii), the amount of the Indebtedness secured.
Interest Expense of any person for any period means the
aggregate amount of interest which, in accordance with GAAP, would be
set opposite the caption "interest expense" or any like caption on an
income statement for such person (including, without limitation or
duplication, imputed interest included in Capitalized Lease
Obligations, all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing,
the net costs associated with Hedging Obligations, amortization of
financing fees and expenses, the interest portion of any deferred
payment obligation, amortization of discount and all other non-cash
interest expense other than interest amortized to cost of sales) plus
the aggregate amount, if any, by which such interest expense was
reduced as a result of the amortization of deferred debt restructuring
credits for such period.
<PAGE>
Interest Period shall mean:
(a) with respect to any LIBOR Loan, each period commencing
on the date such LIBOR Loan is made or Converted from a Loan of another
Type or the last day of the next preceding Interest Period for such
Loan and ending on the numerically corresponding day in the first,
second or third calendar month thereafter, as the Borrower may select
as provided in Section 3.2 hereof, except that each Interest Period
that commences on the last Business Day of a calendar month (or on any
day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business
Day of the appropriate subsequent calendar month;
(b) with respect to any Absolute Rate Loan, the period
commencing on the date such Absolute Rate Loan is made and ending on
any Business Day up to 180 days thereafter, as the Borrower may select
as provided in Section 2.3(b) hereof; and
(c) with respect to any LIBOR Market Loan, the period
commencing on the date such LIBOR Market Loan is made and ending on the
numerically corresponding day in the first, second, third or sixth
calendar month thereafter, as the Borrower may select as provided in
Section 2.3(b) hereof, except that each Interest Period that commences
on the last Business Day of a calendar month (or any day for which
there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month.
Notwithstanding the foregoing: (i) if any Interest Period for any
Competitive Bid Loan would otherwise end after the Conversion Date,
such Interest Period shall end on the Conversion Date; (ii) if any
Interest Period for any LIBOR Loan would otherwise end after the
Maturity Date, such Interest Period shall end on the Maturity Date;
(iii) each Interest Period that would otherwise end on a day which is
not a Business Day shall end on the next succeeding Business Day (or,
in the case of an Interest Period for a LIBOR Loan or a LIBOR Market
Loan, if such next succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day); and (iv)
notwithstanding clauses (i), (ii) and (iii) above, no Interest Period
for any Loan (other than an Absolute Rate Loan) shall have a duration
of less than one month (in the case of a LIBOR Loan or a LIBOR Market
Loan) and, if the Interest Period for any LIBOR Loan or LIBOR Market
Loan would otherwise be a shorter period, such Loan shall not be
available hereunder for such period.
<PAGE>
LC Account Agreement shall mean the LC Account Agreement
dated as of the date hereof between the Borrower and the Agent, as
amended or modified from time to time.
Lease Payments shall mean all amounts payable under any
lease agreement other than obligations under lease agreements that
constitute Indebtedness.
Letter of Credit Borrowings shall mean as of any date the
maximum aggregate amount that the Agent could be required to pay under
drafts that could properly be drawn in compliance with the terms of all
Letters of Credit outstanding on such date, other than drafts that have
been drawn and paid.
Letter of Credit Commitment shall mean an amount not to
exceed $40,000,000.
Letter of Credit Obligations shall mean (a) the Letter of
Credit Borrowings and (b) the Reimbursement Obligations and other
obligations under this Agreement and the Applications with respect to
drawings made on Letters of Credit, including obligations with respect
to all principal, interest, fees and other charges related thereto.
Letters of Credit shall mean and include all letters of
credit heretofore or hereafter issued by NationsBank for the account of
the Borrower pursuant to this Agreement.
Liabilities of any person shall mean obligations that are
properly classified as liabilities under GAAP.
LIBOR Auction shall mean a solicitation of Competitive Bid
Quotes setting forth LIBOR Margins based on the LIBORBased Rate
pursuant to Section 2.3 hereof.
LIBOR-Based Rate shall mean the rate of interest determined
by the Agent at approximately 11:00 A.M. London time two (2) Business
Days prior to the commencement of the Interest Period, based upon such
factors as the Agent deems relevant, as the Agent's best estimate of
the cost of funds available to the Agent from the purchase on the
London interbank market of funds in the form of time deposits in
Dollars in the approximate amount of the Segment that is to bear
interest at the LIBOR-Based Rate, having a maturity comparable to the
Interest Period during which the LIBOR-Based Rate is to be in effect,
it being expressly understood that (i) the Agent may not actually
purchase any such time deposits and obtain such funds (ii) the
LIBOR-Based Rate will be an estimate, and for a variety of reasons,
including changing market conditions, the actual cost of funds to the
Agent (if the Agent elects to purchase funds in the form of time
deposits on such date) might vary from the Agent's estimate.
<PAGE>
LIBOR Loans shall mean Syndicated Loans interest rates on
which are determined on the basis of LIBOR-Based Rates plus the
Syndicated Margin.
LIBOR Margin shall have the meaning assigned to such term in
Section 2.3(c)(ii)(C) hereof.
LIBOR Market Loans shall mean Competitive Bid Loans interest
rates on which are determined on the basis of LIBORBased Rates pursuant
to a LIBOR Auction.
LIBOR Reserve Requirement shall mean the percentage
(expressed as a decimal) prescribed by the Board of Governors of the
Federal Reserve System (or any successor), on the date on which the
LIBOR-Based Rate is determined, for determining the reserve
requirements of the Agent (including any marginal, emergency,
supplemental, special or other reserves) with respect to liabilities
relating to time deposits purchased in the London interbank market
having a maturity equal to the period during which the LIBOR-Based Rate
will be in effect and in an amount equal to the Segment involved,
without any benefit or credit for any proration, exemptions or offsets
under any now or hereafter applicable regulations.
Lien shall mean any mortgage, pledge, assignment, charge,
encumbrance, lien, security interest or financing lease.
Loan Documents shall mean this Agreement, the Notes, the
Applications, the Subsidiary Guaranty Agreements and amendments
thereto, the Partnership Guaranty Agreements and amendments thereto,
the Pledge Agreements, the LC Account Agreement and all other
agreements, instruments and documents executed or delivered at any time
in connection with the Credit Obligations, or to evidence or secure any
of the Credit Obligations.
Loans shall mean the Syndicated Loans, Competitive Bid
Loans, Term Loans, Letter of Credit Borrowings and Reimbursement
Obligations and all extensions and renewals thereof.
Margin Stock shall have the meaning attributed to that term
in Regulation U of the Federal Reserve Board, as amended.
Material Group shall mean, at any time, any group, whether
one or more, or combination of Consolidated Entities (a) whose assets,
in the aggregate, constitute 5% or more of the assets of the Borrower
and the Consolidated Entities on a consolidated basis or (b) whose net
revenues, in the aggregate, constitute 5% or more of the net revenues
of the Borrower and the Consolidated Entities on a consolidated basis.
<PAGE>
Maturity Date means November 30, 2000.
Multi-employer Plan means an employee pension benefit plan
covered by Title IV of ERISA and in respect of which the Borrower or
any Consolidated Entity is an "employer" as described in Section
4001(b) of ERISA, which is also a multi-employer plan as defined in
Section 4001(a)(3) of ERISA;
NationsBank means NationsBank of North Carolina, National
Association, as a Lender and as issuer of the Letters of Credit
pursuant to Section 2.13 hereof and any successor thereof.
Notes shall mean the Syndicated Notes, the Competitive Bid
Notes and the Term Notes.
Opinion of Counsel shall mean a favorable written opinion of
an attorney or firm of attorneys duly licensed to practice law in the
jurisdiction the laws of which are applicable to the legal matters in
question and who is not an employee of the Borrower or of an Affiliate
of the Borrower.
Partnership Liability shall mean, with respect to a
Participating Partnership, that part, if any, of an Advance (together
with interest thereon and fees, prepayment premiums and other charges
properly attributable thereto) that is to be received by and used by or
for the benefit of such Participating Partnership, as certified to the
Agent by the Borrower, under Section 2.6, in connection with the
Borrowers' request for such Advance, and Partnership Liabilities shall
mean the aggregate amount of all such parts of Advances that are to be
received by and used by or for the benefit of such Participating
Partnership.
Partnership Guaranty Agreement shall mean a guaranty
agreement of a Participating Partnership in the form attached hereto
and marked Exhibit C-1, as amended and supplemented from time to time.
Participating Partnership shall mean a Controlled
Partnership that has executed and delivered to the Agent a Partnership
Guaranty Agreement and all other documents necessary to assume joint
and several liability as to the Credit Obligations to the extent of its
Partnership Liabilities.
Participating Subsidiary shall mean a Subsidiary that has
executed and delivered to the Agent a Subsidiary Guaranty Agreement and
all other documents necessary to assume joint and several liability as
to the Credit Obligations (in the maximum amount provided for in such
Subsidiary Guaranty Agreement).
Participation shall mean, with respect to any Lender (other
than NationsBank), the extension of credit represented by the
participation of such Lender hereunder in the liability of NationsBank
in respect of a Letter of Credit issued by NationsBank in accordance
with the terms hereof.
<PAGE>
Permitted Encumbrances shall mean:
(1) taxes, assessments and other governmental charges that
are not delinquent or that are being contested in good faith
by appropriate proceedings duly pursued;
(2) mechanics', materialmen's, contractor's, landlord's or
other similar liens arising in the ordinary course of
business, securing obligations that are not delinquent or
that are being contested in good faith by appropriate
proceedings duly pursued;
(3) restrictions, exception, reservations, easements,
conditions, limitations and other matters of record other
than Liens that do not adversely affect the value or utility
of the property;
(4) Liens on equipment used in a Facility (a) that secure
Indebtedness that already existed when such equipment was
purchased or acquired, or (b) that were created to secure
loans, the proceeds of which were used in their entirety to
pay the purchase price of such equipment, provided that such
Liens attach only to the equipment so purchased;
(5) Liens in favor of the Agent for the benefit of the
Lenders under this Agreement;
(6) Liens and other matters approved in writing by the
Required Lenders; and
(7) Liens in favor of landlords, the amount secured by which
landlords' Liens, in the aggregate, would not materially
adversely affect the Borrower or a Material Group.
Permitted Investments shall mean:
(1) direct obligations of, or obligations the payment of
which is guaranteed by, the United States of America or an
interest in any trust or fund that invests solely in such
obligations or repurchase agreements, properly secured, with
respect to such obligations.
(2) direct obligations of agencies or instrumentalities of
the United States of America having a rating of A or higher
by Standard & Poor's Corporation or A2 or higher by Moody's
Investors Service, Inc.;
(3) a certificate of deposit issued by, or other
interest-bearing deposits with, a bank having its principal
place of business in the United States of America and having
equity capital of not less than $250,000,000;
<PAGE>
(4) a certificate of deposit by, or other interest-bearing
deposits with, any other bank organized under the laws of
the United States of America or any state thereof, provided
that such deposit is either (i) insured by the Federal
Deposit Insurance Corporation or (ii) properly secured by
such bank by pledging direct obligations of the United
States of America having a market value not less than the
face amount of such deposits;
(5) the capital stock of and partnership interests in, and
loans made by the Borrower to, Controlled Partnerships and
Subsidiaries;
(6) prime commercial paper maturing within 270 days of the
acquisition thereof and, at the time of acquisition, having
a rating of A-1 or higher by Standard & Poor's Corporation,
or P-1 or higher by Moody's Investors Service, Inc.;
(7) eligible banker's acceptances, repurchase agreements and
tax-exempt municipal bonds having a maturity of less than
one year, in each case having a rating, or that is the full
recourse obligation of a person whose senior debt is rated,
A or higher by Standard & Poor's Corporation or A2 or higher
by Moody's Investors Service, Inc.;
(8) loans made by the Borrower or a Consolidated Entity in
an aggregate amount of $2,000,000 or less to employees of
the Borrower or of a Consolidated Entity;
(9) loans made by the Borrower or a Controlled Partnership
in an aggregate amount of $1,000,000 or less to limited
partners (or potential limited partners) of Controlled
Partnerships for the purpose of enabling such limited
partners to acquire limited partnership interests in
Controlled Partnerships, to operate their practices or to
restructure partnership interests;
(10) loans in the amount of up to $20,000,000 made by the
Borrower to the HEALTHSOUTH Employee Stock Ownership Plan;
(11) scholarship loans made by the Borrower in an aggregate
amount not exceeding $500,000 to individuals who meet
certain eligibility requirements as established by the
Borrower from time to time;
(12) up to 100% of the outstanding shares of stock of
Caretenders Healthcorp (formerly known as Senior Services,
Inc.) provided that aggregate costs incurred to purchase
such shares shall not exceed $12,000,000;
<PAGE>
(13) other investments of less than $5,000,000 in the
aggregate expressly approved in writing by the Agent and
investments of $5,000,000 or greater expressly approved in
writing by the Required Lenders;
(14) any other investment having a rating of A or higher or
A-1 or higher by Standard & Poor's Corporation or A2 or
higher or P-1 or higher by Moody's Investors Service, Inc.;
(15) loans to health care practitioners and other persons
not to exceed in the aggregate $5,000,000; and
(16) investments in Wellmark, HEALTHSMART, MedPartners and
Austin Medical Office Building which in the aggregate do not
exceed $3,500,000.
Pledge Agreement shall have the meaning attributed to that
term in Section 2.7.
Prime Rate shall mean that rate of interest designated by
the Agent from time to time as its "prime rate", it being expressly
understood and agreed that its prime rate is merely an index rate used
by the Agent to establish lending rates and is not necessarily the
Agent's most favorable lending rate, and that changes in the Agent's
prime rate are discretionary with the Agent. Any change in the Prime
Rate shall be effective as of the date of such change.
Principal Maturities shall mean principal maturing or coming
due on Indebtedness during the next succeeding period of 12 calendar
months.
Principal Office shall mean the principal office of the
Agent located at NationsBank Corporate Center, 100 North Tryon
Street, Charlotte, North Carolina 28255.
Reimbursement Obligation shall mean at any time, the
obligation of the Borrower with respect to any Letter of Credit to
reimburse NationsBank and the Lenders to the extent of their respective
Participations (including by the receipt by NationsBank of proceeds of
Loans pursuant to Section 2.1(b) hereof) for amounts theretofore paid
by NationsBank pursuant to a drawing under such Letter of Credit.
Request for Advance or Interest Election shall have the
meaning attributed to that term in Section 2.2.
Required Lenders shall mean Lenders having at least 66- 2/3%
of the aggregate amount of the Commitments or, if the Commitments shall
have terminated, Lenders holding at least 66-2/3% of the aggregate
unpaid principal amount of the Loans, provided that if any Lender shall
have failed to fund its portion of any Syndicated Loan pursuant to
Section 2.1 and the Agent or NationsBank has made such Loan on such
Lender's behalf, NationsBank shall be deemed the holder of such portion
of such Lender's Commitment for purposes of this definition.
<PAGE>
Revolving Facility shall mean the credit facility made
available to the Borrower by the Lenders under the terms of Article II
in an aggregate amount of up to $550,000,000 as reduced by Borrower
pursuant to Section 2.10 hereof.
Revolving Facility Obligations shall mean the outstanding
principal amount of all Advances, all interest accrued thereon, all
costs, charges, fees and expenses payable in connection therewith, and
all extensions and renewals thereof.
Sale and Leaseback Transaction means, with respect to any
person, an arrangement with any bank, insurance company or other lender
or investor or to which such lender or investor is a party, providing
for the leasing by such person or any of its Subsidiaries of any
property or asset of such person or any of its Subsidiaries which has
been or is being sold or transferred by such person or such Subsidiary
to such lender or investor or to any person to whom funds have been or
are to be advanced by such lender or investor on the security of such
property or asset.
Segment shall mean a portion of the Advances (or all
thereof) with respect to which a particular interest rate is (or is
proposed to be) applicable.
Senior Indebtedness means the Credit Obligations and that
Indebtedness permitted to be incurred pursuant to Section 7.8(a)(9)(B),
(D), (E) and (F) hereof.
Senior Subordinated Notes means the 9.5% Senior Subordinated
Notes due 2001 of the Borrower in the aggregate original principal
amount of $250,000,000.
Single Employer Plan means any employee pension benefit plan
covered by Title IV of ERISA and in respect of which the Borrower or
any Consolidated Entity is an "employer" as described in Section
4001(b) of ERISA, which is not a Multiemployer Plan;
Subordinated Indebtedness means the Senior Subordinated
Notes, the Convertible Subordinated Debentures and any other
Indebtedness incurred pursuant to Section 7.8(a)(9)(G) hereof to
refinance the Senior Subordinated Notes or the Convertible Subordinated
Debentures.
Subsidiary shall mean any corporation, more than 50% of the
shares of stock of which having general voting power under ordinary
circumstances to elect the board of directors, managers or trustees of
such corporation, irrespective of whether or not at the time stock of
any other class or classes shall have or might have voting power by
reason of the happening of any contingency, which is owned or
controlled directly or indirectly by the Borrower and which has either
assets with a value exceeding $2,000 or positive annual operating
income.
<PAGE>
Subsidiary Guaranty Agreement shall mean a guaranty
agreement of a Participating Subsidiary in the form attached hereto and
marked Exhibit C-2, as amended and supplemented from time to time.
Syndicated Loans shall mean the loans provided for by
Section 2.1 or Section 2.4 hereof, which may be Base Rate Loans or
LIBOR Loans.
Syndicated Margin means that percent per annum set forth
below in the case of a LIBOR Loan, which percent shall be the
Syndicated Margin effective on the date of delivery to the Agent of a
Compliance Certificate pursuant to Section 7.3(3) for the fiscal
quarter period as at the end of which the ratio of Indebtedness of the
Borrower and its Consolidated Entities to Consolidated Cash Flow is
greater than or equal to or less than, as the case may be, the ratio
set forth opposite such Syndicated Margin:
Syndicated Margin
-----------------------------
Prior to On or After
Conversion Conversion
Ratio Date Date
------- ----------- ------------
(a) Greater than or equal to 1 5/8% 2 1/8%
5.00 to 1.00
(b) Less than 5.00 to 1.00 but 1 3/8% 1 7/8%
equal to or greater than
4.50 to 1.00
(c) Less than 4.50 to 1.00 but 1 1/8% 1 5/8%
equal to or greater than
3.75 to 1.00
(d) Less than 3.75 to 1.00 but 7/8% 1 3/8%
equal to or greater than
3.00 to 1.00
(e) Less than 3.00 to 1.00 5/8% 1 1/8%
Notwithstanding the foregoing, during the period from the Closing Date
through the date of delivery of a Compliance Certificate for the
quarter period ended September 30, 1994 the Syndicated Margin shall be
1 3/8%
Syndicated Notes shall mean the promissory notes provided
for by Section 2.9 hereof and all promissory notes delivered in
substitution or exchange thereof, in each case as the same shall be
modified and supplemented and in effect from time to time.
<PAGE>
Term Loan means the Loan or Loans made by the Lenders on the
Conversion Date to the Borrower pursuant to Section 2.4 hereof.
Term Loan Commitment means the undertaking of the Lenders,
subject to the terms and conditions of this Agreement, to make the Term
Loan to the Borrower hereunder on the Conversion Date.
Term Note and Term Notes means the promissory notes provided
for by Section 2.9 hereof and all promissory notes delivered in
substitution or exchange thereof, in each case as the same shall be
modified and supplemented and in effect from time to time.
Type shall have the meaning assigned to such term in Section
1.2 hereof.
Unused Amount shall mean with respect to each Lender, (a)
the Commitment of such Lender less (b) such Lender's pro rata share of
outstanding Syndicated Loans and Letter of Credit Obligations less (c)
the outstanding principal amount of all Competitive Bid Loans then held
by such Lender.
Unused Margin means that percent per annum set forth below,
which percent shall be the Unused Margin effective upon the date of
delivery to the Agent of a Compliance Certificate pursuant to Section
7.7(3) for the fiscal quarter as at the end of which the ratio of
Indebtedness of the Borrower and its Consolidated Entities to
Consolidated Cash Flow is greater than or equal to or less than, as the
case may be, the ratio set forth opposite such Unused Margin.
Ratio Unused Margin
------- --------------
(a) Greater than or equal to 1/2%
5.00 to 1.00
(b) Less than 5.00 to 1.00 but 3/8%
equal to or greater than
4.50 to 1.00
(c) Less than 4.50 to 1.00 but 3/8%
equal to or greater than
3.75 to 1.00
(d) Less than 3.75 to 1.00 1/4%
Notwithstanding the foregoing, during the period from the Closing Date
through the date of delivery of a Compliance Certificate for the
quarter ended September 30, 1994 the Unused Margin shall be 3/8%.
Vanderbilt shall mean The Vanderbilt Stallworth
Rehabilitation Hospital, L.P., the partners of which are the Borrower,
Vanderbilt University and Vanderbilt Health Services.
SECTION 1.2 Classes and Types of Loans. Loans hereunder are
distinguished by "Class" and by "Type". The "Class" of a Loan refers to whether
such Loan is a Competitive Bid Loan or a Syndicated Loan, each of which
constitutes a Class. The "Type" of a Loan refers to whether such Loan is a Base
Rate Loan, a LIBOR Loan, an Absolute Loan or a LIBOR Market Loan, each of which
constitutes a Type. Loans may be identified by both Class and Type.
<PAGE>
ARTICLE II
REVOLVING FACILITY TERMS, TERM LOAN AND COLLATERAL
SECTION 2.1 Syndicated Loans.
(a) From and after the Closing Date to and including the
Conversion Date, on the terms and subject to the conditions set forth in this
Agreement, each Lender severally agrees to lend to the Borrower and the Borrower
may borrow, repay and reborrow, an amount not exceeding the amount of the
Commitment of such Lender in effect from time to time, less the amount of such
Lender's Syndicated Loans and the Reimbursement Obligation and Letter of Credit
Borrowings applicable to such Lender; provided, however, that no more than eight
(8) different Interest Periods for both Syndicated Loans and Competitive Bid
Loans may be outstanding at the same time (for which purpose Interest Periods
described in different lettered clauses of the definition of the term "Interest
Period" shall be deemed to be different Interest Periods even if they are
coterminous). All Advances made by the Lenders to the Borrower under this
Agreement with respect to the Revolving Facility shall be evidenced by a
promissory note for each Lender each dated the date of this Agreement payable to
the order of each Lender, duly executed by the Borrower, and in the aggregate
maximum principal amount of $550,000,000 all as provided in Section 2.9 hereof.
The Advances shall bear interest as provided in Article III below. The unpaid
principal amount of all Loans hereunder shall not exceed the Revolving Facility
and each Syndicated Loan made hereunder shall be allocated pro rata among
Lenders based upon their Applicable Commitment Percentage regardless of amounts
outstanding under Competitive Bid Loans.
(b) If a drawing is made under any Letter of Credit in
accordance with the terms thereof prior to the Conversion Date the drawing shall
be paid by the Agent without the requirement of notice from the Borrower from
immediately available funds which shall be advanced by the Lenders under the
Revolving Facility. If a drawing is presented under any Letter of Credit in
accordance with the terms thereof notice of such drawing shall be provided
promptly by NationsBank to the Agent and the Agent shall provide notice to each
Lender by telephone or telecopy. If notice to the Lenders of a drawing under any
Letter of Credit is given by the Agent at or before 12:00 noon Charlotte, North
Carolina time on any Business Day, each Lender shall, pursuant to the conditions
of this Agreement, make a Base Rate Loan in the amount of such Lender's
Applicable Commitment Percentage of such drawing and shall pay such amount to
the Agent for the account of NationsBank at the Principal Office in Dollars and
in immediately available funds before 2:00 P.M. Charlotte, North Carolina time
on the same Business Day. If notice to the Lenders of a drawing under a Letter
of Credit is given by the Agent after 12:00 noon Charlotte, North Carolina time
on any Business Day, each Lender shall, pursuant to the terms and subject to the
conditions of this Agreement, make a Base Rate Loan in the amount of such
Lender's Applicable Commitment Percentage of such drawing and shall pay such
amount to the Agent for the account of NationsBank at the Principal Office in
Dollars and in immediately available funds before 12:00 noon Charlotte, North
Carolina time on the next following Business Day. Such Base Rate Loan shall be
deemed made for a period ending on the following Business Day, which shall be
extended automatically to the next succeeding Business Day unless and until the
Borrower converts such Base Rate Loan in accordance with the terms of Section
3.2 hereof.
<PAGE>
SECTION 2.2 Advances of Syndicated Loans. Advances of Syndicated Loans
shall be made no more frequently than three (3) times in each week. Each Advance
shall be in an amount no less than $5,000,000 and multiples of $1,000,000
thereafter. Each request for an Advance must be in writing (which may be by
facsimile transmission) and must be received by the Agent not later than 10:00
a.m., Charlotte, North Carolina, time, (x) at least three Business Days prior to
the date of any LIBOR Loan and (y) on the day which the Advance is to be made in
the case of a Base Rate Loan. Each request for an Advance shall be in the form
attached hereto as Exhibit D ("Request for Advance or Interest Rate Election")
and shall specify the amount of the Advance requested, the day as of which the
Advance is to be made and the part or parts, if any, of the Advance that are to
be used by or for the benefit of Participating Partnerships, specifying the part
allocable to each Participating Partnership, and shall provide the interest rate
information called for in Section 3.2. The Agent shall promptly (not later than
1:00 P.M. Charlotte, North Carolina time) furnish each Lender by telecopy
transmission a copy of each Request for Advance or Interest Rate Election. Not
later than 2:00 P.M. Charlotte, North Carolina time on the date specified for
each Advance hereunder, each Lender shall make available the amount of the
Syndicated Loan or Loans to be made by it on such date to the Agent at the
Principal Office, in Dollars and in immediately available funds, and the amount
received by the Agent shall be made available to the Borrower by depositing the
proceeds thereof into an account with the Agent in the name of the Borrower.
Subject to Section 2.4, the Lenders' obligation to make Advances shall
terminate, if not sooner terminated pursuant to the provisions of this
Agreement, on the Conversion Date. Each Request for Advance or Interest Rate
Election, whether submitted under this Section 2.2 in connection with a
requested Advance or under Section 3.2 in connection with an interest rate
election, and each Application shall be signed by an officer of the Borrower
designated as authorized to sign and submit Request for Advance or Interest Rate
Election forms and Applications in the documents submitted to the Agent pursuant
to Section 6.3(a) below. The Borrower may, from time to time, by written notice
to the Agent, terminate the authority of any person to submit Request for
Advance or Interest Rate Election forms and Applications and designate new or
additional persons to so act by delivering to the Agent a certificate of the
Secretary of the Borrower certifying the incumbency and specimen signature of
each such person. The Agent shall be entitled to rely conclusively upon the
authority of any person so designated by the Borrower.
<PAGE>
SECTION 2.3 Competitive Bid Loans.
(a) In addition to borrowings of Syndicated Loans, at any
time prior to the Conversion Date and so long as the ratio of Indebtedness of
the Borrower and its Consolidated Entities to Consolidated Cash Flow is equal to
or less than 4.50 to 1.00 the Borrower may, as set forth in this Section 2.3,
request the Lenders to make offers to make Competitive Bid Loans to the Borrower
in Dollars. The Lenders may, but shall have no obligation to, make such offers
and the Borrower may, but shall have no obligation to, accept any such offers in
the manner set forth in this Section 2.3. Competitive Bid Loans may be LIBOR
Market Loans or Absolute Rate Loans (each a "Type" of Competitive Bid Loan),
provided that:
(i) the aggregate amount of outstanding Competitive Bid
Loans of all Lenders shall not exceed one half of the
Revolving Facility;
(ii) there may be no more than eight (8) different
Interest Periods for both Syndicated Loans and Competitive
Bid Loans outstanding at the same time (for which purpose
Interest Periods described in different lettered clauses of
the definition of the term "Interest Period" shall be deemed
to be different Interest Periods even if they are
coterminous);
(iii) the aggregate amount of outstanding Competitive
Bid Loans of a Lender shall not exceed at any time an amount
equal to such Lender's Commitment;
(iv) the aggregate principal amount of all Competitive
Bid Loans, together with the sum of (i) the aggregate
principal amount of all outstanding Syndicated Loans, (ii)
then outstanding Letter of Credit Borrowings and (iii)
Reimbursement Obligations shall not exceed the aggregate
amount of the Commitments at such time; and
(v) no Competitive Bid Loan shall have a maturity
date subsequent to the Conversion Date.
(b) When the Borrower wishes to request offers to make
Competitive Bid Loans, it shall give the Agent (which shall promptly notify the
Lenders) notice (a "Competitive Bid Quote Request") to be received no later than
11:00 a.m. Charlotte, North Carolina time on (x) the fourth Business Day prior
to the date of borrowing proposed therein, in the case of a LIBOR Auction or (y)
the Business Day next preceding the date of borrowing proposed therein, in the
case of an Absolute Rate Auction (or, in any such case, such other time and date
as the Borrower and the Agent, with the consent of the Required Lenders, may
agree). The Borrower may request offers to make Competitive Bid Loans for up to
two (2) different Interest Periods in a single notice (for which purpose
Interest Periods in different lettered clauses of the definition of the term
"Interest Period" shall be deemed to be different Interest Periods even if they
are coterminous); provided that the request for each separate Interest Period
shall be deemed to be a separate Competitive Bid Quote Request for a separate
borrowing (a "Competitive Bid Borrowing") and there shall not be outstanding at
any one time more than four (4) Competitive Bid Borrowings. Each such
Competitive Bid Quote Request shall be substantially in the form of Exhibit E
hereto and shall specify as to each Competitive Bid Borrowing:
<PAGE>
(i) the proposed date of such borrowing, which shall be
a Business Day;
(ii) the aggregate amount of such Competitive Bid
Borrowing, which shall be at least $10,000,000 (or a larger
multiple of $1,000,000) but shall not cause the limits
specified in Section 2.3(a) hereof to be violated;
(iii) the duration of the Interest Period applicable
thereto;
(iv) whether the Competitive Bid Quotes requested for a
particular Interest Period are seeking quotes for LIBOR
Market Loans or Absolute Rate Loans; and
(v) if the Competitive Bid Quotes requested are seeking
quotes for Absolute Rate Loans, the date on which the
Competitive Bid Quotes are to be submitted if it is before
the proposed date of borrowing (the date on which such
Competitive Bid Quotes are to be submitted is called the
"Quotation Date").
Except as otherwise provided in this Section 2.3(b), no Competitive Bid Quote
Request shall be given within five (5) Business Days (or such other number of
days as the Borrower and the Agent, with the consent of the Required Lenders,
may agree) of any other Competitive Bid Quote Request.
(c) (i) Each Lender may submit one or more Competitive Bid
Quotes, each containing an offer to make a Competitive Bid Loan in response to
any Competitive Bid Quote Request; provided that, if the Borrower's request
under Section 2.3(b) hereof specified more than one Interest Period, such Lender
may make a single submission containing one or more Competitive Bid Quotes for
each such Interest Period. Each Competitive Bid Quote must be submitted to the
Agent not later than (x) 2:00 p.m. Charlotte, North Carolina time on the fourth
Business Day prior to the proposed date of borrowing, in the case of a LIBOR
Auction or (y) 10:00 a.m. Charlotte, North Carolina time on the Quotation Date,
in the case of an Absolute Rate Auction (or, in any such case, such other time
and date as the Borrower and the Agent, with the consent of the Required
Lenders, may agree); provided that any Competitive Bid Quote may be submitted by
NationsBank (or its Applicable Lending Office) only if NationsBank (or such
Applicable Lending Office) notifies the Borrower of the terms of the offer
contained therein not later than (x) 1:00 p.m. Charlotte, North Carolina time on
the fourth Business Day prior to the proposed date of borrowing, in the case of
a LIBOR Auction or (y) 9:45 a.m. Charlotte, North Carolina time on the Quotation
Date, in the case of an Absolute Rate Auction. Subject to Sections 4.2, 4.3 and
Article VI and IX hereof, any Competitive Bid Quote so made shall be irrevocable
except with the consent of the Agent given on the instructions of the Borrower.
<PAGE>
(ii) Each Competitive Bid Quote shall be substantially
in the form of Exhibit F hereto and shall specify:
(A) the proposed date of borrowing and the Interest
Period therefor;
(B) the principal amount of the Competitive Bid Loan for
which each such order is being made, which principal amount
shall be at least $2,000,000 (or a larger multiple of
$1,000,000); provided that the aggregate principal amount of
all Competitive Bid Loans for which a Lender submits
Competitive Bid Quotes (x) may not exceed the Commitment of
such Lender and (y) may not exceed the principal amount of
the Competitive Bid Borrowing for a particular Interest
Period for which offers were requested;
(C) in the case of a LIBOR Auction, the margin above or
below the applicable LIBOR-Based Rate (the "LIBOR Margin")
offered for each such Competitive Bid Loan, expressed as a
percentage (rounded upwards, if necessary, to the nearest
1/10,000th of 1%) to be added to or subtracted from the
applicable LIBOR-Based Rate;
(D) in the case of an Absolute Rate Auction, the rate of
interest per annum (rounded upwards, if necessary, to the
nearest 1/10,000th of 1%) offered for each such Competitive
Bid Loan (the "Absolute Rate"); and
(E) the identity of the quoting Lender.
Unless otherwise agreed by the Agent and the Borrower, no Competitive Bid Quote
shall contain qualifying, conditional or similar language or propose terms other
than or in addition to those set forth in the applicable Competitive Bid Quote
Request and, in particular, no Competitive Bid Quote may be conditioned upon
acceptance by the Borrower of all (or some specified minimum) of the principal
amount of the Competitive Bid Loan for which such Competitive Bid Quote is being
made.
(d) The Agent shall (x) in the case of a LIBOR Auction, by
4:00 p.m. Charlotte, North Carolina time on the day a Competitive Bid Quote is
submitted or (y) in the case of an Absolute Rate Auction, as promptly as
practicable after the Competitive Bid Quote is submitted (but in any event not
later than 10:30 a.m. Charlotte, North Carolina time on the Quotation Date),
notify the Borrower of the terms (i) of any Competitive Bid Quote submitted by a
Lender that is in accordance with Section 2.3(c) hereof and (ii) of any
Competitive Bid Quote that amends, modifies or is otherwise inconsistent with a
previous Competitive Bid Quote submitted by such Lender with respect to the same
Competitive Bid Quote Request. Any such subsequent Competitive Bid Quote shall
be disregarded by the Agent unless such subsequent Competitive Bid Quote is
submitted solely to correct a manifest error in such former Competitive Bid
Quote. The Agent's notice to the Borrower shall specify (A) the aggregate
principal amount of the Competitive Bid Borrowing for which orders have been
received and (B) the respective principal amounts and LIBOR Margins or Absolute
Rates, as the case may be, so offered by each Lender (identifying the Lender
that made each Competitive Bid Quote).
<PAGE>
(e) Not later than 11:00 a.m. Charlotte, North Carolina time
on (x) the third Business Day prior to the proposed date of borrowing, in the
case of a LIBOR Auction or (y) the Quotation Date, in the case of an Absolute
Rate Auction (or, in any such case, such other time and date as the Borrower and
the Agent, with the consent of the Required Lenders, may agree), the Borrower
shall notify the Agent of its acceptance or nonacceptance of the offers so
notified to it pursuant to Section 2.3(d) hereof (and the failure of the
Borrower to give such notice by such time shall constitute nonacceptance) and
the Agent shall promptly notify each affected Lender. In the case of acceptance,
such notice shall specify the aggregate principal amount of offers for each
Interest Period that are accepted. The Borrower may accept any Competitive Bid
Quote in whole or in part (provided that any Competitive Bid Quote accepted in
part shall be at least $2,000,000 or a larger multiple of $1,000,000); provided
that:
(i) the aggregate principal amount of each Competitive
Bid Borrowing may not exceed the applicable amount set forth
in the related Competitive Bid Quote Request;
(ii) the aggregate principal amount of each Competitive
Bid Borrowing shall be at least $10,000,000 (or a larger
multiple of $1,000,000) but shall not cause the limits
specified in Section 2.3(a) hereof to be violated;
(iii) acceptance of offers may be made only in ascending
order of LIBOR Margins or Absolute Rates, as the case may
be, in each case beginning with the lowest rate so offered;
provided, however, that the Borrower, in its sole
discretion, may accept other than the lowest rate where
acceptance of the lowest rate will result in (x) the
outstanding Loans of a Lender or Lenders offering the lowest
rate exceeding such Lender's Commitment and (y) an increase
in the Unused Fee payable by Borrower under Section 2.11
hereof; and
(iv) the Borrower may not accept any offer where the
Agent has correctly advised the Borrower that such offer
fails to comply with Section 2.3(c)(ii) hereof or otherwise
fails to comply with the requirements of this Agreement
(including, without limitation, Section 2.3(a) hereof).
<PAGE>
If offers are made by two or more Lenders with the same LIBOR Margins or
Absolute Rates, as the case may be, for a greater aggregate principal amount
than the amount in respect of which offers are accepted for the related Interest
Period after the acceptance of all offers, if any, of all lower LIBOR Margins or
Absolute Rates, as the case may be, offered by any Lender for such related
Interest Period, the principal amount of Competitive Bid Loans in respect of
which such offers are accepted shall be allocated by the Borrower among such
Lenders as nearly as possible (in amounts of at least $2,000,000 or larger
multiples of $1,000,000) in proportion to the aggregate principal amount of such
offers. Determinations by the Borrower of the amounts of Competitive Bid Loans
and the lowest bid after adjustment as provided in Section 2.3(e)(iii) shall be
conclusive in the absence of manifest error.
(f) Any Lender whose offer to make any Competitive Bid Loan
has been accepted shall, not later than 1:00 p.m. Charlotte, North Carolina time
on the date specified for the making of such Loan, make the amount of such Loan
available to the Agent at the Principal Office in Dollars and in immediately
available funds, for account of the Borrower. The amount so received by the
Agent shall, subject to the terms and conditions of this Agreement, be made
available to the Borrower on such date by depositing the same, in Dollars and in
immediately available funds, in an account of the Borrower maintained at the
Principal Office.
SECTION 2.4 Term Loan. (a) On the Conversion Date, on the terms and
subject to the conditions set forth in this Agreement, each Lender severally
agrees to convert all or such portion of its Commitment as the Borrower may
request by written notice to the Agent not later than 10:00 A.M., Charlotte,
North Carolina time, on the third Business Day preceding the Conversion Date to
a Term Loan. Each Lender's portion of the Term Loan Commitment shall be
evidenced by a promissory note of the Borrower dated the Conversion Date payable
to the order of such Lender, duly executed by the Borrower, all as provided in
Section 2.9 hereof and shall be equal to such Lender's Applicable Commitment
Percentage of the total of all outstanding Advances on the Conversion Date which
Borrower has requested be continued as a Term Loan. The Term Loan shall bear
interest as provided in Article III below.
(b) The Borrower shall make fourteen (14) consecutive
quarterly payments of principal on the Term Loans, each payment to be due on the
last day of March, June, September and December commencing June 30, 1997, each
of which shall be in an amount equal to 6.666% of the Term Loan. The Borrower
shall make a fifteenth payment on November 30, 2000 which payment shall be in an
amount sufficient to repay in full the remaining principal amount of the Term
Loan together with accrued interest and unpaid fees, if any. Interest on the
Term Loan will be payable as set forth in Section 2.5 and Article III.
<PAGE>
(c) The Borrower shall pay to the Agent for the benefit of
the Lenders on the Conversion Date a fee of 1/4% of each Lender's portion of the
Term Loan.
SECTION 2.5 Payments. All interest accrued on Loans subject to the Base
Rate shall be payable on the last day of each successive March, June, September
and December, commencing on June 30, 1994 and upon payment in full of such
Loans, and all interest accrued on each Fixed Rate Loan, shall be payable at the
earlier of (i) the end of the applicable Interest Period then in effect or (ii)
the end of each ninety (90) day period in the case of an Absolute Rate and each
three (3) month period in the case of a LIBOR Market Rate. The principal amount
of the Advances shall be due on the Conversion Date unless such Advances are
converted to a Term Loan pursuant to Section 2.4. All payments of Credit
Obligations shall be payable to the Agent on or before 11:00 A.M. Charlotte,
North Carolina time on the date when due, at the Principal Office in Dollars and
in immediately available funds free and clear of all rights of set-off or
counterclaim.
SECTION 2.6 Joint and Several Obligations.
(a) Each of the Subsidiaries and Controlled Partnerships
named in Exhibit G attached hereto and made a part hereof shall execute and
deliver to the Agent as of the Closing Date either an Amended and Restated
Subsidiary Guaranty Agreement or Amended and Restated Partnership Guaranty
Agreement or a Subsidiary Guaranty Agreement or Partnership Guaranty Agreement,
and each other Subsidiary and Controlled Partnership that is to become after the
Closing Date a Participating Subsidiary or Participating Partnership, as the
case may be, shall, at the time it is to become a Participating Subsidiary or
Participating Partnership, execute and deliver to the Agent a Subsidiary
Guaranty Agreement or Partnership Guaranty Agreement, as the case may be in the
form attached hereto as Exhibit C-2 and Exhibit C-1, respectively ("collectively
the "Guaranty Agreements").
(b) Although Advances shall be and heretofore have been made
only to the Borrower, all or portions of such Advances may be used by the
Borrower for the benefit of or loaned by the Borrower to a Participating
Subsidiary or Participating Partnership. As a condition to the use of Loans for
the benefit of Participating Subsidiaries and Participating Partnerships, the
Lenders have required that the Participating Subsidiaries and Participating
Partnerships guaranty the payment of the Credit Obligations of Borrower arising
under this Agreement and the other Loan Documents to the extent set forth in the
respective Guaranty Agreements to which they are a party. Each of the
Participating Subsidiaries and Participating Partnerships separately and
severally, hereby appoints and designates the Borrower as each such party's
agent and attorney-in-fact to act on behalf of each such party for all purposes
of the Loan Documents relating to the Credit Obligations. The Borrower shall
have authority to exercise on behalf of each Participating Subsidiary and
Participating Partnership all rights and powers that the Borrower deems
necessary, incidental or convenient in connection with the Loan Documents
relating to the Credit Obligations, including the authority to execute and
<PAGE>
deliver certificates, documents, agreements and other instruments referred to in
or contemplated by such Loan Documents, request Advances hereunder for their
benefit, request for the issuance of Letters of Credit for their benefit,
receive all proceeds of Advances, give all notices, approvals and consents
required or requested from time to time by the Agent or Lenders and take any
other actions and steps that a Participating Subsidiary or a Participating
Partnership could take for its own account in connection with the Loan Documents
from time to time, it being the intent of the Participating Subsidiaries and the
Participating Partnerships to grant to the Borrower plenary power to act on
behalf of the Participating Subsidiaries and the Participating Partnerships in
connection with and pursuant to such Loan Documents. The appointment of the
Borrower as agent and attorney-in-fact for the Participating Subsidiaries and
the Participating Partnerships hereunder shall be coupled with an interest and
be irrevocable so long as any Loan Document relating to the Credit Obligations
shall remain in effect. The Agent or Lenders need not obtain any Participating
Subsidiary's or Participating Partnership's consent or approval for any act
taken by the Borrower pursuant to any Loan Document, and all such acts shall
bind and obligate the Borrower, the Participating Subsidiaries and the
Participating Partnerships, jointly and severally. Each Participating Subsidiary
and Participating Partnership forever waives and releases any claim (whether now
or hereafter arising) against the Agent or Lenders based on the Borrower's lack
of authority to act on behalf of any Participating Subsidiary or Participating
Partnership in connection with the Loan Documents relating to the Revolving
Facility.
SECTION 2.7 Pledge Agreement. As security for the Credit Obligations,
the Borrower and certain of the Participating Subsidiaries have, pursuant to the
Prior Agreement, executed and delivered a pledge and security agreement to the
Agent and shall execute and deliver to the Agent amended and restated pledge
agreements on the Closing Date and from time to time after the Closing Date
pursuant to the terms of Section 7.14 hereof or upon request by the Agent,
pledge and security agreements in form acceptable to the Agent and its counsel
(all being collectively called the "Pledge Agreements") granting to the Agent a
first priority security interest in and lien on (i) all shares of stock of all
Subsidiaries owned directly or indirectly by the Borrower, (ii) all right, title
and interest in and to both the ownership interest of Borrower in any
partnership and all distributions payable to the Borrower or any Subsidiary as a
partner of any partnership (including Controlled Partnerships but not including
Vanderbilt), (iii) all notes payable to Borrower by any Subsidiary or Controlled
Partnership evidencing any loan or advance made by Borrower, and (iv) all
accounts receivable due to Borrower by any Subsidiary or Controlled Partnership
arising by reason of any loan or advance made by Borrower, together with all
financing statements, stock certificates and duly executed stock powers
necessary to perfect the Agent's security interest therein, in each case whether
now owned or hereafter acquired.
<PAGE>
SECTION 2.8 Prepayment. (a) The Borrower may at any time prior to the
Conversion Date prepay all or any part of the Advances, without premium or
penalty (except as set forth below); provided, however, that no Fixed Rate
Segment may be prepaid during an Interest Period unless the Borrower shall pay
to the Agent the amounts required by Section 4.2 hereof. The Borrower shall pay
all interest accrued to the date of prepayment on any amount prepaid as
permitted under the terms of the next preceding sentence on or prior to the
Conversion Date in connection with the prepayment in full of the Credit
Obligations and the concurrent termination of this Agreement. The Borrower shall
give the Agent notice of its intent to pay any Base Rate Loan not later than
11:00 a.m. on the date of payment. Failure to give such notice shall result in
payment of interest through the next succeeding Business Day on the amount so
paid.
(b) The Borrower from time to time after the Conversion Date
(but not more frequently than quarterly), upon not less than three (3) Business
Days prior written notice to the Agent, may prepay the Term Loan in whole or in
part. The Agent shall give each Lender, within one (1) Business Day thereafter,
telephonic notice (confirmed in writing) of such prepayment. Each such
prepayment shall be in the aggregate amount of $10,000,000 or such greater
amount which is an integral multiple of $1,000,000 or the unpaid balance of all
Credit Obligations. No such prepayment shall result in the payment of a portion
of the Term Loan bearing interest at a Fixed Rate other than on the last day of
the Interest Period of such Loan.
SECTION 2.9 Notes.
(a) Prior to the Conversion Date, the Syndicated Loans made
by each Lender shall be evidenced by a single promissory note of the Borrower
substantially in the form of Exhibit H-1 hereto, dated the date hereof, payable
to such Lender in a principal amount equal to the amount of its Commitment as
originally in effect and otherwise duly completed.
(b) The Competitive Bid Loans made by any Lender shall be
evidenced by a single promissory note of the Borrower substantially in the form
of Exhibit H-2 hereto, dated the date hereof, payable to such Lender and
otherwise duly completed.
(c) The Term Loan made by each Lender on the Conversion Date
shall be evidenced by a single promissory note of the Borrower substantially in
the form of Exhibit H-3 hereto, dated the Conversion Date, payable to such
Lender in a principal amount equal to the amount of its Applicable Commitment
Percentage of the Term Loan Commitment and otherwise duly completed.
(d) The date, amount, Type, interest rate and duration of
Interest Period (if applicable) of each Loan of each Class made by each Lender
to the Borrower, and each payment made on account of the principal thereof,
shall be recorded by such Lender on its books and, prior to any transfer of the
Note evidencing the Loans of such Class held by it, endorsed by such Lender on
the schedule attached to such Note or any continuation thereof; provided that
<PAGE>
the failure of such Lender to make, or any error by the Lender in making any
such recordation or endorsement, shall not affect the obligations of the
Borrower to make a payment when due of any amount owing hereunder or under such
Note in respect of the Loans to be evidenced by such Note.
(e) No Lender shall be entitled to have its Notes
subdivided, by exchange for promissory notes of lesser denominations or
otherwise, except in connection with a permitted assignment of all or any
portion of such Lender's Commitment, Loans and Notes pursuant to Section 10.1
hereof.
(f) Each Lender that is a Prior Lender under the Prior
Agreement shall surrender to the Borrower the promissory notes delivered to it
pursuant to the Prior Agreement in exchange for the Notes described in Section
2.9(a) and (b).
SECTION 2.10 Reduction in Revolving Facility. The Borrower shall have
the right from time to time (but not more frequently than once during each
quarterly period), but upon not less than three (3) Business Days written notice
to the Agent to reduce the amount of the Revolving Facility. The Agent shall
give each Lender, within one (1) Business Day thereafter, telephonic notice
(confirmed in writing) of such reduction. Each such reduction shall be in the
aggregate principal amount of $10,000,000 or such greater amount which is an
integral multiple of $1,000,000, and shall permanently reduce the Commitment of
each Lender on a pro rata basis. No such reduction shall result in payment of a
Fixed Rate Loan other than on the last day of the Interest Period of such Loan.
Each reduction of the Revolving Facility shall be accompanied by payment of the
Loans to the extent that the Credit Obligations exceed the Revolving Facility
after giving effect to such reductions together with accrued and unpaid interest
on the amounts prepaid.
SECTION 2.11 Unused Fee. The Borrower shall pay to the Agent for the
benefit of each Lender a fee (the "Unused Fee") computed at a per annum rate of
the then applicable Unused Margin times the daily average Unused Amount of such
Lender. The Unused Fee shall be payable quarterly on the last day of each
successive March, June, September and December in each year for the immediately
preceding quarterly period, commencing on June 30, 1994, and upon the Conversion
Date. The Unused Fee shall be computed on an Actual/360 Basis.
SECTION 2.12 Lending Offices. The Loans of each Type made by each
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Loans of such Type.
SECTION 2.13 Letter of Credit Borrowings.
(a) NationsBank may issue from time to time in accordance
with Section 6.1, in its sole discretion, for the account of the Borrower
Letters of Credit in an aggregate outstanding stated amount up to but not to
exceed the Letter of Credit Commitment. All Letters of Credit issued pursuant to
<PAGE>
this Agreement, shall expire on or before the fifth (5th) Business Day next
preceding the Conversion Date. The aggregate Letter of Credit Obligations shall
at no time exceed the Letter of Credit Commitment. In the event that the
Borrower shall pay in full all amounts outstanding under the Revolving Facility
and permanently reduce the Revolving Facility to zero as permitted pursuant to
Section 2.10 hereof, it shall simultaneously cause all obligations of
NationsBank under the Letters of Credit and all obligations of the Lenders with
respect to Participations to be discharged in full, whether by providing
replacement letters of credit therefor or payment in full of the amount
outstanding with respect to the Letter of Credit.
(b) The Borrower hereby unconditionally agrees to pay to
NationsBank on demand at the Principal Office (i) all amounts required to pay
all drafts drawn in accordance with the terms of the Letter of Credit or
purporting to be drawn under the Letters of Credit and (ii) the face amount of
each draft complying with the Letter of Credit accepted by NationsBank on the
maturity date of such draft, or in the event of a Default or Event of Default,
and any and all reasonable expenses of every kind incurred by NationsBank in
connection with the Letters of Credit and in any event and without demand to
place in possession of NationsBank (which shall include Advances under the
Revolving Facility if permitted by Section 2.1 hereof) sufficient funds to pay
all debts and liabilities arising under any Letter of Credit. Subject to the
terms hereof, the Borrower's obligations to pay NationsBank under this Section
2.13, and the right of NationsBank to receive the same, shall be absolute and
unconditional and shall not be affected by any circumstance whatsoever.
NationsBank may charge any account the Borrower may have with it for any and all
amounts NationsBank pays under a Letter of Credit, plus commissions, charges and
expenses as from time to time agreed to by NationsBank and the Borrower;
provided that to the extent permitted by Section 2.1(b), amounts shall be paid
pursuant to Advances under the Revolving Facility. The Borrower agrees that
NationsBank may, in its sole discretion, accept or pay, as complying with the
terms of any Letter of Credit, any drafts or other documents otherwise in order
which may be signed or issued by an administrator, executor, trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
liquidator, receiver, attorney in fact or other legal representative of a party
who is authorized under such Letter of Credit to draw or issue any drafts or
other documents. The Borrower agrees to pay NationsBank interest on any amounts
not paid when due hereunder at the Base Rate plus two percent (2%), or such
lower rate as may be required by law.
(c) In accordance with the provisions of Section 2.1(b)
hereof, NationsBank shall notify the Agent (and shall also notify the Borrower)
of any drawing under any Letter of Credit issued for account of the Borrower as
promptly as practicable following the receipt by NationsBank of such drawing.
(d) Each Lender (other than NationsBank) shall automatically
acquire on the date of issuance thereof, a Participation in the liability of
NationsBank in respect of each Letter of Credit in an amount equal to such
<PAGE>
Lender's Applicable Commitment Percentage of such liability, and to the extent
that the Borrower is obligated to pay NationsBank under Section 2.13(a), each
Lender (other than NationsBank) thereby shall absolutely, unconditionally and
irrevocably assume, and shall be unconditionally obligated to pay to NationsBank
as hereinafter described, its Applicable Commitment Percentage of the liability
of NationsBank under such Letter of Credit. On the fifth Business Day prior to
the Conversion Date, each Lender (including NationsBank in its capacity as a
Lender) shall make a Base Rate Loan to the Borrower by paying to the Agent for
the account of NationsBank at the Principal Office in Dollars and in immediately
available funds, an amount equal to its Applicable Commitment Percentage of any
drawing under a Letter of Credit, all as described and pursuant to Section
2.1(b). With respect to drawings under any of the Letters of Credit, each
Lender, upon receipt from the Agent of notice of a drawing in the manner
described in Section 2.1(b), shall promptly pay to the Agent for the account of
NationsBank, prior to the applicable time set forth in Section 2.1(b), its
Applicable Commitment Percentage of such drawing. Simultaneously with the making
of each such payment by a Lender or NationsBank, such Lender shall,
automatically and without any further action on the part of NationsBank or such
Lender, acquire a Participation in an amount equal to such payment (excluding
the portion thereof constituting interest) in the related Reimbursement
Obligation of the Borrower. The Reimbursement Obligations of the Borrower shall
be immediately due and payable whether by Advances made in accordance with
Section 2.1(b) or otherwise. Each Lender's obligation to make payment to the
Agent for the account of NationsBank pursuant to this Section 2.13(d), and the
right of NationsBank to receive the same, shall be absolute and unconditional,
shall not be affected by any circumstance whatsoever and shall be made without
any offset, abatement, withholding or reduction whatsoever. If any Lender is
obligated to pay but does not pay amounts to the Agent for the account of
NationsBank in full upon receipt of such notice of a drawing as required by this
Section 2.13(d), such Lender shall, on demand, pay to the Agent for the account
of NationsBank interest on the unpaid amount for each day during the period
commencing on the date of notice given to such Lender pursuant to Section 2.1(b)
until such Lender pays such amount to the Agent for the account of NationsBank
in full at the interest rate per annum for overnight borrowing by NationsBank
from the Federal Reserve Bank.
(e) Promptly following the end of each calendar quarter,
NationsBank shall deliver to the Agent, and the Agent shall deliver to each
Lender, a notice describing the aggregate undrawn amount of Letters of Credit
and aggregate face amount of all drafts accepted and outstanding at the end of
such quarter. Upon the request of any Lender from time to time, NationsBank
shall deliver to the Agent, and the Agent shall deliver to such Lender, any
other information reasonably requested by such Lender with respect to the Letter
of Credit then outstanding.
(f) The issuance by NationsBank of any Letter of Credit
shall be subject to the conditions that such Letter of Credit be insuch form,
<PAGE>
contain such terms and support such transactions or obligations as shall be
reasonably satisfactory to NationsBank consistent with its then current
practices and procedures with respect to similar letters of credit. All Letters
of Credit shall be issued pursuant to and subject to the Uniform Customs and
Practice for Documentary Creditors, 1993 revision, International Chamber of
Commerce Publication No. 500 and all subsequent amendments and revisions
thereto. The Borrower shall have executed and delivered such other instruments
and agreements relating to such Letter of Credit as NationsBank shall have
reasonably requested consistent with such practices and procedures.
(g) Without duplication of Section 10.12 hereof, the
Borrower hereby indemnifies and holds harmless NationsBank, each other Lender
and the Agent from and against any and all claims and damages, losses,
liabilities, costs or expenses which NationsBank, such other Lender or the Agent
may reasonably incur (or which may be claimed against NationsBank, such other
Lender or the Agent) by any person by reason of or in connection with the
issuance or transfer of or payment or failure to pay under any Letter of Credit;
provided that the Borrower shall not be required to indemnify NationsBank, any
other Lender or the Agent for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, (i) caused by the willful
misconduct or negligence of the party to be indemnified, (ii) caused by the
failure of NationsBank to pay under any Letter of Credit after the presentation
to it of a request strictly complying with the terms and conditions of such
Letter of Credit, unless such payment is prohibited by any law, regulation,
court order or decree, or (iii) paid or payable by any Lender under Section 2.15
or Section 9.10 hereof and provided, further, Borrower shall not be required to
indemnify any Lender who has failed to perform its obligations hereunder.
(h) Without limiting Borrower's rights as set forth in
Section 2.13(g) above, the obligation of Borrower to immediately reimburse Agent
for drawings made under the Letter of Credit in accordance with the terms
thereof shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement and such Letters of
Credit, under all circumstances whatsoever.
(i) The Borrower agrees to pay to the Agent for the benefit
of the Lenders a per annum Letter of Credit fee equal to the applicable
Syndicated Margin in effect at the time of issuance of each such Letter of
Credit times the amount of outstanding Letter of Credit Borrowings. In addition,
the Borrower agrees to pay to the Agent for its own account an issuance fee
equal to one-eighth of one percent (1/8%) per annum times the amount of
outstanding Letter of Credit Borrowings. Such fees shall be payable quarterly in
arrears on the last day of each March, June, September and December, beginning,
however, on the first such day to occur following the Closing Date.
(j) The Borrower acknowledges that NationsBank as issuer of
the Letter of Credit will be required by applicable rules and regulations of the
<PAGE>
Federal Reserve Board to maintain reserves for its liability to honor draws made
pursuant to a Letter of Credit notwithstanding the obligation of the Lenders for
a Participation in such liability. The Borrower agrees to promptly reimburse
NationsBank for all additional costs which it may hereafter incur solely by
reason of its acting as issuer of the Letter of Credit and its being required to
reserve for such liability, it being understood by the Borrower that other
interest and fees payable under this Agreement do not include compensation of
NationsBank for such reserves. NationsBank shall furnish to the Borrower at the
time of its demand for payment of such additional costs, the computation of such
additional cost which shall be conclusive absent manifest error, provided that
such computations are made on a reasonable basis.
(k) The Borrower shall pay to NationsBank administrative and
other fees, if any, in connection with the Letters of Credit in such amounts and
at such times as NationsBank and the Borrower shall agree from time to time.
SECTION 2.14 Pro Rata Payments. Except as otherwise provided herein,
(a) each payment on account of the principal of and interest on the Syndicated
Loans and fees (other than the Agent's fees payable under Section 9.11 hereof,
which shall be retained by the Agent and the fees payable to NationsBank
pursuant to Section 2.13(i) and (k) which shall be retained by NationsBank)
described in this Agreement shall be made to the Agent for the account of the
Lenders pro rata based on their Applicable Commitment Percentages, (b) each
payment on account of principal of and interest on a Competitive Bid Loan shall
be made to the Agent for the account of the Lender making such Competitive Bid
Loan, and the principal amount of Competitive Bid Loans shall be paid on the
last day of the Interest Period for such Competitive Bid Loan, (c) all payments
to be made by the Borrower for the account of each of the Lenders on account of
principal, interest and fees, shall be made without set-off or counterclaim, and
(d) the Agent will promptly (to the extent received by the Agent by 12:00 noon,
Charlotte, North Carolina time within the same Business Day, otherwise the next
Business Day if received after 12:00 noon) distribute payments received to the
Lenders.
SECTION 2.15 Deficiency Advances. No Lender shall be responsible for
any default of any other Lender in respect to such other Lender's obligation to
make any Loan hereunder nor shall the Commitment of any Lender hereunder be
increased as a result of such default of any other Lender. Without limiting the
generality of the foregoing, in the event any Lender (a "failing Lender") shall
fail to advance funds to the Borrower as herein provided, the Agent may in its
discretion, but shall not be obligated to, advance under the Note or Notes in
its favor as a Lender all or any portion of such amount (the "deficiency
advance") and shall thereafter be entitled to payments of principal of and
interest on such deficiency advance in the same manner and at the same interest
rate or rates to which such failing Lender would have been entitled had such
failing Lender made such Advance under its Note or Notes; provided that, upon
payment to the Agent from such failing Lender of the entire outstanding amount
<PAGE>
of such deficiency advance, together with interest thereon, from the most recent
date or dates interest was paid to the Agent by the Borrower on each Loan
comprising the deficiency advance at the interest rate per annum for overnight
borrowing by the Agent from the Federal Reserve Bank, then such payment shall be
credited against the Note or Notes of the Agent in full payment of such
deficiency advance and the Borrower shall be deemed to have borrowed the amount
of such deficiency advance from such failing Lender as of the most recent date
or dates, as the case may be, upon which any payments of interest were made by
the Borrower thereon. Acceptance by the Borrower of a deficiency advance from
the Agent shall in no way limit the rights of the Borrower against a failing
Lender.
SECTION 2.16 Adjustments by Agent. Notwithstanding the construction of
"pro rata" to mean based on the Applicable Commitment Percentage and any
provisions contained herein for the advancement of funds or distribution of
payments on a pro rata basis, the Agent may, in its discretion, but shall not be
obligated to, adjust downward or upward (but not in excess of any applicable
Commitment) the principal amount of any Loan to be made by any Lender to the
nearest amount which is evenly divisible by $100, and make appropriate related
adjustment in the distribution of payments of principal and interest on the
Loans.
<PAGE>
ARTICLE III
INTEREST ON SYNDICATED LOANS
SECTION 3.1 Applicable Interest Rates. The Borrower shall have the
option to elect to have any Syndicated Loan Segment bear interest at the Base
Rate or the LIBOR-Based Rate plus the applicable Syndicated Margin. For any
period of time and for any Segment with respect to which the Borrower does not
elect another interest rate, such Segment shall bear interest at the Base Rate.
The Borrower's right to elect a LIBOR-Based Rate shall be subject to the
following requirements: (a) each Syndicated Loan Segment shall be in the amount
of $5,000,000 or more and in an integral multiple of $1,000,000 and (b) each
LIBOR-Based Rate Segment shall have a maturity selected by the Borrower of one,
two or three months; provided, however, that no LIBOR-Based Rate Segment shall
have a maturity date later than the Conversion Date.
SECTION 3.2 Procedure for Exercising Interest Rate Options. The
Borrower may elect to have a particular interest rate apply to a Segment of a
Syndicated Loan by notifying the Agent in writing (which may be by facsimile
transmission) not later than 10:00 a.m., Charlotte, North Carolina time, three
(3) Business Days prior to the effective date any LIBOR-Based Rate is to become
applicable or on the same day on which a requested Base Rate is to become
applicable. Any notice of interest rate election hereunder shall be irrevocable
and shall be in the form attached hereto as Exhibit D and shall set forth the
following: (a) the amount of the Segment to which the requested interest rate
will apply, (b) the date on which the selected interest rate will become
applicable, (c) whether the interest rate selected is the Base Rate or a
LIBORBased Rate, and (d) if the interest rate selected is a LIBOR-Based Rate,
the maturity selected for the Interest Period. On the second Business Day
preceding the Business Day that a requested LIBORBased Rate is to become
applicable, the Agent shall use its best efforts to notify the Borrower by
telephone of the Agent's estimate of the applicable LIBOR-Based Rate by 10:00
a.m., Charlotte, North Carolina time, or as early on that day as may be
practical in the circumstances. The Agent shall not be required to provide an
estimate of the LIBOR-Based Rate on any day on which dealings in deposits in
Dollars are not transacted in the London interbank market. If the Borrower does
not immediately accept a LIBOR-Based Rate quoted by the Agent, the Agent may, in
view of changing market conditions, revise the quoted LIBOR-Based Rate at any
time. No LIBOR-Based Rate shall be effective until mutually agreed upon by the
Borrower and the Agent. If the Agent and the Borrower attempt to agree on a
LIBOR-Based Rate but fail so to agree, or if there is any uncertainty as to
whether or not the Agent and the Borrower have agreed upon a LIBOR-Based Rate,
interest shall accrue on the Segment for which a LIBOR-Based Rate has been
selected at the then applicable Base Rate.
SECTION 3.3 Base Rate. Each Segment subject to the Base Rate shall bear
interest from the date the Base Rate becomes applicable thereto until payment in
full, or until a LIBOR-Based Rate is selected by the Borrower and becomes
applicable thereto, on the unpaid principal balance of such Segment on an
<PAGE>
Actual/360 Basis. Any change in the Base Rate shall take effect on the effective
date of such change in the Base Rate designated by the Agent, without notice to
the Borrower and without any further action by the Agent.
SECTION 3.4 Fixed Rate. Each LIBOR-Based Rate Segment shall bear
interest from the date the LIBOR-Based Rate becomes applicable thereto until the
end of the applicable Interest Period on the unpaid principal balance of such
LIBOR-Based Rate Segment at the LIBOR-Based Rate on an Actual/360 Basis plus the
applicable Syndicated Margin.
SECTION 3.5 Changes in Syndicated Margin. Any change in the rate of
interest payable with respect to LIBOR Loans because of a change in the
Syndicated Margin shall become effective as of the day of receipt by the Agent
of the financial statement furnished to the Agent pursuant to Section 7.3(1) and
(2) hereof and the Compliance Certificate required by Section 7.3(3) to
accompany such financial statement and the determination by the Agent, based
upon such Compliance Certificate, that as a result of a change in the ratio of
Indebtedness of the Borrower and its Consolidated Entities to Consolidated Cash
Flow there has been a change in the Syndicated Margin.
<PAGE>
ARTICLE IV
TERMINATION OF LIBOR-BASED RATE AND YIELD PROTECTION
SECTION 4.1 Suspension of Loans.
(a) If at any time the Agent shall reasonably determine
(which determination, if reasonable, shall be final, conclusive and binding upon
all parties) that:
(i) by reason of any changes arising after the
Closing Date affecting the London interbank market or
affecting the position of any Lender or the Agent in such
markets, adequate and fair means do not exist for ascertaining
the LIBOR-Based Rate with respect to a LIBOR Loan or LIBOR
Market Loan; or
(ii) the continuation by any Lender of any LIBOR
Loans or LIBOR Market Loans or the funding thereof in the
London interbank market would be unlawful by reason of any
law, governmental rule, regulation, guidelines or order; or
(iii) the continuation by any Lender of any LIBOR
Loans or LIBOR Market Loans or the funding thereof in the
London interbank market would be impracticable as a result of
a contingency occurring after the date of this Agreement that
materially and adversely affects the London interbank market;
then, and in any such event, the Agent shall on such date give notice (by
telephone and confirmed in writing) to the Borrower of such determination. The
obligation of any Lender to make or maintain Fixed Rate Segments so affected or
to permit interest to be computed thereon at the LIBOR-Based Rate shall be
terminated, and interest shall thereafter be computed on the affected Segment or
Segments at the then applicable Base Rate.
(b) It is the intention of the parties that the Fixed Rates
shall accurately reflect the cost to the Lender of maintaining any Fixed Rate
Segment during any period in which interest accrues thereon at a Fixed Rate.
Accordingly:
(i) if by reason of any change after the date
hereof in any applicable law or governmental rule, regulation
or order (or any interpretation thereof and including the
introduction of any new law or governmental rule, regulation
or order), including any change in the LIBOR Reserve
Requirement, the cost to the Lender of maintaining any Fixed
Rate Segment or funding the same by means of a London
interbank market time deposit shall increase, the Fixed Rate
applicable to such Fixed Rate Segment shall be adjusted as
necessary to reflect such change in cost to the Lender,
effective as of the date on which such change in any
applicable law, governmental rule, regulation or order becomes
effective.
<PAGE>
(ii) If any Lender shall have determined that the
adoption after the date of this Agreement of any law, rule,
regulation or guideline regarding capital adequacy, or any
change in any of the foregoing or in the interpretation or
administration of any of the foregoing by any Governmental
Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any
Lender (or any lending office of any Lender) or such Lender's
holding company with any request or directive regarding
capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on such
Lender's capital or on the capital of such Lender's holding
company, as a consequence of the Lender's obligations under
this Agreement or the Advances made by such Lender pursuant
hereto to a level below that which such Lender or any such
Lender's holding company could have achieved but for such
adoption, change or compliance (taking into consideration the
Lender's guidelines with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from time to
time the Borrower shall pay to the Lender such additional
amount or amounts as will compensate the Lender or the
Lender's holding company for any such reduction suffered.
SECTION 4.2 Compensation. The Borrower shall compensate any Lender for
all reasonable losses, expenses and liabilities (including any interest by such
Lender to lenders on funds borrowed by such Lender to make or carry any Fixed
Rate Segment and any loss sustained by the Lender in connection with the
re-employment of such funds), that such Lender may sustain: (a) if for any
reason (other than a default by such Lender) following agreement between the
Borrower and such Lender as to the Fixed Rate applicable to a Fixed Rate Segment
the Borrower fails to accept such Fixed Rate Segment, (b) as a consequence of
any unauthorized action taken or default by the Borrower in the repayment of any
Fixed Rate Segment when required by the terms of this Agreement or (c) with
respect to any loss of income incurred by the Lenders (as determined in a
reasonable manner by the Agent) associated with the payment of principal other
than the last day of an Interest Period with respect to any Fixed Rate Loan. A
certificate as to the amount of any additional amounts payable pursuant to
Section 4.2 (setting forth in reasonable detail the basis for requesting such
amounts) submitted by such Lender to the Borrower shall be conclusive, in the
absence of manifest error. The Borrower shall pay to such Lender the amount
shown as due on any such certificate delivered by such Lender within 30 days
after the Borrower's receipt of the same.
SECTION 4.3 Taxes. All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future excise, stamp
or franchise taxes or other taxes, whatsoever imposed by any taxing authority,
but excluding franchise taxes and taxes imposed on or measured by any Lender's
<PAGE>
net income or receipts (such non-excluded items being called "Taxes"). In the
event that any withholding or deduction from any payment to be made by the
Borrower hereunder is required in respect of any Taxes pursuant to any
applicable law, rule or regulation, then the Borrower will
(a) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
(c) pay to the Agent for the account of the Lender such
additional amount or amounts as is necessary to ensure that the net
amount actually received by each Lender will equal the full amount such
Lender would have received had no such withholding or deduction been
required.
Moreover, if any Taxes are directly asserted against the Agent or any Lender
with respect to any payment received by the Agent or such Lender hereunder, the
Agent or such Lender may pay such Taxes and the Borrower will promptly pay such
additional amounts (including any penalties, interest or expenses) as is
necessary in order that the net amount received by the Agent or such Lender
after the payment of such Taxes (including any Taxes on such additional amount)
shall equal the amount the Agent or such Lender would have received had no such
Taxes been asserted. Upon the request of the Borrower or the Agent, each Lender
and each participant that is organized under the laws of a jurisdiction other
than the United States shall, prior to the due date or any payments under the
Notes, execute and deliver to the Borrower and the Agent, on or about the first
scheduled payment date in each Fiscal Year, one or more (as the Borrower or the
Agent may reasonably request) United States Internal Revenue Service Forms 4224
or Forms 1001 or such other forms or documents (or successor forms or
documents), appropriately completed, as may be applicable (if any are) to
establish the extent, if any, to which a payment to such Lender or participant
is exempt from withholding or deduction of Taxes.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent, for the account of the
respective Lender, the required amounts, receipts or other required documentary
evidence, the Borrower shall indemnify the Lenders for any incremental Taxes,
interest or penalties that may become payable by the Lender as a result of any
such failure. For purposes of this Section 4.3, a distribution hereunder by the
Agent or any Lender to or for the account of any Lenders shall be deemed a
payment by the Borrower.
If Taxes are incorrectly or illegally paid or assessed, and if any
Lender or the Agent contests the assessment of such Taxes, such Lender or the
Agent shall refund, to the extent of any refund made to such Lender or the
Agent, any amounts paid by the Borrower under this Section in respect of such
Taxes.
<PAGE>
Without prejudice to the survival of any other agreements of the
Borrower hereunder or any other Loan Document, the agreements of the Borrower
contained in this Section shall survive the payment in full of all its Credit
Obligations and the termination of all Commitments.
To the extent any Lender shall become liable for the payment of any
Taxes hereunder and shall seek reimbursement therefor pursuant to this Section
4.3, the Borrower shall be entitled, upon the giving of five Business Days
notice to the Agent, (i) to replace such Lender with a substitute lender, and
(ii) in connection with such substitution, prepay in full the outstanding
Commitment of the Lender requesting reimbursement without penalty or payment
under Section 4.2 hereof.
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower and each Participating Subsidiary and Participating
Partnership jointly and severally represent and warrant to the Agent and the
Lenders as follows:
SECTION 5.1 Organization, Powers, Existence, etc. (a) The Borrower and
each Consolidated Entity is duly organized or formed, validly existing and in
good standing under the laws of the state in which it is incorporated or formed,
(b) the Borrower and each Consolidated Entity has the power and authority to own
its properties and assets and to carry on its business as now being conducted,
(c) the Borrower and each Consolidated Entity has the power to execute, deliver
and perform the Loan Documents to which it is a party, and (d) the Borrower and
each Consolidated Entity is duly qualified to do business in each state in which
it is required to be so qualified.
SECTION 5.2 Authorization of Borrowing, etc. The execution, delivery
and performance of the Loan Documents (a) have been duly authorized by all
requisite action and (b) will not violate any Governmental Requirement, the
certificate of incorporation, bylaws or partnership agreement of the Borrower or
any Consolidated Entity, or any indenture, agreement or other instrument to
which the Borrower or any Consolidated Entity is a party, or by which the
Borrower or any Consolidated Entity or any of their properties are bound, or be
in conflict with, result in a breach of or constitute (with due notice or lapse
of time or both) a default under, any such indenture, agreement or other
instrument, or result in the creation or imposition of any Lien upon any of the
properties or assets of the Borrower or any Consolidated Entity, except as
required by the terms of this Agreement.
SECTION 5.3 Liabilities. The Borrower has furnished to the Agent and
the Lenders a copy of the audited consolidated balance sheet of the Borrower and
the Consolidated Entities dated as of December 31, 1993 and a statement of
changes in shareholders' equity and the related statements of income and cash
flow as of the end of Fiscal Year 1993 and the unaudited consolidated balance
sheet of the Borrower and the Consolidated Entities dated as of March 31, 1994,
and the related statements of income and cash flow for the fiscal period then
ended. Such financial statements were prepared in conformity with GAAP
consistently applied throughout the period involved, are in accordance with the
books and records of the Borrower and the Consolidated Entities, are correct and
complete and present fairly the financial condition of the Borrower and the
Consolidated Entities as of the date of such financial statements, and, since
the date of such financial statements, no material adverse change in the
financial condition, business or operations of the Borrower or any of the
Consolidated Entities has occurred. Neither the Borrower nor any Consolidated
Entity has any Liabilities, Guaranteed Obligations or other obligations or
liabilities, direct or contingent, in an aggregate amount in excess of $300,000
other than (a) the Liabilities reflected in such balance sheet and the notes
thereto or (b) Liabilities incurred in the ordinary course of business.
<PAGE>
SECTION 5.4 Taxes. The Borrower and each Consolidated Entity has filed
or caused to be filed all federal, state and local tax returns that are required
to be filed, and has paid all taxes as shown on said returns or on any
assessment received by the Borrower or any Consolidated Entity to the extent
that such taxes have become due.
SECTION 5.5 Litigation. There are no actions, suits or proceedings
pending or, to the best knowledge of the Borrower, threatened against or
affecting the Borrower, any Consolidated Entity or any Facility, by or before
any Governmental Authority that involve any of the transactions contemplated in
this Agreement or the possibility of any judgment or liability that may result
in a material adverse change in the operations or financial condition of the
Borrower and the Consolidated Entities, on a consolidated basis; and neither the
Borrower nor any Consolidated Entity is in default with respect to any material
Governmental Requirement.
SECTION 5.6 Agreements. Neither the Borrower nor any Consolidated
Entity is in default in the performance, observance or fulfillment of any of the
obligations contained in any agreement or instrument to which it is a party,
which default could have a material adverse effect upon the operations or
financial condition of the Borrower and the Consolidated Entities on a
consolidated basis.
SECTION 5.7 Use of Proceeds. Neither the Borrower nor any Participating
Subsidiary or Participating Partnership intends to use any part of the proceeds
of Advances or proceeds of drawings under Letters of Credit for the purpose of
purchasing or carrying any Margin Stock or retiring any debt incurred to
purchase or carry any Margin Stock or for any other purpose that is not
expressly authorized by this Agreement.
SECTION 5.8 ERISA Requirement. (i) The execution and delivery of the
Loan Documents will not involve any prohibited transaction within the meaning of
ERISA, (ii) the Borrower and each Consolidated Entity has fulfilled its
obligations under the minimum funding standards imposed by ERISA and each is in
compliance in all material respects with the applicable provisions of ERISA, and
(iii) no "Reportable Event," as defined in Section 4043(b) of Title IV of ERISA,
has occurred with respect to any plan maintained by the Borrower or any of its
Consolidated Entities.
SECTION 5.9 Subsidiaries. The Borrower has no direct or indirect equity
ownership in any person other than (a) Controlled Partnerships, Subsidiaries and
Consolidated Entities and (b) those ownership interests listed in Exhibit L.
None of the Subsidiaries or Controlled Partnerships has any direct or indirect
equity ownership in any other person except other Consolidated Entities except
as set forth in subparagraph (b) in the preceding sentence. The Borrower's
ownership interest in each Subsidiary and Controlled Partnership is free and
clear of all Liens, warrants, options, rights to purchase and other interests of
<PAGE>
any person except for rights of first refusal that apply to certain limited
partnership interests whose value is not material in amount and rights of first
refusal given to certain limited partners of HEALTHSOUTH Rehabilitation Center
of Charlotte Limited Partnership and HEALTHSOUTH Rehabilitation Center of San
Francisco Limited Partnership covering the Borrower's general partnership
interests therein. All capital stock of the Subsidiaries has been duly
authorized and validly issued and is fully paid and non-assessable. There have
been delivered and pledged to the Lender all certificates representing all
capital stock in all Subsidiaries. All now-existing Subsidiaries and Controlled
Partnerships are listed in Exhibit M hereto.
SECTION 5.10 Principal Place of Business. The principal place of
business and chief executive office of the Borrower is at its address shown in
Section 10.2 and will not be changed from such address unless, prior to such
change, the Borrower shall have notified the Agent of the proposed change, and
in no event will the Borrower's principal place of business or chief executive
office be located outside the State of Alabama.
SECTION 5.11 Environmental Laws. The Borrower and each Consolidated
Entity are in material compliance with all applicable federal, state and local
laws and regulations relating to air, water, soil and other environmental
quality and all material laws relating to the handling and disposal of hazardous
waste materials.
SECTION 5.12 Disclosure. No financial statement, document, certificate
or other written communication furnished to the Agent or the Lenders by or on
behalf of the Borrower or any Consolidated Entity or to the extent not a
Consolidated Entity any Participating Subsidiary or Participating Partnership in
connection with any Loan Document contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading. There is no fact known to the
Borrower that materially adversely affects the business or condition of the
Borrower or any Material Group that has not been disclosed herein or in such
financial statements.
SECTION 5.13 Licenses. All material certificates of need, licenses,
permits, accreditations and approvals required by all Governmental Authorities
necessary in order for each Facility to be operated for its intended purpose
have been obtained and are in full force and effect.
SECTION 5.14 Title to Properties. The Borrower has good and marketable
title to all its properties and assets reflected on the balance sheet referred
to in Section 5.3 except for those matters shown on such balance sheet and
except for such properties and assets as have been disposed of since the date of
said balance sheet as no longer used or useful in the conduct of its business or
as have been disposed of in the ordinary course of the business and except that
the property of HEALTHSOUTH Doctors' Hospital, Inc. is held subject to a right
of first refusal benefitting the Dr. John T. Macdonald Foundation. All such
properties and assets are free and clear of all Liens, except as otherwise
permitted or required by the provisions of the Loan Documents.
<PAGE>
ARTICLE VI
GENERAL CONDITIONS OF LENDING
The Lenders' obligation to make each Advance hereunder is subject to
the following conditions precedent:
SECTION 6.1 Representations and Warranties. On the date of each Advance
hereunder and on the date the Borrower presents to the Agent a Request for
Advance or Interest Rate Election form or Competitive Bid Quote Request or
Application, and on the Conversion Date the representations and warranties set
forth in this Agreement and in all other Loan Documents shall be true and
correct on and as of such date with the same effect as though such
representations and warranties had been made on the date of the Advance or on
the date the Borrower presents to the Agent a Request for Advance or Interest
Rate Election form or Competitive Bid Quote Request or Application or on the
Conversion Date, as the case may be. Each such warranty and representation shall
be deemed to be continuing in effect so long as this Agreement remains in
effect. The presentation by the Borrower of each Request for Advance or Interest
Rate Election, Competitive Bid Quote Request, Application or Term Note shall
constitute a representation and warranty by the Borrower to the Lender that no
material adverse change in the financial condition of the Borrower and the
Consolidated Entities, on a consolidated basis, as reflected in the financial
statements delivered to the Agent and Lenders pursuant to Section 5.3 has
occurred since the date of such financial statements.
SECTION 6.2 No Default. On the date of each Advance and issuance of a
Letter of Credit hereunder and on the Conversion Date, the Borrower and all
Material Groups shall be in compliance with all the terms and conditions set
forth in this Agreement on its or their part to be observed or performed, and no
Event of Default, nor event that upon notice or lapse of time or both would
constitute an Event of Default, shall have occurred and be continuing.
SECTION 6.3 Supporting Documents.
(a) The Agent, on behalf of the Lenders, shall have also
received on the date of execution of this Agreement (i) a copy of resolutions of
the Board of Directors of the Borrower, certified as in full force and effect on
such date by the Secretary of the Borrower, authorizing the execution, delivery
and performance of the Loan Documents and authorizing designated officers of the
Borrower to execute and deliver the Loan Documents on behalf of the Borrower and
to execute and deliver to the Agent Request for Advance or Interest Rate
Election or Competitive Bid Quote Request forms and Applications; (ii) a
certificate of the Secretary of the Borrower, dated such date, certifying that
(A) an attached copy of the Certificate of Incorporation and bylaws of the
Borrower is true and correct as of such date, (B) that the Certificate of
Incorporation and Bylaws of the Borrower have not been amended since the date of
the last amendment attached thereto and (C) the incumbency and specimen
signatures of the designated officers referred to in clause (i) above; (iii) an
Opinion of Counsel to the Borrower in the form required by the Agent; (iv) duly
executed Pledge Agreements by the Borrower, the Participating Subsidiaries and
the Participating Partnerships to the extent applicable, together with all stock
powers, stock certificates and financing statements related thereto; (v) such
additional supporting documents as the Agent may reasonably request; and (vi)
all fees payable to the Agent and the Lenders.
<PAGE>
(b) The Agent, on behalf of the Lenders, shall also have
received on or before the date on which a Subsidiary becomes a Participating
Subsidiary (on or before the Closing Date in the case of each Subsidiary listed
in Exhibit G hereto) (i) a copy of resolutions of the Board of Directors and
shareholders of such Subsidiary (if necessary) certified as in full force and
effect on the date thereof by the Secretary of such Subsidiary, authorizing such
Subsidiary's execution, delivery and performance of, and the assumption of
liability under, the Loan Documents and all other agreements and instruments
that this Agreement contemplates will be executed, delivered and performed by
such Subsidiary; (ii) a copy of the Certificate of Incorporation or Articles of
Incorporation, as the case may be, and Bylaws of such Subsidiary, certified as
true and correct on and as of the date on which Loan Documents are executed and
delivered by the Borrower and such Subsidiary; (iii) an Opinion of Counsel to
such Subsidiary in a form acceptable to the Agent as to the execution and
delivery by such Subsidiary of the Loan Documents and other matters related
thereto; (iv) fully executed copies of all Loan Documents that this Agreement
contemplates will be executed or delivered (or both) by such Subsidiary
(including a fully executed Subsidiary Guaranty Agreement); and (v) such
additional supporting documents as the Agent or its counsel may reasonably
request.
(c) The Agent, on behalf of the Lenders, shall also have
received on or before the date on which a Controlled Partnership becomes a
Participating Partnership (on or before the Closing Date in the case of each
Controlled Partnership listed in Exhibit G hereto) (i) a copy of the partnership
agreement under which such Controlled Partnership was formed, certified as true
and correct on and as of the date of which Loan Documents are executed and
delivered by the Borrower and such Controlled Partnership; (ii) an Opinion of
Counsel to such Controlled Partnership in a form acceptable to the Agent as to
the execution and delivery by such Controlled Partnership of the Loan Documents
and other matters related thereto; (iii) fully executed copies of all Loan
Documents that this Agreement contemplates will be executed or delivered (or
both) by such Controlled Partnership (including a fully executed Partnership
Guaranty Agreement); and (iv) such additional supporting documents as the Agent
or its counsel may reasonably request.
<PAGE>
ARTICLE VII
GENERAL COVENANTS OF THE BORROWER
From the date on which this Agreement is delivered until payment in
full of the Credit Obligations and the termination in writing of the Lenders'
obligation to extend credit under this Agreement, the Borrower and each
Participating Subsidiary and Participating Partnership, jointly and severally,
covenant and agree that:
SECTION 7.1 Existence, Properties, etc. The Borrower shall, and shall
cause each Consolidated Entity to, (a) do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
and franchises and comply with all Governmental Requirements applicable to it
and (b) at all times maintain, preserve and protect all franchises and trade
names and preserve all of its property used or useful in the conduct of its
business and keep the same in good repair, working order and condition, and from
time to time make, or cause to be made, all needful and proper repairs and
improvements thereto (normal wear and tear excepted).
SECTION 7.2 Payment of Indebtedness, Taxes, etc. The Borrower shall,
and shall cause each Consolidated Entity to, (a) pay its indebtedness and
obligations in accordance with normal terms and (b) pay and discharge or cause
to be paid and discharged promptly all taxes, assessments and other charges or
levies of Governmental Authorities imposed upon it or upon its income and
profits or upon any of its properties before the same shall become in default;
provided, however, that the Borrower and the Consolidated Entities shall not be
required to pay and discharge or cause to be paid and discharged any such
indebtedness, obligation, tax, assessment, charge, levy or claim so long as the
validity thereof shall be duly pursued and contested in good faith by
appropriate proceedings and the Borrower and the Consolidated Entities shall
maintain adequate reserves for such taxes, indebtedness, obligations,
assessments, charges, levies or claims during such proceedings.
SECTION 7.3 Financial Statements, Reports, etc. It shall deliver or
cause to be delivered to the Agent and each Lender:
(1) Not later than 50 days after the end of each calendar
quarter, a balance sheet and a statement of revenues and expenses of
the Borrower and its Consolidated Entities on a consolidated and on a
consolidating basis (provided Borrower may report the results of
operations of its outpatient centers on an aggregate basis) and a
statement of cash flow of the Borrower and its Consolidated Entities on
a consolidated basis for such calendar quarter and for the period
beginning on the first day of the fiscal year and ending on the last
day of such calendar quarter (in sufficient detail to indicate the
Borrower's and each Consolidated Entity's compliance with the financial
covenants set forth in this Article VII), together with statements in
comparative form for the corresponding periods in the preceding fiscal
<PAGE>
year together with calculations supporting the same store performance
as summarized in the Borrower's Form 10-Q for the corresponding period,
and certified by the president or chief financial officer of the
Borrower.
(2) Not later than 100 days after the end of each fiscal year,
financial statements (including a balance sheet, a statement of
revenues and expenses, a statement of changes in shareholders' equity
and a statement of cash flow) of the Borrower and its Consolidated
Entities on a consolidated and on a consolidating basis (provided
Borrower may report the results of operations of its outpatient centers
on an aggregate basis) for such fiscal year (in sufficient detail to
indicate the Borrower's and each Consolidated Entity's compliance with
the financial covenants set forth in this Article VII), together with
statements in comparative form for the preceding fiscal year together
with calculations supporting the same store performance as summarized
in the Borrower's Form 10-K for the corresponding period, and
accompanied by an opinion of certified public accountants acceptable to
the Agent, which opinion shall state in effect that such financial
statements (A) were audited using generally accepted auditing
standards, (B) were prepared in accordance with generally accepted
accounting principles applied on a consistent basis, and (C) present
fairly the financial condition and results of operations of the
Borrower and its Consolidated Entities for the periods covered.
(3) Together with the financial statements required by
paragraphs (1) and (2) above a compliance certificate duly executed by
the chief executive officer or the president or chief financial officer
of the Borrower in the form of Exhibit I attached hereto ("Compliance
Certificate"), accompanied by a contribution report in the form
attached as Schedule I-3 to Exhibit I and an accounts receivable aging
report in the form attached as Schedule I-4 to Exhibit I.
(4) Promptly upon receipt thereof, copies of all reports,
management letters and other documents submitted to the Borrower or any
Consolidated Entity by independent accountants in connection with any
annual or interim audit of the books of the Borrower or any
Consolidated Entity made by such accountants.
(5) Contemporaneously with the distribution thereof to the
Borrower's or any Consolidated Entity's stockholders or partners or the
filing thereof with the Securities and Exchange Commission, as the case
may be, copies of all statements, reports, notices and filings
distributed by the Borrower or any Consolidated Entity to its
stockholders or partners or filed with the Securities and Exchange
Commission (including reports on SEC Forms 10-K, 10-Q and 8-K).
(6) Promptly after the Borrower knows or has reason to know of
the occurrence of any "reportable event" under Section 4043 of ERISA
applicable to the Borrower or any Consolidated Entity, a certificate of
the president or chief financial officer of the Borrower setting forth
the details as to such "reportable event" and the action that the
<PAGE>
Borrower or the Consolidated Entity has taken or will take with respect
thereto, and promptly after the filing or receiving thereof, copies of
all reports and notices that the Borrower and each Consolidated Entity
files under ERISA with the Internal Revenue Service or the Pension
Benefit Guaranty Corporation or the United States Department of Labor.
(7) Promptly after the Borrower or any of its Consolidated
Entities becomes aware of the commencement thereof, notice of any
investigation, action, suit or proceeding before any Governmental
Authority involving the condemnation or taking under the power of
eminent domain of any of its property or the revocation or suspension
of any permit, license, certificate of need or other Governmental
Requirement applicable to any Facility.
(8) Within 10 days of the receipt by the Borrower or any of
its Consolidated Entities, copies of all material deficiency notices,
compliance orders or adverse reports issued by any Governmental
Authority or accreditation commission having jurisdiction over
licensing, accreditation or operation of a Facility or by any
Governmental Authority or private insurance company pursuant to a
provider agreement, which, if not promptly complied with or cured,
could result in the suspension or forfeiture of any license,
certification or accreditation necessary in order for the Facility to
carry on its business as then conducted or the termination of any
material insurance or reimbursement program available to the Facility.
(9) No less frequently than once in each calendar year and at
any time the Agent reasonably requests, a certificate of the risk
management director of the Borrower describing all insurance maintained
by the Borrower and its Consolidated Entities, and certifying that such
insurance complies with the requirements of this Agreement and
attaching thereto the certificates of insurance issued by the insurers
for all insurance described in such certificate; provided, however, the
Borrower shall promptly notify the Agent of any material change in the
insurance coverages required by this Agreement or any other Loan
Document.
(10) Such other information regarding any Facility or the
financial condition or operations of the Borrower or its Consolidated
Entities as the Agent shall reasonably request from time to time or at
any time.
SECTION 7.4 Litigation Notice. The Borrower shall, promptly after the
same shall have become known to any officer of the Borrower, notify the Agent in
writing of any action, suit or proceeding at law or in equity or by or before
any Governmental Authority that, if adversely determined, might impair the
ability of the Borrower or any Material Group to perform its obligations under
<PAGE>
this Agreement or any other Loan Document or might materially and adversely
affect the business or condition, financial or other, of the Borrower or any
Material Group.
SECTION 7.5 Default Notice. The Borrower shall promptly give notice in
writing to the Agent of the occurrence of any Default or Event of Default.
SECTION 7.6 Further Assurances. The Borrower shall at its cost and
expense, upon the request of the Agent, duly execute and deliver, or cause to be
duly executed and delivered, to the Agent such further instruments and do and
cause to be done such further acts as may be reasonably necessary or proper in
the opinion of the Agent or its counsel to carry out more effectively the
provisions and purposes of the Loan Documents.
SECTION 7.7 Insurance. The Borrower and each Consolidated Entity shall
at all times maintain in force, and pay all premiums and costs related to,
insurance coverages comparable to the coverages reviewed by the Agent prior to
the Closing Date a summary of which coverage is set forth in Exhibit J hereto
and any other coverages required under applicable Governmental Requirements. The
Borrower shall deliver to the Agent annually on or before the anniversary date
of this Agreement, and at such other time or times as the Agent may request (but
not more often than monthly), a certificate of the president or chief financial
officer of the Borrower setting out in such detail as the Agent may reasonably
require a description of all insurance coverages maintained by the Borrower and
each Consolidated Entity. The Agent shall have no obligation to give the
Borrower or any Consolidated Entity notice of any notification received by the
Agent with respect to any insurance policies or take any steps to protect the
Borrower's or any Consolidated Entity's interests under such policies.
SECTION 7.8 Covenants Regarding Financial Condition.
(a) The Borrower covenants and agrees that:
(1) Minimum Net Worth. Consolidated Net Worth shall
not be less than $300,000,000 plus (A) 75% of Consolidated Net
Income (if positive and including for purposes of this Section
7.8(a)(1) only any extraordinary gain), on an ongoing basis
for each fiscal quarter beginning with the fiscal quarter
ending June 30, 1994, plus (B) the aggregate amount of all
increases, if any, in its capital accounts resulting from the
issuance of Capital Stock or conversion of debt into Capital
Stock or other securities properly classified as equity in
accordance with generally accepted accounting principles, or
from the sale or other disposition of treasury shares, from
the date of this Agreement through the date of determination.
(2) Working Capital Ratio. The ratio of Consolidated
Current Assets to Consolidated Current Liabilities shall not
at any time be less than 2.00 to 1.00.
<PAGE>
(3) Consolidated Leverage Ratio. The ratio of
Indebtedness of Borrower and its Consolidated Entities to
Consolidated Total Capital shall during the periods set forth
below be equal to or less than the ratio set forth opposite
such period:
Ratio of
Consolidated
Period Indebtedness to Total Capital
Closing Date through .75 1.00
September 30, 1994
October 1, 1994 through .725 1.00
December 31, 1995
January 1, 1996 through .675 1.00
December 31, 1996
January 1, 1997 through .65 1.00
the Conversion Date
Thereafter .55 1.00
(4) Senior Indebtedness to Consolidated Total
Capital. The ratio of Senior Indebtedness to Consolidated
Total Capital shall at all times be equal to or less than .45
to 1.00.
(5) Indebtedness to Consolidated Cash Flow. The ratio
of Indebtedness of the Borrower and its Consolidated Entities
to Consolidated Cash Flow shall at all times during the
periods set forth below be equal to or less than the ratio set
forth opposite such period:
Ratio of
Consolidated
Period Indebtedness to Cash Flow
Closing Date through 5.50 1.00
September 30, 1994
October 1, 1994 through 5.00 1.00
December 31, 1994
January 1, 1995 through 4.75 1.00
June 30, 1995
July 1, 1995 through 4.25 1.00
December 31, 1995
January 1, 1996 through 3.75 1.00
December 31, 1996
January 1, 1997 and 3.50 1.00
Thereafter
(6) Debt Service Coverage Ratio. The Debt Service
Coverage Ratio shall not at any time be less than 1.75 to
1.00.
<PAGE>
(7) EBITDA Coverage Ratio. The EBITDA Coverage Ratio
shall not at any time be less than 2.25 to 1.00.
(8) Capital Expenditures. The Borrower and the
Consolidated Entities on a consolidated basis will not (i)
make Capital Expenditures on a non-cumulative basis in an
amount in excess of (a) in Fiscal Year 1994 $135,000,000 plus
up to $40,000,000 to be utilized solely for the purpose of
acquiring Diagnostic Health Corporation and capital
expenditures relating to Diagnostic Health Corporation
subsequent to its acquisition, but in no event shall total
Capital Expenditures exceed $170,000,000 in Fiscal Year 1994,
and (b) in any Fiscal Year thereafter the lesser of
$150,000,000 or 100% of Cash Flow Available for Capital
Expenditures (including Capital Expenditures not to exceed
$20,000,000 related to Diagnostic Health Corporation) and (ii)
make Capital Expenditures exceeding in the aggregate
$20,000,000 during any Fiscal Year with respect to any one
particular Facility. There shall not be included as a Capital
Expenditure the portion of the purchase price of any
Acquisition which is paid for with Capital Stock of the
Borrower; provided, however, that the total of (x) Capital
Expenditures and (y) Acquisitions in which Capital Stock is
used to pay all or a portion of the purchase price may not
exceed $250,000,000 in any Fiscal Year. For purposes of this
Section 7.8(a)(8) the value of a share of Capital Stock of
Borrower shall be the closing price of such Capital Stock on
the New York Stock Exchange on the effective date of such
Acquisition. In addition, the portion of the purchase price of
any Acquisition which represents the acquisition of accounts
receivable shall not be included as a Capital Expenditure for
purposes of determining compliance with this Section 7.8(a)(8)
if (i) such accounts receivable are less than 151 days old and
(ii) the portion of the purchase price represented by accounts
receivable does not exceed 30% of the purchase price of the
Acquisition (any amount by which the accounts receivable
exceed 30% of the purchase price of the Acquisition to be
treated as a Capital Expenditure). All accounts receivable
shall be valued at the lesser of the net amount owed thereon
or their book value.
(9) Indebtedness. The Borrower and Consolidated
Entities on a consolidated basis will not incur, or otherwise
become liable with respect to, any Indebtedness other than (A)
the Credit Obligations; (B) Indebtedness arising under those
Letters of Credit set forth on Exhibit K which Letters of
Credit shall not be modified or amended; (C) the Senior
Subordinated Notes and the Convertible Subordinated
Debentures; (D) up to an aggregate of $10,000,000 of unsecured
Indebtedness incurred prior to the Maturity Date, but no
extension, renewal or replacement thereof; (E) up to
$10,000,000 of Indebtedness incurred to purchase property,
plant or equipment; (F) Guaranteed Obligations permitted under
Section 7.8(a)(10); and (G) Subordinated Indebtedness of the
Borrower, the proceeds of which are used to permanently reduce
the principal portion of the Senior Subordinated Notes or the
Convertible Subordinated Debentures so long as such
Subordinated Indebtedness is (i) unsecured, (ii) bears
interest at a rate of 12% or less per annum, (iii) contains
covenants, restrictions, terms of subordination and redemption
provisions no less favorable to the Lenders than those
contained in Indentures pursuant to which the Senior
Subordinated Notes or Convertible Subordinated Debentures, as
the case may be, were issued, as such Indentures exist on the
Closing Date, (iv) prohibits payment of principal whether by
its terms or by prepayment prior to 100 days next following
the Maturity Date, and (v) does not result in an increase in
the amount of outstanding Indebtedness.
<PAGE>
(10) Guarantees. Borrower and the Consolidated
Entities on a consolidated basis will not incur any Guaranteed
Obligations (whether by directly guaranteeing obligations of
another person or by agreement to purchase the indebtedness of
any other person, or entering into an agreement for the
furnishing of funds to any other person through the purchase
of goods, supplies or services or by way of stock purchase,
contribution, advance or loan for the purpose of paying or
discharging the indebtedness of any other person or
otherwise), in an aggregate amount in excess of $30,000,000,
except for (A) the endorsement of negotiable instruments in
the ordinary course of business for collection; (B)
obligations arising by reason of the Borrower's status as a
general partner of a Controlled Partnership; (C) obligations
to advance funds to Subsidiaries and Controlled Partnerships,
but only so long as the note or notes or accounts receivable
evidencing the advance of such funds is assigned to the Agent
as security for the Credit Obligations; (D) the guarantees
arising under the Guaranty Agreements; (E) the guarantee of up
to $22,000,000 of Indebtedness of Vanderbilt, and (F)
guarantees of Indebtedness incurred to pay the principal
amount of the Credit Obligations, provided that, concurrently
with the incurrence of such Guaranteed Obligation, the
Borrower and the Agent agree in writing to reduce the credit
available to the Borrower under this Agreement by an amount
equal to the amount of such Guaranteed Obligations and the
Borrower pays any fee required to be paid in connection with
such reduction.
(11) Lease Payments. Borrower will not, and will not
permit any Consolidated Entity to, incur the obligation to
make Lease Payments in an aggregate amount in excess of
$3,500,000 in any Fiscal Year; and the Borrower and its
Consolidated Entities on a consolidated basis will not incur
the obligation to make Lease Payments in an aggregate amount
in excess of (i) $60,000,000 in the Fiscal Year ended December
31, 1994, (ii) $65,000,000 in the Fiscal Year ended December
31, 1995, (iii) $70,000,000 in the Fiscal Year ended December
31, 1996, and (iv) $75,000,000 in any Fiscal Year thereafter.
<PAGE>
(12) Investment and Loans. Borrower and the
Consolidated Entities on a consolidated basis will not,
directly or indirectly, purchase or otherwise acquire any
stock, security, obligation or evidence of indebtedness of,
make any capital contribution to, own any equity interest in,
or make any loan or advance to, any other person; provided,
however, that it may continue to hold (A) all stock of and own
partnership interests in the persons that constitute
Consolidated Entities on the Closing Date; (B) stock of,
partnership interests in, and assets of, new Consolidated
Entities acquired subsequent to the Closing Date (such
purchases to be included as a Capital Expenditure for purposes
of determining compliance with Section 7.8(a)(8) hereof); (C)
Permitted Investments; and (D) investments in an aggregate
amount not exceeding $20,000,000 in corporations, partnerships
or joint ventures who do not constitute Consolidated Entities
(such investments not to be included as a Capital Expenditure
for purposes of determining compliance with Section 7.8(a)(8)
hereof), provided if any single investment exceeds
$15,000,000, Borrower shall provide to the Agent prior to
making such investment, a Compliance Certificate demonstrating
that on a pro forma historical basis giving effect to such
investment as at the beginning of the most recent Four-Quarter
Period covered by such Compliance Certificate no Default or
Event of Default would exist.
(13) Disposition of Assets. Borrower and the
Consolidated Entities on a consolidated basis will not without
the consent of the Required Lenders (which consent shall not
be unreasonably withheld), sell, lease, transfer or otherwise
dispose of in excess of 5% of their total properties and
assets over the term of this Agreement; except (A) the
Borrower may lease its existing skilled nursing facility
located in New Orleans, Louisiana to a third party on terms
fairly reflecting current market conditions at the time of
lease, and (B) the Borrower may sell physician or medical
office buildings or other non-revenue producing properties and
out-patient buildings listed in Exhibit O, other than a
Facility, at a price not less than the book value of such
property at the time of sale.
(14) Consolidation or Merger. Borrower and its
Consolidated Entities may merge or consolidate with another
person only if (i) in the case of a merger or consolidation of
the Borrower, the Borrower is the continuing or surviving
entity, (ii) in the case of a merger or consolidation
involving a Consolidated Entity, the continuing or surviving
entity is majority-owned by the Borrower (with such majority
ownership constituting a controlling interest), and (iii)
before and after giving effect to the proposed merger or
consolidation, no Default or Event of Default shall exist
under this Agreement; provided that in the case of any
consolidation or merger with a person which is not a
Consolidated Entity and the total assets of such person exceed
$15,000,000 the Borrower shall provide to the Agent prior to
such merger or consolidation a Compliance Certificate
demonstrating that on a pro forma historical basis giving
effect to such merger or consolidation as at the beginning of
the most recent Four-Quarter Period covered by such Compliance
Certificate no Default or Event of Default would exist.
(15) Liens. Borrower will not, and will not permit
any Consolidated Entity to, incur, create, assume or permit to
exist any Lien upon any of its accounts receivable, contract
rights, chattel paper, inventory, equipment, instruments,
general intangibles or other personal or real property of any
character, whether now owned or hereafter acquired, other than
(i) Liens that constitute Permitted Encumbrances, (ii) Liens
existing as of the date hereof and described on Exhibit N
hereof and (iii) Liens securing Indebtedness incurred under
Section 7.8(a)(9)(E) so long as the Lien extends only to the
asset acquired with such Indebtedness.
(16) Dividends and Distributions. Borrower will not
permit any Consolidated Entity to be or become subject to any
restrictions on the ability of such Consolidated Entity to pay
dividends or to make partnership distributions.
(17) Acquisitions. Prior to entering into any
agreement to acquire any person or Facility, the Borrower
shall provide to the Agent evidence, (i) that the person or
Facility to be acquired is in the same line of business
presently engaged in by the Borrower or its Consolidated
Entities, (ii) that the person or Facility to be acquired does
not oppose the Acquisition, and (iii) if the cost of the
Acquisition exceeds $15,000,000, prior to consummation of such
Acquisition deliver to the Agent a Compliance Certificate
demonstrating on a pro forma basis, giving effect to such
Acquisition, that no Default or Event of Default will exist
under this Agreement.
(18) Restricted Payments. Borrower will not declare
or pay dividends (other than stock dividends) or make any
other stockholder distributions to the shareholders of the
Borrower or redemptions or purchases of the Capital Stock of
Borrower, or make any principal payments with respect of
Subordinated Indebtedness (collectively "Restricted Payments")
except Borrower may make Restricted Payments in any Fiscal
Year so long as such payments are less than 25% of
Consolidated Net Income for such Fiscal Year and Borrower
shall deliver to the Agent prior to making any such Restricted
Payment a Compliance Certificate demonstrating that on a pro
forma basis after giving effect to such payment no Default or
Event of Default exists.
<PAGE>
(b) Except as otherwise expressly provided in this
Section 7.8, (i) the Borrower shall also cause and require each of its
Consolidated Entities to observe and perform each of the covenants and
agreements of this section to be observed and performed by the
Borrower, whether or not a specific reference is made to the
Consolidated Entities in each such covenant (other than the financial
covenants set forth in paragraphs (1) through (7) of subsection (a)
above, which apply to the Borrower and the Consolidated Entities on a
consolidated basis), and (ii) all computations required in connection
with such financial covenants and the limitations set forth in
paragraphs (8) through (18) of subsection (a) above shall be made for
the Borrower and its Consolidated Entities on a combined or
consolidated basis, in accordance with generally accepted accounting
principles, after elimination of intercompany items.
SECTION 7.9 Continuation of Current Business. Neither the Borrower nor
any Consolidated Entity will (i) engage in any business other than the business
now being conducted by it and other businesses directly related to providing
rehabilitation services (including outpatient surgery, diagnostic services and
management of physician practices) or orthopedic surgery related acute care
similar in operation (but not in scope) to the HEALTHSOUTH Medical Center
Facility or (ii) acquire or attempt to acquire any person who is opposed to such
acquisition.
SECTION 7.10 Management Contracts. Neither the Borrower nor any
Consolidated Entity will enter into any agreement whereby the management,
supervision or control of its business or any Facility shall be delegated to or
placed in any persons other than its governing body and officers, the Borrower
or a Consolidated Entity, except that management of the Facility owned by
Vanderbilt Stallworth Rehabilitation Hospital, L.P. is vested in part in a
Governance Committee and in part in a Subsidiary of the Borrower pursuant to the
applicable limited partnership agreement and a management agreement.
SECTION 7.11 Cooperation; Inspection of Properties. The Borrower shall,
and shall cause the Consolidated Entities to, permit the Lenders and their
representatives to inspect the Borrower's and the Consolidated Entities'
properties and assets, and to inspect, review and audit the Borrower's and the
Consolidated Entities' books and records from time to time and at any time.
SECTION 7.12 Use of Proceeds. The Borrower shall use the proceeds of
Advances exclusively to provide funding for the acquisition and development of
Facilities and to provide working capital to the Borrower, the Participating
Subsidiaries and the Participating Partnerships.
SECTION 7.13 Limit on Investment in HEALTHSOUTH of Birmingham, Inc. The
Borrower will not cause or permit its aggregate direct and indirect investment,
whether by stock purchase, capital contribution, advance, loan, guarantee or
otherwise, in HEALTHSOUTH of Birmingham, Inc. to exceed at any time $500,000.
SECTION 7.14 Additional Consolidated Entities. On the last day of each
fiscal quarter of the Borrower (or such earlier time as the Agent may request)
the Borrower will cause each Consolidated Entity that is hereafter acquired or
created to become a Participating Subsidiary or Participating Partnership by
execution of a Guaranty Agreement and all other documents necessary to cause it
to become jointly and severally liable for the Credit Obligations (subject to
the limitations provided in the Guaranty Agreement) and the Borrower or the
Participating Subsidiary or the Participating Partnership, if applicable, shall
execute a Pledge Agreement as more particularly described in Section 2.7 herein
and shall deliver or cause to be delivered all financing statements, stock
certificates and duly executed stock powers necessary to perfect the Agent's
security interest granted under such Pledge Agreement.
SECTION 7.15 ERISA. With respect to all employee pension benefit plans
maintained by the Borrower or any Subsidiary:
(i) terminate any of such employee pension benefit plans so as to
incur any liability to the Pension Benefit Guaranty Corporation
established pursuant to ERISA;
(ii) allow or suffer to exist any prohibited transaction involving
any of such employee pension benefit plans or any trust created
thereunder which would subject the Borrower or a Subsidiary to a tax or
penalty or other liability on prohibited transactions imposed under
Internal Revenue Code Section 4975 or ERISA;
(iii) fail to pay to any such employee pension benefit plan any
contribution which it is obligated to pay under the terms of such plan;
(iv) allow or suffer to exist any accumulated funding deficiency,
whether or not waived, with respect to any such employee pension
benefit plan;
<PAGE>
(v) allow or suffer to exist any occurrence of a reportable event
or any other event or condition, which presents a material risk of
termination by the Pension Benefit Guaranty Corporation of any such
employee pension benefit plan that is a Single Employer Plan, which
termination could result in any liability to the Pension Benefit
Guaranty Corporation; or
(vi) incur any withdrawal liability with respect to any
Multi-employer Plan.
<PAGE>
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.1 Events of Default. The following shall constitute Events of
Default under this Agreement:
(a) the Borrower or any Participating Subsidiary or any
Participating Partnership shall fail to pay within (i) one Business Day of the
date when due any principal payable under the terms of any Note or (ii) three
Business Days of the date when due any interest or fees payable under the terms
of any Note or any amount payable under this Agreement, any Guaranty Agreement
or any other of the Credit Obligations or any other amount owed to the Agent or
Lenders under or in connection with the Loan Documents; or
(b) The Borrower or any Material Group shall default in the
performance or observance of any other provision of this Agreement (other than
the provisions of Article VII hereof), except as covered by clause (a) above,
and shall not cure such default within thirty days after the first to occur of
(i) the date the Agent or Lenders gives written or telephonic notice of the
default to the Borrower or (ii) the date the Borrower otherwise has notice
thereof; or
(c) the Borrower or any Participating Subsidiary or any
Participating Partnership or any Material Group shall default in the observance
or performance of any provision in Article VII hereof; or
(d) the Agent shall determine that any statement,
certification, representation or warranty contained herein, or in any of the
other Loan Documents or in any report, financial statement, certificate or other
instrument delivered to the Agent or any Lender by or on behalf of the Borrower
or any Participating Subsidiary or any Participating Partnership was misleading
or untrue in any material respect at the time it was made; or
(e) default shall be made (i) in the payment of any
Indebtedness (other than the Credit Obligations) of the Borrower or any
Consolidated Entity when due or (ii) in the performance, observance or
fulfillment of any term or covenant contained in any agreement or instrument
under or pursuant to which any such Indebtedness may have been issued, created,
assumed, guaranteed or secured by Borrower or any Consolidated Entity, if the
effect of such default is to accelerate the maturity of such Indebtedness or to
permit the holder thereof to cause such Indebtedness to become due prior to its
stated maturity, and such default shall not be cured within 10 days after the
occurrence of such default, and the amount of the Indebtedness involved exceeds
$3,000,000; or
(f) the Borrower or any Material Group shall fail to pay its
or their debts generally as they come due, or a receiver, trustee, liquidator or
other custodian shall be appointed for the Borrower or any Material Group or for
any of the property of the Borrower or any Material Group or a petition in
bankruptcy, or under any insolvency law, shall be filed by or against the
Borrower or any Material Group or the Borrower or any Material Group shall apply
for the benefit of, or take advantage of, any law for relief of debtors, or
enter into an arrangement or composition with, or make an assignment for the
benefit of, creditors; or
<PAGE>
(g) final judgment for the payment of money in excess of any
aggregate of $50,000 shall be rendered against the Borrower or any participating
Subsidiary or any Participating Partnership or any Material Group, and the same
shall remain undischarged for a period of 30 days during which execution shall
not be effectively stayed; or
(h) an event of default, as therein defined, shall occur under
any other Loan Document; or
(i) if any of the Guaranty Agreements, Notes, Pledge
Agreements or LC Agreement shall be deemed unenforceable by a court of competent
jurisdiction or shall no longer be effective; or
(j) if any person or group of persons acting together who are
not as at the Closing Date owners of Capital Stock of the Borrower having voting
rights shall own directly or indirectly fifteen percent (15%) or more of the
Capital Stock of the Borrower having voting rights; or
(k) if (i) the Borrower or any Consolidated Entity shall
engage in any prohibited transaction (as described in Section 7.15(ii) hereof),
which is not subject to a statutory or administrative exemption, involving any
employee pension benefit plan of the Borrower or any Consolidated Entity, (ii)
any accumulated funding deficiency (as referred to in Section 7.15(iv) hereof),
whether or not waived, shall exist with respect to any Single Employer Plan,
(iii) a reportable event (as referred to in Section 7.15(v) hereof) (other than
a reportable event for which the statutory notice requirement to the Pension
Benefit Guaranty Corporation has been waived by regulation) shall occur with
respect to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed to administer or to terminate, any Single Employer
Plan, which reportable event or institution or proceedings is, in the reasonable
opinion of the Required Lenders, likely to result in the termination of such
Single Employer Plan for purposes of Title IV of ERISA, and in the case of such
a reportable event, the continuance of such reportable event shall be unremedied
for sixty (60) days after notice of such reportable event pursuant to Section
4043(a), (c) or (d) of ERISA is given, as the case may be, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, and such
termination results in a material liability of the Borrower or any Consolidated
Entity to such Single Employer Plan or the Pension Benefit Guaranty Corporation,
(v) the Borrower or any Subsidiary shall withdraw from a Multi-employer Plan for
purposes of Title IV of ERISA, and, as a result of any such withdrawal, the
Borrower or any Consolidated Entity shall incur withdrawal liability to such
Multi-employer Plan, or (vi) any other event or condition shall occur or exist;
and in each case in clauses (i) through (vi) of this Section 8.1(k), such event
or condition, together with all other such events or conditions, if any, could
subject the Borrower or any Consolidated Entity to any tax, penalty or other
liabilities in excess of $100,000, and in each such case the event or condition
is not remedied to the satisfaction of the Required Lenders within ninety (90)
days after the earlier of (i) receipt of notice of such event or condition by
the Authorized Representative from the Agent or (ii) the Borrower becomes aware
of such event or condition; then, and in any such event and at any time
thereafter, if such Event of Default shall then be continuing,
<PAGE>
(A) either or both of the following actions may be
taken: (i) the Agent may, and at the direction of the Required
Lenders shall, declare any obligation of the Lenders to make
further Loans or issue Letters of Credit terminated, whereupon
the obligation of each Lender to make further Loans or
NationsBank to issue Letters of Credit, hereunder shall
terminate immediately, and (ii) the Agent shall at the
direction of the Required Lenders, at their option, declare by
notice to the Borrower any or all of the Credit Obligations to
be immediately due and payable, and the same, including all
interest accrued thereon and all other obligations of the
Borrower to the Lenders, shall forthwith become immediately
due and payable without presentment, demand, protest, notice
or other formality of any kind, all of which are hereby
expressly waived, anything contained herein or in any
instrument evidencing the Credit Obligations to the contrary
notwithstanding; provided, however, that notwithstanding the
above, if there shall occur an Event of Default under clause
(f) above, then the obligation of the Lenders to lend
hereunder shall automatically terminate and any and all of the
Credit Obligations shall be immediately due and payable
without the necessity of any action by the Agent or the
Required Lenders or notice to the Agent or the Lenders;
(B) Borrower shall, upon demand of Agent deposit cash
with the Agent in an amount equal to the amount of any Letters
of Credit remaining undrawn or unpaid, as collateral security
for the repayment of any future drawings or payments under
such Letters of Credit, and Borrower shall forthwith deposit
and pay such amounts and such amounts shall be held by Agent
pursuant to the terms of the LC Account Agreement; and
<PAGE>
(C) the Agent, on behalf of the Lenders, shall have
all of the following rights and remedies in addition to all of
the rights and remedies of a secured party under the Uniform
Commercial Code in respect of the Collateral and otherwise be
available under the Loan Documents or under any applicable
law: the Agent may at any time and from time to time, with or
without judicial process or the aid and assistance of others
and without incurring any liability to the Borrower, upon ten
(10) days' notice to the Borrower sell or otherwise dispose of
any Collateral, at public or private sale or proceedings or
otherwise, by one or more contracts, in one or more parcels,
at the same or different times, with or without having the
Collateral at the place of sale or other disposition, for cash
and/or credit, and upon any terms, at such place(s) and
time(s) and to such person(s) as the Agent deems best; if any
Collateral is sold by the Agent upon credit or for future
delivery, the Agent shall not be liable for the failure of the
purchaser to pay for same and in such event the Agent may
resell such Collateral in accordance with the provisions
hereof provided the Borrower shall be given credit for
proceeds received by reason of such sale; the Agent or any
Lender may buy any Collateral at any public sale and, the
Agent or any Lender may buy such Collateral at private sale so
long as such sale is made in a commercially reasonable manner
and in each case may make payment therefor by any means.
Except to the extent the Agent shall have failed to take
action required under this Agreement, no Lenders shall be
entitled to enforce the provisions of this subsection (C) of
Section 8.1 independently.
SECTION 8.2 Agent to Act. In case any one or more Events of Default
shall occur and be continuing, the Agent may, and at the direction of the
Required Lenders shall, proceed to protect and enforce their rights or remedies
either by suit in equity or by action at law, or both, whether for the specific
performance of any covenant, agreement or other provision contained herein or in
any other Loan Document, or to enforce the payment of the Obligations or any
other legal or equitable right or remedy.
SECTION 8.3 Cumulative Rights. No right or remedy herein conferred upon
the Lenders, the Agent and the Borrower is intended to be exclusive of any other
rights or remedies contained herein or in any other Loan Document, and every
such right or remedy shall be cumulative and shall be in addition to every other
such right or remedy contained herein and therein or now or hereafter existing
at law or in equity or by statute, or otherwise.
SECTION 8.4 No Waiver. No course of dealing between the Borrower and
any Lender or the Agent or any failure or delay on the part of any Lender, the
Agent or the Borrower in exercising any rights or remedies hereunder shall
operate as a waiver of any rights or remedies hereunder and no single or partial
exercise of any rights or remedies hereunder shall operate as a waiver or
preclude the exercise of any other rights or remedies hereunder or of the same
right or remedy on a future occasion.
<PAGE>
SECTION 8.5 Default. The Agent and the Lenders shall have no right to
accelerate any of the Loans upon, or to institute any action or proceeding
before any court to realize upon Collateral as a result of, the occurrence of
any Default which shall not also constitute an Event of Default; provided,
however, nothing contained in this sentence shall in any respect impair or
adversely affect the right, power and authority of the Agent and the Lenders (i)
to take any action expressly required or permitted to be taken under the Loan
Documents upon the occurrence of any Default (and including any action or
proceeding which the Agent may determine to be necessary or appropriate in
furtherance of any such expressly authorized action) and (ii) to take any action
provided under the Loan Documents or otherwise available by statute, at law or
in equity upon the occurrence of any Default.
SECTION 8.6 Allocation of Proceeds. If an Event of Default has occurred
and is continuing, and the maturity of the Notes has been accelerated pursuant
to this Article VIII, all payments received by the Agent hereunder in respect of
any principal of or interest on the Credit Obligations or any other amounts
payable by the Borrower hereunder shall be applied by the Agent in the following
order:
(i) amounts due to the Lenders pursuant to Sections 2.11
hereof;
(ii) amounts due to the Agent and NationsBank pursuant to
Section 9.11 and Section 2.13(i) and (k) hereof;
(iii) payments of interest, to be applied in accordance with
Section 2.14 hereof;
(iv) payments of principal, to be applied in accordance with
Section 2.14 hereof;
(v) payment of cash amounts to the Agent pursuant to Section
8.1(B) hereof; and
(vi) payments of all other amounts due under this Agreement,
if any, to be applied in accordance with each Lender's pro rata share
of all principal due to the Lenders.
<PAGE>
ARTICLE IX
THE AGENT
SECTION 9.1 Appointment. Each Lender (including NationsBank in its
capacity as issuer of the Letters of Credit) hereby irrevocably designates and
appoints NationsBank as the Agent of the Lenders under this Agreement, and each
of the Lenders hereby irrevocably authorizes NationsBank as the Agent for such
Lender, to take such action on its behalf under the provisions of this Agreement
and the other Loan Documents and to exercise such powers as are expressly
delegated to the Agent by the terms of this Agreement, together with such other
powers as are reasonably incidental thereto. The Agent shall not have any duties
or responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any of the Lenders, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Agent.
SECTION 9.2 Attorneys-in-fact. The Agent may execute any of its duties
under this Agreement by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Agent shall not be responsible for the gross negligence or willful
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.
SECTION 9.3 Limitation on Liability. Neither the Agent nor any of its
officers, directors, employees, agents or attorneys-in-fact shall be liable to
the Lenders for any action lawfully taken or omitted to be taken by it or them
under or in connection with this Agreement except for its or their own gross
negligence or willful misconduct. Neither the Agent nor any of its affiliates
shall be responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by the Borrower, any of its
Controlled Entities or Controlled Partnerships, or any officer or partner
thereof contained in this Agreement or in any of the other Loan Documents, or in
any certificate, report, statement or other document referred to or provided for
in or received by the Agent under or in connection with this Agreement or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any of the other Loan Documents, or for any failure of the
Borrower to perform its obligations thereunder. The Agent shall not be under any
obligation to any of the Lenders to ascertain or to inquire as to the observance
or performance of any of the terms, covenants or conditions of this Agreement or
any of the other Loan Documents on the part of the Borrower or to inspect the
properties, books or records of the Borrower or its Controlled Entities or
Controlled Partnerships.
<PAGE>
SECTION 9.4 Reliance. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any Note, writing, resolution, notice, consent
certificate, affidavit, letter, cablegram, telegram, telecopy or telex message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by the Agent. The Agent may deem and treat the payee of any Note as the
owner thereof for all purposes unless an Assignment and Acceptance shall have
been filed with and accepted by the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Agreement unless it shall
first receive advice or concurrence of the Lenders or the Required Lenders as
provided in this Agreement or it shall first be indemnified to its satisfaction
by the Lenders against any and all liability and expense which may be incurred
by it by reason of taking or continuing to take any such action. The Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement in accordance with a request of the Required Lenders, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders and all present and future holders of the Notes.
SECTION 9.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender, or the Borrower or
any of the Subsidiaries referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Agent receives such a notice, the Agent shall promptly give
notice thereof to the Lenders. The Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided that, unless and until the Agent shall have received such
directions, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Event of Default as it
shall deem advisable in the best interests of the Lenders.
SECTION 9.6 No Representations. Each Lender expressly acknowledges that
neither the Agent nor any of its affiliates has made any representations or
warranties to it and that no act by the Agent hereafter taken, including any
review of the affairs of the Borrower or any of its Consolidated Entities, shall
be deemed to constitute any representation or warranty by the Agent to any
Lender. Each Lender represents to the Agent that it has, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it has deemed appropriate, made its own appraisal of and
investigation into the financial condition, creditworthiness, affairs, status
and nature of the Borrower and Controlled Partnerships and made its own decision
to enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and to make such investigation as it
deems necessary to inform itself as to the status and affairs, financial or
otherwise, of the Borrower and its Consolidated Entities and Controlled
Partnerships. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Agent hereunder, the Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of the
Borrower or any of its Consolidated Entities and Controlled Partnerships which
may come into the possession of the Agent or any of its affiliates.
<PAGE>
SECTION 9.7 Indemnification. The Lenders agree to indemnify the Agent
in its capacity as such (to the extent not reimbursed by the Borrower or any of
its Consolidated Entities and without limiting any obligations of the Borrower
or any of its Consolidated Entities so to do), ratably according to the
respective principal amount of the Notes held by them (or, if no Notes are
outstanding, ratably in accordance with their respective Applicable Commitment
Percentages as then in effect) from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may at any time
(including without limitation at any time following the payment of the Note) be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of this Agreement or any other document contemplated by or referred
to herein or the transactions contemplated hereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing; provided that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or willful
misconduct. The agreements in this subsection shall survive the payment of the
Obligations and the termination of this Agreement.
SECTION 9.8 Lender. The Agent and its affiliates may make loans to,
accept deposits from and generally engage in any kind of business with the
Borrower and its Consolidated Entities and Controlled Partnerships as though it
were not the Agent hereunder. With respect to its Loans made or renewed by it
and any Note issued to it, the Agent shall have the same rights and powers under
this Agreement as any Lender and may exercise the same as though it were not the
Agent, and the terms "Lender" and "Lenders" shall, unless the context otherwise
indicates, include the Agent in its individual capacity.
SECTION 9.9 Resignation. If the Agent shall resign as Agent under this
Agreement, then the Required Lenders may appoint a successor Agent for the
Lenders, which successor shall be approved by the Borrower, which approval shall
not be unreasonably withheld, which shall be a commercial bank organized under
the laws of the United States or any state thereof, having a combined surplus
and capital of not less than $500,000,000, whereupon such successor Agent shall
succeed to the rights, powers and duties of the former Agent and the obligations
of the former Agent shall be terminated and canceled, without any other or
further act or deed on the part of such former Agent or any of the parties to
this Agreement; provided, however, that the former Agent's resignation shall not
become effective until such successor Agent has been appointed and has succeeded
of record to all right, title and interest of the former Agent in the
Collateral; provided, further, if the Required Lenders cannot agree as to a
successor Agent within ninety (90) days after such resignation, the Agent shall
appoint a successor Agent and the parties hereto agree to execute whatever
documents are necessary to effect such action under this Agreement or any other
document executed pursuant to this Agreement; provided, however in such event
all provisions of this Agreement and the Loan Documents, shall remain in full
force and effect. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article IX shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement.
<PAGE>
SECTION 9.10 Sharing of Payments, etc. Each Lender agrees that if it
shall, through the exercise of a right of banker's lien, set-off, counterclaim
or otherwise, obtain payment with respect to its Credit Obligations (other than
any payment pursuant to Article IV) which results in its receiving more than its
pro rata share of the aggregate payments with respect to all of the Credit
Obligations (other than any payment pursuant to Article IV), then (A) such
Lender shall be deemed to have simultaneously purchased from the other Lenders a
share in their Credit Obligations so that the amount of the Credit Obligations
held by each of the Lenders shall be pro rata and (B) such other adjustments
shall be made from time to time as shall be equitable to insure that the Lenders
share such payments ratably; provided, however, that for purposes of this
Section 9.10 the term "pro rata" shall be determined with respect to both the
Commitment of each Lender and to the Revolving Facility after subtraction in
each case of amounts, if any, by which any such Lender has not funded its share
of the outstanding Loans and Reimbursement Obligations. If all or any portion of
any such excess payment is thereafter recovered from the Lender which received
the same, the purchase provided in this Section 9.10 shall be rescinded to the
extent of such recovery, without interest. The Borrower expressly consents to
the foregoing arrangements and agrees that each Lender so purchasing a portion
of the other Lenders' Obligations may exercise all rights of payment (including,
without limitation, all rights of set-off, banker's lien or counterclaim) with
respect to such portion as fully as if such Lender were the direct holder of
such portion.
SECTION 9.11 Fees. The Borrower agrees to pay to the Agent, for its
individual account, in advance a quarterly Agent's fee in such amount as shall
be agreed to from time to time.
SECTION 9.12 Independent Agreements. The provisions contained in
Sections 9.1 through 9.8 and 9.10 of this Article IX constitute independent
obligations and agreements of the Agent and the Lenders and the Borrower shall
not be deemed a party thereto nor bound thereby. Borrower does acknowledge the
rights of Lenders and Agent under Sections 9.9 and 9.11 hereof.
<PAGE>
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Assignments and Participations.
(a) At any time after the Closing Date each Lender may, with
the prior consent of the Agent and the Borrower, which consent shall not be
unreasonably withheld, assign to one or more banks or financial institutions all
or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of the Notes payable to its order);
provided, that (i) each such assignment shall be of a constant, and not a
varying, percentage of all of the assigning Lender's rights and obligations
(including Loans and Participations) under this Agreement (ii) for each
assignment involving the issuance and transfer of Notes, the assigning Lender
shall execute an Assignment and Acceptance and the Borrower hereby consents to
execute replacement Notes to give effect to the assignment, (iii) the minimum
Commitment which shall be assigned is $10,000,000 (together with which the
assigning Lender's applicable portion of Participations and the Letter of Credit
Commitment shall also be assigned) and (iv) such assignee shall have an office
located in the United States. Upon such execution, delivery, approval and
acceptance, from and after the effective date specified in each Assignment and
Acceptance, (x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder or under such Notes have been
assigned or negotiated to it pursuant to such Assignment and Acceptance have the
rights and obligations of a Lender hereunder (including, in respect of the
Collateral, all the rights and obligations of a Lender, as fully as if such
assignee had been named as a Lender in this Agreement) and a holder of such
Notes and (y) the assignor thereunder shall, to the extent that rights and
obligations hereunder or under such Notes have been assigned or negotiated by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its future obligations under this Agreement. No assignee shall
have the right to further assign its rights and obligations pursuant to this
Section 10.1. Any Lender who makes an assignment shall pay to the Agent a
one-time administrative fee of $2,500.00 which fee shall not be reimbursed by
Borrower.
(b) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) the assignment made
under such Assignment and Acceptance is made under such Assignment and
Acceptance without recourse; (ii) such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of the Borrower or any Controlled Entity or Controlled Partnership or
the performance or observance by the Borrower or any Controlled Entity or
Controlled Partnership of any of its obligations under any Loan Document or any
other instrument or document furnished pursuant hereto; (iii) such assignee
confirms that it has received a copy of this Agreement, together with copies of
the financial statements delivered pursuant to Section 7.3 and such other Loan
Documents and other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon the
Agent, such assigning Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement, the Note and the other
Loan Documents as are delegated to the Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto; and (vi) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender and a holder of such Note.
<PAGE>
(c) The Agent shall maintain at its address referred to herein
a copy of each Assignment and Acceptance delivered to and accepted by it.
(d) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender, the Agent shall give prompt notice thereof to Borrower.
(e) Each Lender may sell participations to one or more banks
or other entities as to all or a portion of its rights and obligations under
this Agreement; provided, that (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any Notes issued to it for the
purpose of this Agreement, (iv) such participations shall be in a minimum amount
of $10,000,000 and shall include an allocable portion of such Lender's
Participation, and (v) Borrower, the Agent and the other Lenders shall continue
to deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and with regard to any and all
payments to be made under this Agreement; provided, that the participation
agreement between a Lender and its participants may provide that such Lender
will obtain the approval of such participant prior to such Lender's agreeing to
any amendment or waiver of any provisions of this Agreement which would (A)
extend the maturity of the Notes, (B) reduce the interest rate hereunder, (C)
increase the Commitment of the Lender granting the participation or (D) release
all or any substantial part of the Collateral other than in accordance with the
terms of the Loan Documents, and (vi) the sale of any such participations which
require Borrower to file a registration statement with the United States
Securities and Exchange Commission or under the securities regulations or laws
of any state shall not be permitted.
(f) Notwithstanding the provisions of this Section 10.1 to the
contrary, any Lender may assign all or any portion of its interest in Loans to
its Affiliates without approval of the Agent or Borrower upon payment of the
administrative fee described in Section 10.1(a) above, and all or any portion of
its interest in Loans to the Federal Reserve Bank without approval of the Agent
or Borrower and without payment of any fees.
<PAGE>
SECTION 10.2 Notices. Any notice shall be conclusively deemed to have
been received by any party hereto and be effective on the day on which delivered
to such party (against receipt therefor) at the address set forth below or such
other address as such party shall specify to the other parties in writing (or,
in the case of telephonic notice or notice by telecopy, telegram or telex (where
the receipt of such message is verified by return) expressly provided for
hereunder, when received at such telephone, telecopy or telex number as may from
time to time be specified in written or verbal notice to the other parties
hereto or otherwise received), or if sent prepaid by certified or registered
mail return receipt requested on the third Business Day after the day on which
mailed, addressed to such party at said address:
(a) if to the Borrower or a Participating Partnership
or a Participating Subsidiary at:
Two Perimeter Park South
Suite 224W
Birmingham, Alabama 35243
Attention: Richard M. Scrushy
with a copy to:
Chief Financial Officer
HealthSouth Rehabilitation Corporation
Suite 224W
Two Perimeter Park South
Birmingham, Alabama 35243
and with a copy to:
Treasurer
HealthSouth Rehabilitation Corporation
Suite 224W
Two Perimeter Park South
Birmingham, Alabama 35243
and with a copy to:
J. Brooke Johnston, Jr.
Haskell Slaughter Young
1200 AmSouth-Harbert Plaza
1901 6th Avenue North
Birmingham, Alabama 35203
(b) if to the Agent at:
NationsBank Corporate Center
100 South Tryon Street
Charlotte, North Carolina 28255
Attention: Agency Services
<PAGE>
With a copy to:
600 Peachtree Street, N.E.
21st Floor
Atlanta, Georgia 30308-2212
Attention: Corporate Banking
(c) if to NationsBank in its capacity as issuer of the
Letters of Credit:
NationsBank of North Carolina, N.A.
NationsBank Plaza
Charlotte, North Carolina 28255
Attention: Letter of Credit Department
(d) if to the Lenders:
At the addresses set forth on the signature pages
hereof or on the signature page of each Assignment
and Acceptance.
SECTION 10.3 No Waiver. No failure or delay on the part of the Agent,
any Lender or the Borrower in the exercise of any right, power or privilege
hereunder shall operate as a waiver of any such right, power or privilege nor
shall any such failure or delay preclude any other or further exercise thereof.
The rights and remedies herein provided are cumulative and not exclusive of any
rights or remedies provided by law.
SECTION 10.4 Setoff. The Borrower agrees that the Agent and each Lender
shall have a lien for all the Credit Obligations of the Borrower upon all
deposits or deposit accounts, of any kind, or any interest in any deposits or
deposit accounts thereof, now or hereafter pledged, mortgaged, transferred or
assigned to the Agent or such Lender or otherwise in the possession or control
of the Agent or such Lender (other than for safekeeping) for any purpose for the
account or benefit of the Borrower and including any balance of any deposit
account or of any credit of the Borrower with the Agent or such Lender, whether
now existing or hereafter established, hereby authorizing the Agent and each
Lender at any time or times from and after the occurrence of a Default or Event
of Default with or without prior notice to apply such balances or any part
thereof to such of the Credit Obligations of the Borrower to the Lenders then
past due and in such amounts as they may elect, and whether or not the
collateral or the responsibility of other persons primarily, secondarily or
otherwise liable may be deemed adequate. For the purposes of this paragraph, all
remittances and property shall be deemed to be in the possession of the Agent or
such Lender as soon as the same may be put in transit to it by mail or carrier
or by other bailee.
SECTION 10.5 Survival. All covenants, agreements, representations and
warranties made herein shall survive the making by the Lenders of the Loans and
the expiration of the Letters of Credit and the execution and delivery to the
Lenders of this Agreement and the Notes and shall continue in full force and
effect so long as any of the Credit Obligations remain outstanding or any Lender
has any Commitment hereunder. Whenever in this Agreement, any of the parties
hereto is referred to, such reference shall be deemed to include the successors
and permitted assigns of such party and all covenants, provisions and agreements
by or on behalf of the Borrower which are contained in this Agreement and the
Notes shall inure to the benefit of the successors and permitted assigns of the
Lenders or any of them and any rights of the Borrower hereunder shall inure to
the benefit of successors and assigns of Borrower to the extent Lenders may
consent to succession or assignment.
<PAGE>
SECTION 10.6 Expenses. The Borrower agrees (a) to pay or reimburse the
Agent for all its reasonable and customary out-of-pocket costs and expenses
incurred in connection with the preparation, negotiation and execution of, and
any amendment, supplement or modification to, this Agreement or any of the other
Loan Documents, and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, the reasonable and customary fees and
disbursements of counsel to the Agent, (b) to pay or reimburse the Agent for all
its reasonable costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, including without limitation,
the reasonable fees and disbursements of their counsel, (c) to pay, indemnify
and hold the Agent harmless from any and all recording and filing fees and any
and all liabilities with respect to, or resulting from any failure of Borrower
to pay or delay of Borrower in paying, documentary, stamp, excise, withholding
and other similar taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation of any
amendment, supplement or modification of, or any waiver or consent under or in
respect of, this Agreement, and (d) from and after the occurrence of any Event
of Default to pay, indemnify, and hold the Agent harmless from and against any
and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement or in any respect relating to the transactions
contemplated hereby or thereby, (all the foregoing, collectively, the
"indemnified liabilities"); provided, however, that the Borrower shall have no
obligation hereunder with respect to indemnified liabilities arising from (i)
the willful misconduct or negligence of the party seeking indemnification, (ii)
legal proceedings commenced against the Agent or any Lender by any security
holder or creditor thereof arising out of and based upon rights afforded any
such security holder or creditor solely in its capacity as such, (iii) any taxes
imposed upon the Agent or any Lender other than the documentary, stamp, excise,
withholding and similar taxes described in clause (c) above or any tax resulting
from any change described in Section 4.1, which tax would be payable to Lenders
by Borrower pursuant to Article IV hereof, (iv) taxes imposed as a result of a
transfer or assignment of any Note, participation or assignment of a portion of
its rights, (v) any taxes imposed upon any transferee of any Note, or (vi) or by
reason of the failure of the Agent or any Lender to perform its or their
obligations under this Agreement. The agreements in this subsection shall
survive repayment of the Notes and all other Credit Obligations hereunder.
<PAGE>
SECTION 10.7 Amendments. No amendment, modification or waiver of any
provision of this Agreement or any of the Loan Documents and no consent by the
Lenders to any departure therefrom by the Borrower shall be effective unless
such amendment, modification or waiver shall be in writing and signed by the
Agent and the Borrower, but only upon having received the written consent of the
Required Lenders, and the same shall then be effective only for the period and
on the conditions and for the specific instances and purposes specified in such
writing; provided, however, that, no such amendment, modification or waiver
(i) which changes, extends or waives any provision of Section
2.4(c), Section 2.11, Section 2.13(i), Section 9.10 or this Section
10.7, the amount of or the due date of any scheduled installment of or
the rate of interest payable on any Credit Obligation, changes the
definition of Required Lenders, which increases or extends the
Commitment of any Lender or which increases or extends the Conversion
Date or Maturity Date or which waives any condition to the making of
any Loan shall be effective unless in writing and signed by each of the
Lenders; provided, however, the Required Lenders may in their sole
discretion waive any Default or Event of Default (other than any Event
of Default under Section 8.1(a) as to which only the Lender which is
the payee of a Note may waive the failure to make a payment of
principal or interest due on such Note);
(ii) which permits that Acquisition described in Borrower's
confidential letter to the Agent dated the date of this Agreement shall
be permitted without the consent of each Lender;
(iii) which releases Collateral or any Guarantor (other than
in accordance with the terms of the Loan Documents) shall be effective
unless with the written consent of each of the Lenders; or
(iv) which affects the rights, privileges, immunities or
indemnities of the Agent, shall be effective unless in writing and
signed by the Agent.
Notwithstanding any provision of the other Loan Documents to the contrary, as
between the Agent and the Lenders, execution by the Agent shall not be deemed
conclusive evidence that the Agent has obtained the written consent of the
Required Lenders; however, the Borrower shall be entitled to rely on the
signature of the Agent as evidence of consent. No notice to or demand on the
Borrower in any case shall entitle the Borrower to any other or further notice
or demand in similar or other circumstances, except as provided by law or as
otherwise expressly provided herein. No delay or omission on any Lender's, the
Agent's or the Borrower's part in exercising any right, remedy or option shall
operate as a waiver of such or any other right, remedy or option or of any
Default or Event of Default.
<PAGE>
SECTION 10.8 Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such fully-executed counterpart.
SECTION 10.9 Waivers by Borrower. In any litigation in any court with
respect to, in connection with, or arising out of this Agreement, the Loans, any
of the Notes, any of the other Loan Documents, the Collateral, the Credit
Obligations, or any instrument or document delivered pursuant to this Agreement,
or the validity, protection, interpretation, collection or enforcement thereof,
or any other claim or dispute howsoever arising between the Borrower and the
Lenders or the Agent, the Borrower and each Lender and the Agent hereby waive,
to the extent permitted by law, trial by jury in connection with any such
litigation.
The Borrower, the Agent and the Lenders believe that, inasmuch as this
Agreement and the transactions contemplated hereby have been entered into and
consummated outside the State of Alabama, such transactions constitute
transactions in interstate commerce, so that neither the Agent nor any of the
Lenders is required, solely by entering into this Agreement and consummating the
transactions contemplated hereby, to qualify to do business as a foreign
corporation within the State of Alabama. Notwithstanding the foregoing, however,
the Borrower hereby irrevocably waives all rights that it may have to raise, in
any action brought by any of the Lenders or the Agent to enforce the rights of
the Lenders and the Agent hereunder or under any of the other Loan Documents, or
the obligations of the Borrower hereunder or thereunder, any defense which is
based upon the failure of any of the Lenders or the Agent to qualify to do
business as a foreign corporation in the State of Alabama, including, but not
limited to, any defenses based upon ss. 232 of the Alabama Constitution of 1901,
ss. 10-2A-247 of the Code of Alabama (1975) or ss. 40-14-4 of the Code of
Alabama (1975), or any successor provision to any thereof. The foregoing waiver
is made knowingly and voluntarily and is a material inducement for the Agent and
the Lenders to enter into the transactions contemplated by this Agreement or any
of the other Loan Documents.
SECTION 10.10 Termination. The termination of this Agreement shall not
affect any rights of the Borrower, the Lenders or the Agent or any obligation of
the Borrower, the Lenders or the Agent, arising prior to the effective date of
such termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into or rights created or obligations incurred
prior to such termination have been fully disposed of, concluded or liquidated
and the Credit Obligations arising prior to or after such termination have been
irrevocably paid in full. The security interests, liens and rights granted to
the Agent for the benefit of the Lenders hereunder and under the other Loan
Documents shall continue in full force and effect, notwithstanding the
termination of this Agreement, until all of the Credit Obligations have been
paid in full after the termination hereof or the Borrower has furnished the
<PAGE>
Lenders and the Agent with an indemnification satisfactory to the Agent and each
Lender with respect thereto. All representations, warranties, covenants, waivers
and agreements contained herein shall survive termination hereof until payment
in full of the Credit Obligations unless otherwise provided herein.
Notwithstanding the foregoing, if after receipt of any payment of all or any
part of the Obligations, any Lender is for any reason compelled to surrender
such payment to any Person because such payment is determined to be void or
voidable as a preference, impermissible setoff, a diversion of trust funds or
for any other reason, this Agreement shall continue in full force and the
Borrower shall be liable to, and shall indemnify and hold such Lender harmless
for, the amount of such payment surrendered until such Lender shall have been
finally and irrevocably paid in full. The provisions of the foregoing sentence
shall be and remain effective notwithstanding any contrary action which may have
been taken by the Lenders in reliance upon such payment, and any such contrary
action so taken shall be without prejudice to the Lenders' rights under this
Agreement and shall be deemed to have been conditioned upon such payment having
become final and irrevocable.
SECTION 10.11 Governing Law. All documents executed pursuant to the
transactions contemplated herein, including, without limitation, this Agreement
and each of the Loan Documents shall be deemed to be contracts made under, and
for all purposes shall be construed in accordance with, the internal laws and
judicial decisions of the State of North Carolina; provided that this Section
10.11 shall not affect the applicability of, and interpretation or construction
of appropriate terms and provisions under the Uniform Commercial Code of any
jurisdiction which govern the security interests in any of the Collateral. The
Borrower hereby submits to the jurisdiction and venue of the state and federal
courts of North Carolina for the purposes of resolving disputes hereunder or
arising out of the transaction contemplated hereby or for the purposes of
collection.
SECTION 10.12 Indemnification. In consideration of the execution and
delivery of this Agreement by the Agent and each Lender and the extension of the
Commitments, and so long as the Agent and Lenders have fulfilled their
obligations hereunder, the Borrower hereby indemnifies, exonerates and holds the
Agent and each Lender and each of their respective officers, directors,
employees and agents (collectively, the "Indemnified Parties") free and harmless
from and against any and all actions, causes of action, claims, suits, losses,
costs, liabilities and damages, and expenses incurred in connection therewith
(irrespective of whether any such Indemnified Party is a party to the action for
which indemnification hereunder is sought), including reasonable attorneys' fees
and disbursements (collectively, the "Indemnified Liabilities"), incurred by the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to any of the following:
<PAGE>
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Loan or
supported by any Letter of Credit;
(b) the entering into and performance of this Agreement and
any other Loan Document by any of the Indemnified Parties;
(c) provided Lenders have no ownership interest in real
property of Borrower, any investigation, litigation or proceeding
related to any environmental cleanup, audit, compliance or other matter
relating to the protection of the environment or the release by the
Borrower or any of its Participating Subsidiaries or Participating
Partnerships of any hazardous waste material; or
(d) provided Lenders have no ownership interest in real
property of Borrower, the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or releases from,
any real property owned or operated by the Borrower or any Subsidiary
or Controlled Partnership thereof of any hazardous waste material
(including any losses, liabilities, damages, injuries, costs, expenses
or claims asserted or arising under any environmental laws), regardless
of whether caused by, or within the control of, the Borrower or such
Participating Subsidiary or Participating Partnerships,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
negligence or willful misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
SECTION 10.13 Agreement Controls. In the event that any term of any of
the Loan Documents other than this Agreement conflicts with any term of this
Agreement, the terms and provisions of this Agreement shall control.
SECTION 10.14 Integration. This Agreement and the Loan Documents
represent the final agreement between the parties and may not be contradicted by
evidence of prior, contemporaneous, or subsequent oral agreements of the
parties. There are no unwritten oral agreements between the parties.
SECTION 10.15 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that the Borrower may not assign or
transfer its rights or obligations hereunder without the prior written consent
of the Agent and all Lenders. The Agent and the Lenders may assign or transfer
their interest hereunder but only as provided herein.
SECTION 10.16 Severability. If any provision of this agreement or the
other Loan Documents shall be determined to be illegal or invalid as to one or
more of the parties hereto, then such provision shall remain in effect with
respect to all parties, if any, as to whom such provision is neither illegal nor
invalid, and in any event all other provisions hereof shall remain effective and
binding on the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be made, executed and delivered by their duly authorized officers as of the day
and year first above written.
HEALTHSOUTH REHABILITATION
CORPORATION
ATTEST:
By: /s/ Stacy H. Pulliam By: /s/ C. Drew Demaray
____________________ _______________________________
Stacy H. Pulliam C. Drew Demaray
Assistant Secretary Vice President
<PAGE>
NATIONSBANK OF NORTH CAROLINA,
NATIONAL ASSOCIATION, as Agent
for the Lenders
By: /s/ Douglas E. Coltharp
________________________________
Name: Douglas E. Coltharp
Title: Senior Vice President
COMMITMENT: NATIONSBANK OF NORTH CAROLINA,
$75,000,000 NATIONAL ASSOCIATION
By: /s/ Douglas E. Coltharp
________________________________
Name: Douglas E. Coltharp
Title: Senior Vice President
Lending Office:
100 South Tryon Street
Charlotte, North Carolina 28255
Wire Transfer Instructions:
NationsBank of North Carolina,
National Association
Charlotte, North Carolina
ABA #053000196
Reference: HEALTHSOUTH
Rehabilitation Corporation
Attention: Agency Services
Margaret Lydon
COMMITMENT: THE BANK OF NOVA SCOTIA
$50,000,000
By:________________________________
Title: Representative
Lending Office:
The Bank of Nova Scotia
Atlanta Agency
600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Wire Transfer Instructions:
The Bank of Nova Scotia
The Bank of Nova Scotia,
New York Agency
ABA # 026002532
For Further Credit to Account
0606634 Atlanta Agency
Attention: HEALTHSOUTH
<PAGE>
COMMITMENT: AMSOUTH BANK, N.A.
$15,000,000
By:________________________________
Title: Senior Vice President
Lending Office:
AmSouth Bank, N.A.
1900 5th Avenue
Birmingham, Alabama
Wire Transfer Instructions:
AmSouth Bank, N.A.
Birmingham, Alabama
ABA #062000019
Reference: Acct # 50214327
HEALTHSOUTH
Attention: Lisa Mann
COMMITMENT: NATIONAL CITY BANK, KENTUCKY
$40,000,000
By:________________________________
Title: Senior Vice President
Lending Office:
101 S. Fifth Street, 8th Floor
Louisville, Kentucky 40202
Wire Transfer Instructions:
National City Bank, Kentucky
Louisville, Kentucky
ABA # 0830-0005-6
Reference: HEALTHSOUTH
Attention: Sandy Walker
<PAGE>
COMMITMENT: FIRST UNION NATIONAL BANK OF
$50,000,000 NORTH CAROLINA
By:________________________________
Title: Vice President
Lending Office:
One First Union Plaza
Charlotte, North Carolina 28288-0735
Wire Transfer Instructions:
First National Union Bank of
North Carolina
Charlotte, North Carolina
ABA # 053000219
Acct # 465906 0001802
Reference: HEALTHSOUTH
Attention: Sue Patterson
COMMITMENT: WACHOVIA BANK OF GEORGIA, N.A.
$45,000,000
By:________________________________
Title: Vice President
Lending Office:
Wachovia Bank of Georgia
Atlanta, Georgia
Wire Transfer Instructions:
Wachovia Bank of Georgia, N.A.
Atlanta, Georgia
ABA #061000010
Acct # 18-800-621
Reference: HealthSouth
Attention: Claudia Lamie
<PAGE>
COMMITMENT: PNC BANK, KENTUCKY, INC.
$40,000,000
By:________________________________
Title:_____________________________
Lending Office:
PNC Bank, Kentucky, Inc.
Louisville, Kentucky
Wire Transfer Instructions:
PNC Bank, Kentucky, Inc.
Louisville, Kentucky
ABA #083-000-108
Reference: HEALTHSOUTH
Attention: Patricia Jarvis
COMMITMENT: THE DAIWA BANK, LIMITED
$20,000,000
By:________________________________
Title:_____________________________
By:________________________________
Title:_____________________________
Lending Office:
Daiwa Bank, Chicago Branch
Chicago, Illinois
Wire Transfer Instructions:
The Daiwa Bank, Limited
Chicago Branch
Chicago, Illinois
ABA #071006075
Reference: HealthSouth
Attention: Maria Martinez
<PAGE>
COMMITMENT: THE BANK OF TOKYO, LTD.,
$20,000,000 Atlanta Agency
By:________________________________
Title:_____________________________
Lending Office:
The Bank of Tokyo, Ltd.
New York, New York
Wire Transfer Instructions:
The Bank of Tokyo, Ltd.
New York, New York
ABA #0260-0963-2
Reference: Payment for
HEALTHSOUTH
Attention: Jan Gilbreath/
Glynnis Slaten
COMMITMENT: MELLON BANK, N.A.
$45,000,000
By:________________________________
Title:_____________________________
Lending Office:
Mellon Bank
Pittsburgh, Pennsylvania 15259
Wire Transfer Instructions:
Mellon Bank, N.A.
Pittsburgh, Pennsylvania 15259
ABA #0430 00261-990873800
Acct # 990873800
Reference: HEALTHSOUTH
Attention: Elaine Washburn
<PAGE>
COMMITMENT: HIBERNIA NATIONAL BANK
$20,000,000
By:________________________________
Title:_____________________________
Lending Office:
New Orleans, Louisiana
Wire Transfer Instructions:
Hibernia National Bank
New Orleans, Louisiana
ABA # 065000090
Acct # 0520-36615
National Accounts
Reference: HEALTHSOUTH
Attention: Hal Hopson
COMMITMENT: THE BANK OF CALIFORNIA, N.A.
$20,000,000
By:________________________________
Title:_____________________________
Lending Office:
Los Angeles, California 90071
Wire Transfer Instructions:
The Bank of California, N.A.
San Francisco, California
ABA # 121000015
Acct # 001-060-235
Reference: HEALTHSOUTH
Attention: Hisako Sakamoto
<PAGE>
COMMITMENT: COOPERATIVE CENTRALE RAIFFEISEN-
$35,000,000 BOERENLEENBANK, B.A.
"RaboBank Nederland, New York Branch"
By:________________________________
Title:_____________________________
Lending Office:
New York, New York 10167
Wire Transfer Instructions:
Bank of New York
New York, New York
ABA # 021000018
For the Account of RaboBank
Acct # 8026002533
Reference: HEALTHSOUTH
Attention: Corporate Services
COMMITMENT: SHAWMUT BANK CONNECTICUT, N.A.
$20,000,000
By:________________________________
Title:_____________________________
Lending Office:
Hartford, Connecticut
Wire Transfer Instructions:
Shawmut Bank Connecticut, N.A.
Hartford, Connecticut
ABA # 011900445
Acct # 00-6612-7761
Reference: HEALTHSOUTH
Attention: Sandy Sousa
<PAGE>
COMMITMENT: THIRD NATIONAL BANK
$15,000,000
By:______________________________
Title:___________________________
Lending Office:
201 4th Avenue N.
Nashville, Tennessee
Wire Transfer Instructions:
ABA # 064000046
Acct # 680040009990348
Reference: HEALTHSOUTH
Attention: Leigh Ann Gregory
COMMITMENT: TORONTO DOMINION BANK
$40,000,000
By:______________________________
Title:___________________________
Lending Office:
31 West 52nd Street
New York, New York
Wire Transfer Instructions:
Morgan Guaranty Trust Co.
New York, New York
ABA # 021000238
Credit: Toronto Dominion Bank,
New York Branch
Acct # 630-00-271
Favor: TD Houston
Acct # 2159251
Reference: HEALTHSOUTH
Attention: Jano Mott
<PAGE>
Amended and Restated
Credit Agreement
Among
HEALTHSOUTH Rehabilitation Corporation
and
Nationsbank of North Carolina
National Association
A. Lenders and Commitment Percentages
B. Form of Assignment and Acceptance
C-1. Partnership Guaranty Agreement
C-2. Subsidiary Guaranty Agreement
D. Form of Request for Advance on Interest Rate Election
E. Form of Competitive Bid Quete Request
F. Form of Competitive Bid Quete
G. Participating Subsidiaries and Participating Partnership
H-1. Form of Syndicated Note
H-2. Form of Competitive Bid Note
I. Form of Compliance Certificate
J. Summary of Insurance
K. Outstanding Letters of Credit
L. Permitted Investors
M. Subsidiaries
N. Existing Liens
O. Disposal Properties
<PAGE>
EXHIBIT 11
HEALTHSOUTH Corporation and Subsidiaries
Computation of Income Per Share (Unaudited)
In thousands, except for per share data
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1992 1993 1994
---------- --------- --------
<S> <C> <C> <C>
PRIMARY:
Weighted average common shares outstanding 31,945 33,003 33,727
Net effect of dilutive stock options 2,473 1,714 4,211
-------- -------- --------
Total Common and Common Equivalent Shares 34,418 34,717 37,938
======== ======== ========
Net Income $ 34,594 $ 13,592 $ 53,225
======== ======== ========
Net income per common and common
equivalent share $ 1.01 $ .39 $ 1.40
======== ======== ========
FULLY DILUTED:
Weighted average common shares outstanding 31,945 33,003 33,727
Net effect of dilutive stock options 2,473 1,714 4,211
-------- -------- --------
34,418 34,717 37,938
Assumed conversion of 5% Convertible
Subordinated Debentures due 2001 (1) (1) 2,361
-------- -------- --------
Total Common and Common Equivalent
Shares, Fully Diluted -- -- 40,299
======== ======== ========
Net Income $ 34,594 $ 13,592 $ 53,225
Elimination of interest and amortization on 5% Convertible
Subordinated Debentures Due 2001, less the related effect on the
provision for income taxes -- -- 2,927
-------- -------- --------
Net income, fully diluted -- -- $ 56,152
======== ======== ========
Net income per common and common equivalent
share -- -- $ 1.39
======== ======== ========
<FN>
(1) There were no other potentially dilutive securities outstanding for this
period.
</TABLE>
<PAGE>
Exhibit 21
SUBSIDIARIES
of
HEALTHSOUTH Corporation
Corporate Subsidiaries
<TABLE>
<CAPTION>
State of
Name of Subsidiary Organization Qualification
<S> <C> <C>
HEALTHSOUTH Medical Center, Inc. Alabama
HEALTHSOUTH of Texas, Inc. Texas
HEALTHSOUTH Rehabilitation Center, Inc. South Carolina
HEALTHSOUTH of New Mexico, Inc. New Mexico
HEALTHSOUTH of Louisiana, Inc. Delaware LA
HEALTHSOUTH of South Carolina, Inc. Delaware SC
HEALTHSOUTH of Michigan, Inc. Delaware MI
HEALTHSOUTH Rehabilitation of Florida, Inc. Delaware FL
HEALTHSOUTH of Oklahoma, Inc. Delaware OK
HEALTHSOUTH of Missouri, Inc. Delaware MO
Sports Therapy and Advanced Rehabilitation
Training, Inc. Texas
HEALTHSOUTH of East Tennessee, Inc. Delaware TN
HEALTHSOUTH of Birmingham, Inc. Delaware AL
HEALTHSOUTH of New Hampshire, Inc. Delaware NH
HEALTHSOUTH of Charleston, Inc. Delaware SC
HEALTHSOUTH of Middle Tennessee, Inc. Delaware TN
HEALTHSOUTH Real Property Holding Corporation Delaware AZ/AL
HEALTHSOUTH of Virginia, Inc. Delaware VA
</TABLE>
<PAGE>
Corporate Subsidiaries
<TABLE>
<CAPTION>
State of
Name of Subsidiary Organization Qualification
Physician Practice Management Corporation Delaware VA/FL
<S> <C> <C>
HEALTHSOUTH Doctors' Hospital, Inc. Delaware FL
Hospital Health Systems, Inc. Florida
Doctors' Health Service Corporation Florida
(all wholly-owned subsidiaries of HEALTHSOUTH
Doctors' Hospital, Inc.)
Doctors' Scanning Associates, Inc. Florida
Doctors' Home Health, Inc. Florida
Doctors' Medical Equipment Corp. Florida
(all wholly-owned subsidiaries of Doctors'
Health Service Corporation)
HEALTHSOUTH International, Inc. Delaware MD
Disability and Impairment Evaluation Centers
of America, Inc. Delaware LA
DIECA, Inc. Delaware LA
(a wholly-owned subsidiary of Disability and
Impairment Evaluation Centers of America, Inc.)
HEALTHSOUTH Sub-Acute Center of Mechanicsburg, Inc. Delaware PA
HEALTHSOUTH of Great Lakes, Inc. Delaware PA/OH
HEALTHSOUTH of Mechanicsburg, Inc. Delaware PA
HEALTHSOUTH of Erie, Inc. Delaware PA
HEALTHSOUTH of York, Inc. Delaware PA
HEALTHSOUTH of Altoona, Inc. Delaware PA/MD/WV
HEALTHSOUTH of Pittsburgh, Inc. Delaware PA
HEALTHSOUTH of Nittany Valley, Inc. Delaware PA
HEALTHSOUTH of Toms River, Inc. Delaware NJ
HEALTHSOUTH of Fort Smith, Inc. Delaware AR/OK
HEALTHSOUTH of Ontario, Inc. Delaware Canada
HEALTHSOUTH of Dallas, Inc. Delaware TX
HEALTHSOUTH of Texarkana, Inc. Delaware TX
HEALTHSOUTH of Utah, Inc. Delaware UT
HEALTHSOUTH of Midland, Inc. Delaware TX
HEALTHSOUTH of Austin, Inc. Delaware TX
HEALTHSOUTH Sub-Acute Center of Houston, Inc. Delaware TX
HEALTHSOUTH Community Re-Entry Center of
Dallas, Inc. Delaware TX
HEALTHSOUTH of Wichita, Inc. Delaware KS
HEALTHSOUTH of Houston, Inc. Delaware TX
HEALTHSOUTH of Treasure Coast, Inc. Delaware FL
HEALTHSOUTH of San Antonio, Inc. Delaware TX
HEALTHSOUTH of Columbia, Inc. Delaware MO
HEALTHSOUTH of Salem, Inc. Delaware NH
HEALTHSOUTH of Montgomery, Inc. Alabama
Tuckahoe Surgery Center, Inc. Virginia
HEALTHSOUTH of Gadsden, Inc. Alabama
HEALTHSOUTH of Dothan, Inc. Alabama
Diagnostic Health Corporation Delaware Various
HEALTHSOUTH Holdings, Inc. Delaware Various
ReLife, Inc. Delaware Various
Lakeshore System Services, Inc. Alabama Various
Lakeshore System Services of Florida, Inc. Florida
Health Providers, Inc. Florida
ReLife of Tennessee, Inc. Tennessee
Rebound, Inc. Delaware Various
ReLife Acquisition Corporation Alabama
Renaissance Rehabilitation Center, Inc. Georgia
Renaissance Rehabilitation Center of
Chattanooga, Inc. Georgia TN
American Health Resources, Inc. Ohio KY, WV
West Virginia Rehabilitation Resources, Inc. West Virginia
HEALTHSOUTH Aviation, Inc. Alabama
HEALTHSOUTH Specialty Hospital, Inc. Texas
HEALTHSOUTH Properties, Inc. Delaware
ASC Atlanta Acquisition Company, Inc. Delaware
HEALTHSOUTH Surgical Center of Tuscaloosa, Inc. Alabama
</TABLE>
<PAGE>
Affiliate Partnerships
<TABLE>
<CAPTION>
State of
Name of Partnership Organization Qualification
HEALTHSOUTH Rehabilitation Center of Birmingham, Ltd. Alabama
<S> <C> <C>
Rehabilitation Centers of Maryland Limited Partnership Alabama MD
Medical Rehab & Sports Medicine Center
of Jacksonville, Ltd. Alabama FL
HEALTHSOUTH Rehabilitation Center of St. Louis
Limited Partnership Alabama MO/IL
HEALTHSOUTH Rehabilitation Center of Jackson, Ltd. Alabama MS
Miami Rehabilitation Institute, Ltd. Alabama FL
HEALTHSOUTH Rehabilitation Center of Denver, Ltd. Alabama CO
HEALTHSOUTH Rehabilitation Center of Kendall, Ltd. Alabama FL
HEALTHSOUTH Rehabilitation Center of San Antonio, Ltd. Alabama TX
HEALTHSOUTH Rehabilitation Center of Ft.
Lauderdale, Ltd. Alabama FL
HEALTHSOUTH Regional Rehabilitation Center, Ltd. Alabama FL
HEALTHSOUTH Rehabilitation Center of New Orleans, Ltd. Alabama LA
HEALTHSOUTH Rehabilitation Center of Little Rock
Limited Partnership Alabama AR
HEALTHSOUTH Rehabilitation Center of North
Atlanta, Ltd. Alabama GA
HEALTHSOUTH Rehabilitation Center of Charlotte
Limited Partnership Alabama NC
HEALTHSOUTH Rehabilitation Center of Montgomery, Ltd. Alabama
HEALTHSOUTH Rehabilitation Center of Metairie, Ltd. Alabama LA
HEALTHSOUTH Rehabilitation Center of Ft. Worth, Ltd. Alabama TX
HEALTHSOUTH Rehabilitation Center of Boca
Raton, Ltd. Alabama FL
HEALTHSOUTH Sports Medicine and Rehabilitation
Center of Orlando, Ltd. Alabama FL
HEALTHSOUTH Spine and Rehabilitation Center of
Memphis Limited Partnership Alabama TN
HEALTHSOUTH Rehabilitation Center of Louisville, Ltd. Alabama KY
HEALTHSOUTH Rehabilitation Center of Tampa, Ltd. Alabama FL
HEALTHSOUTH Rehabilitation Center of Scottsdale
Limited Partnership Alabama AZ
HEALTHSOUTH Rehabilitation Center of Lorain
Limited Partnership Alabama OH
HEALTHSOUTH Rehabilitation Center of Palm Bay, Ltd. Alabama FL
HEALTHSOUTH Rehabilitation Center of Albuquerque, Ltd. Alabama NM
HEALTHSOUTH Rehabilitation Hospital of New Mexico
Limited Partnership Alabama NM
HEALTHSOUTH Rehabilitation Center of Richmond
Limited Partnership Alabama VA
HEALTHSOUTH Rehabilitation Center of Santa Rosa
Limited Partnership Alabama CA
HEALTHSOUTH Rehabilitation Center of Mobile, Ltd. Alabama
HEALTHSOUTH Rehabilitation Center of Rockville
Limited Partnership Alabama MD
HEALTHSOUTH Rehabilitation Center of Austin, Ltd. Alabama TX
HEALTHSOUTH Spine Center of Baltimore Limited
Partnership Alabama MD
HEALTHSOUTH Rehabilitation Center of Nashville, Ltd. Alabama TN
HEALTHSOUTH Rehabilitation Center of Palm Beach, Ltd. Alabama FL
HEALTHSOUTH Rehabilitation Center of San Francisco
Limited Partnership Alabama CA
HEALTHSOUTH of Vestavia Limited Partnership Alabama
HEALTHSOUTH Rehabilitation Center of West Denver
Limited Partnership Alabama CO
HEALTHSOUTH Rehabilitation Center of Tucson
Limited Partnership Alabama AZ
HEALTHSOUTH Rehabilitation Center of Merritt
Island, Ltd. Alabama FL
HEALTHSOUTH Rehabilitation Center of Paramus
Limited Partnership Alabama NJ
HEALTHSOUTH Rehabilitation Center of Viera
Limited Partnership Alabama FL
HEALTHSOUTH Rehabilitation Center of New Hampshire,
Ltd. Alabama NH
HEALTHSOUTH Rehabilitation Center of Cumming
Limited Partnership (formerly HEALTHSOUTH
Rehabilitation Center of Lawrenceville Limited
Partnership) Alabama GA
HEALTHSOUTH Sports Medicine and Rehabilitation
Center of Atlanta Limited Partnership Alabama GA
HEALTHSOUTH Rehabilitation Center of Dallas Limited
Partnership Alabama TX
HEALTHSOUTH Sports Medicine and Rehabilitation Center
of San Carlos Limited Partnership Alabama CA
HEALTHSOUTH Rehabilitation and Spine Center of Woodside
Limited Partnership Alabama CA
HEALTHSOUTH Rehabilitation Center of Bedford Limited
Partnership Alabama NH
HEALTHSOUTH Rehabilitation Center of Phoenix Limited
Partnership Alabama AZ
HEALTHSOUTH Rehabilitation Center of Virginia Beach
Limited Partnership Alabama VA
HEALTHSOUTH Rehabilitation Center of Columbia Limited
Partnership Alabama MO
HEALTHSOUTH Rehabilitation Center of Green Bay
Limited Partnership Alabama WI
HEALTHSOUTH Rehabilitation Center of Alexandria,
Limited Partnership Alabama VA
HEALTHSOUTH Rehabilitation Center of West Orange
Limited Partnership Alabama FL
HEALTHSOUTH Rehabilitation Center of Portola Valley
Limited Partnership Alabama CA
HEALTHSOUTH Rehabilitation Center of Cape Girardeau
Limited Partnership Alabama MO/IL
HEALTHSOUTH Rehabilitation Center of Pittsburgh
Limited Partnership Alabama PA
Doctors' Hospital of South Miami, Ltd. Florida
MRI of Miami, Ltd. Florida
Vanderbilt Stallworth Rehabilitation Hospital, L.P. Tennessee
HEALTHSOUTH/Methodist Rehabilitation Hospital
Limited Partnership Tennessee
HEALTHSOUTH Rehabilitation Center of Chevy Chase
Limited Partnership Alabama MD
HEALTHSOUTH Rehabilitation Center of Colorado Springs
Limited Partnership Alabama CO
HEALTHSOUTH Rehabilitation Center of Edison
Limited Partnership Alabama NJ
HEALTHSOUTH Rehabilitation Center of Fresno
Limited Partnership Alabama CA
HEALTHSOUTH Rehabilitation Center of Roanoke
Limited Partnership Alabama VA
HEALTHSOUTH Rehabilitation Center of Van Nuys
Limited Partnership Alabama CA
HEALTHSOUTH Rehabilitation Center of Washington,
D.C. Limited Partnership Alabama D.C.
HEALTHSOUTH Sports Medicine & Rehabilitation Center
of Blue Springs Limited Partnership Alabama MO/KS
HEALTHSOUTH Sports Medicine & Rehabilitation Center of
Lake Ozark Limited Partnership Alabama MO
HEALTHSOUTH Sports Medicine & Rehabilitation Center of
Ocala Limited Partnership Alabama FL
HEALTHSOUTH Sports Medicine & Rehabilitation Center of
Port St. Lucie Limited Partnership Alabama FL
HEALTHSOUTH Rehabilitation Center of Kansas City
Limited Partnership Alabama MO/KS
HEALTHSOUTH Rehabilitation Center of Redding
Limited Partnership Alabama CA
HEALTHSOUTH Rehabilitation Center of Warrenton
Limited Partnership Alabama VA
HEALTHSOUTH Sports Medicine and Rehabilitation
Center of San Diego Limited Partnership Alabama CA
HEALTHSOUTH/San Antonio Clinics Limited
Partnership Alabama TX
HEALTHSOUTH Sports Medicine & Rehabilitation
Center of Omaha Limited Partnership Alabama NE
HEALTHSOUTH Rehabilitation Center of Des Moines
Limited Partnership Alabama IA
</TABLE>
<PAGE>
Affiliate Partnerships
<TABLE>
<CAPTION>
State of
Name of Partnership Organization Qualification
<S> <C> <C>
HEALTHSOUTH Sports and Rehabilitation Center of
Memphis Limited Partnership Alabama TN
HEALTHSOUTH Rehabilitation Center of Linden
Limited Partnership Alabama NJ
HEALTHSOUTH Rehabilitation Center of Franklin
Limited Partnership Alabama TN
HEALTHSOUTH Rehabilitation Center of Hickory
Limited Partnership Alabama NC
HEALTHSOUTH Real Property Limited Partnership Alabama FL
HEALTHSOUTH Occupational and Preventive Diagnostics
Limited Partnership Alabama
HEALTHSOUTH Sports Medicine & Rehabilitation Center
of Waco Limited Partnership Alabama TX
HEALTHSOUTH Rehabilitation Center of Baltimore
Limited Partnership Alabama MD
HEALTHSOUTH Sports Medicine and Rehabilitation
Center of Chicago Limited Partnership Alabama IL
HEALTHSOUTH Home Health of St. Louis Limited
Partnership Alabama MO
HEALTHSOUTH Rehabilitation Center of Arlington
Limited Partnership Alabama VA
HEALTHSOUTH Rehabilitation Center of Ashville
Limited Partnership Alabama NC
HEALTHSOUTH Rehabilitation Center of Dyersburg
Limited Partnership Alabama TN
HEALTHSOUTH Rehabilitation Center of Illinois
Limited Partnership Alabama IL
HEALTHSOUTH Rehabilitation Center of New Brunswick
Limited Partnership Alabama NJ
HEALTHSOUTH Rehabilitation Center of Pottstown
Limited Partnership Alabama PA
HEALTHSOUTH Spine and Rehabilitation Center of
Chattanooga Limited Partnership Alabama TN
HEALTHSOUTH Sports and Rehabilitation Center of
La Jolla Limited Partnership Alabama CA
HEALTHSOUTH Sports Medicine and Rehabilitation
Center of Manahawkin Limited Partnership Alabama NJ
HEALTHSOUTH Sports Medicine and Rehabilitation
Center of Oklahoma City Limited Partnership Alabama OK
HEALTHSOUTH Rehabilitation Center of Tinton Falls
Limited Partnership Alabama NJ
HEALTHSOUTH Rehabilitation Center of Greater
Washington Limited Partnership Alabama MD
HEALTHSOUTH Rehabilitation Center of Houston
Limited Partnership Alabama TX
HEALTHSOUTH Rehabilitation Center of Somerset
Limited Partnership Alabama NJ
HEALTHSOUTH Rehabilitation Center of Sugarland
Limited Partnership Alabama TX
HEALTHSOUTH Sports Medicine & Rehabilitation
Center of Clearwater Limited Partnership Alabama FL
HEALTHSOUTH Rehabilitation Center of Syracuse
Limited Partnership Alabama NY
HEALTHSOUTH Rehabilitation Center of Ft. Collins
Limited Partnership Alabama CO
HEALTHSOUTH Spine & Rehabilitation Center of
Dallas Limited Partnership Alabama TX
HEALTHSOUTH Surgical Center of Tuscaloosa
Limited Partnership Alabama
HEALTHSOUTH Sports Medicine & Rehabilitation
Center of Marina Del Rey Limited Partnership Alabama CA
HEALTHSOUTH Rehabilitation Center of Tuscaloosa
Limited Partnership Alabama
</TABLE>
<PAGE>
Exhibit (23)-1 CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of HEALTHSOUTH Corporation and Subsidiaries of our report, dated February 24,
1995, included in the 1994 Annual Report to Shareholders of HEALTHSOUTH
Corporation and Subsidiaries.
Our audits also included the financial statement schedule of HEALTHSOUTH
Corporation and Subsidiaries listed in Item 14(a). This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, present fairly in all material respects the information set
forth therein.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-13489) pertaining to the 1984 Incentive Stock Option Plan, in
the Registration Statement (Form S-8 No. 33-23642) pertaining to the 1988
Non-Qualified Stock Option Plan, in the Registration Statement (Form S-8 No.
33-34908) pertaining to the 1989 Stock Option Plan, in the Registration
Statement (Form S-8 No. 33-40798) pertaining to the 1990 Stock Option Plan, in
the Registration Statement (Form S-8 No. 33-50440) pertaining to the 1991 Stock
Option Plan, in the Registration Statement (Form S-8 No. 33-64308) pertaining to
the 1992 Stock Option Plan, in the Registration Statement (Form S-8 No.
33-64316) pertaining to the 1993 Consultants' Stock Option Plan and in the
Registration Statement (Form S-8 No. 33-55303) pertaining to the 1993 Stock
Option Plan of our report, dated February 24, 1995, with respect to the
consolidated financial statements incorporated herein by reference, and our
report included in the preceding paragraph with respect to the consolidated
financial statement schedules included in this Annual Report (Form 10-K) of
HEALTHSOUTH Corporation and Subsidiaries.
ERNST & YOUNG LLP
Birmingham, Alabama
March 6, 1995
